Apple's $1 Billion Win Over Samsung: Q&A
In what has been dubbed “the patent trial of the century,” Apple has emerged victorious beyond measure. On Friday a Silicon Valley jury ruled that a series of ubiquitous smartphone and tablet features—such as the rounded rectangular form and how screens slide and bounce when touched—are proprietary Apple innovations.
The nine-person jury, which deliberated for less than three days, found the South Korean company had copied iPhone and iPad features and awarded Apple more than $1 billion in damages. The verdict could lead to a ban on sales of popular Samsung products and further cements Apple's dominance in the mobile device market.
For Apple fans, it’s great news. But for the millions of people walking around with Android devices in hand, we have some questions.
Q: What is still to be determined in this case?
A: The big unknowns are whether Apple will get an injunction [stopping sale of infringing Samsung devices], and how big Apple's damages will be.
Apple will likely ask for an injunction preventing Samsung from selling its infringing devices in the United States. That would immediately remove a large number of Samsung devices from the market. Given that Samsung is the largest Android vendor, an injunction might move the market share numbers back in Apple's favor, at least temporarily.
Apple also was granted a large amount of damages. The bigger news, though, was that the jury also found that Samsung's infringement was "willful." Patent law has a special provision that penalizes knowing copying of a patented feature by making the damages up to three times bigger.
Q: Will the ruling affect features and functions in current Samsung devices?
A: Yes. Even though most of the devices found infringing in today's verdict are older-generation phones, some of them are still being sold. Depending on whether Apple is granted an injunction, those devices may need to be removed from the market. Samsung will also need to modify some aspects of its "Touchwiz" user interface to make them less like Apple's iPhone user interface.
This win may also affect Apple's other lawsuit against Samsung, alleging that some of Samsung's newer models (such as the Galaxy II and the Galaxy Nexus) also infringe Apple's patents—but Samsung will have a chance to fight that battle in 2014.
Q: What about software updates to phones people already own? Could Samsung disable some features because of the ruling?
A: It will depend on the specific ruling from the Judge. The judge may require software updates to remove infringing functionality. It has happened before. The “global search” functionality was removed in some phones due to a patent threat.
Q: What about upcoming products—how will Samsung need to pivot its products going forward?
A: Many of the patents at issue today had to do with the exterior design of the iPhone, so the biggest and most visible differences going forward will likely be in the shapes of Samsung's phones. Some would say that Samsung has already started to "pivot" its design. For example, the Galaxy S III and the Galaxy Note are visually distinct from Apple's iPhones. It is also likely that Samsung will spend some greater effort trying to distinguish its user interface from the interface of Apple’s iPhones.
Q: Samsung is a big supplier to Apple. How does a company get into a patent scuffle of this magnitude with a customer and not suffer in orders later down the road?
A: Samsung's business relationship with Apple may well be damaged, perhaps seriously. At some point, though, I imagine that someone inside Samsung gambled that the profits in mobile were bigger than the profits in component supply. Based on Samsung's latest quarterly reports, that appears to have been a good bet so far. We will see how a 1B+ verdict changes the equation.
Q: Could it be said that Apple effectively has a monopoly on the smartphone market?
A: Not at all. Even though the iPhone is spectacularly successful, most people don't realize that there are so many other types of phones in the market that iPhones made up only 17 percent of all smartphone sales last quarter.
Q: Regarding monopoly, this Vancouver Sun story says “If Samsung has to redesign its devices, no other company will be capable of challenging Apple for the foreseeable future.” Your thoughts?
A: This ruling is undeniably a setback for Samsung. As Apple’s most successful competitor, holding Samsung back may clear the way for Apple to extend its lead in smartphones. On a more fundamental level, though, I disagree with the assumption that the only way to effectively compete is to adopt the features of Apple’s phones.
[Note – the Vancouver Sun article is more nuanced. It seems to be arguing that, from a business perspective, only Samsung has the wherewithal to compete with Apple. Removing them from the marketplace will make it so that nobody will have the business might to compete. That is a different argument, but one too nuanced to address here.]
Q: Does the ruling mean that innovation in the mobile space will grind to a halt?
A: Again, no. Companies will need to be much more careful about adopting Apple's design language. Other companies will be forced to adopt new and less Apple-like designs. This could lead to greater innovation in the mobile space. At minimum, it will lead to greater differentiation.
Q: Are there any upsides for consumers here?
A: Well, consumers will be less able to buy Apple-like phones from anybody who is not Apple. On the other hand, this will likely lead to a greater variety of phone designs in the market. Some of those designs might be better than the iPhone. Some of them will definitely be worse.
Q: Business magnate Mark Cuban tweeted "[Thanks] Apple it's now mandatory for tech companies to sue each other. Prices go up, competition [and] innovation suffer." Your thoughts?
A: Unfortunately, the trend toward tech companies suing each other was already in full swing before Apple sued Samsung. I agree with Mark, though, that size of this judgment will probably encourage more lawsuits. We can only hope that the business executives realize that lawsuits don’t always turn out as they hoped. Remember Oracle’s case against Google?
Q: Anything else people should be thinking about?
A: Although it is somewhat fashionable to be anti-patent these days, this was one trial in which Apple was using its patents exactly as intended under the system. Apple innovated, disclosed their innovations in a patent, and they are now using their patents to fend off "copycats" in the marketplace. I am much more sympathetic to Apple because they are actually bringing products embodying their innovations to market.
Many times, patent cases are argued like someone was trespassing: This idea is my property, and you started using it. What Apple did well in this trial is that it portrayed Samsung as a cheater—someone who looked over Apple's shoulder and copied down its answers. This portrayal obviously resonated with the jury leading to this overwhelming win.
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