Apple Decimates Its Competition, Samsung Crippled, Google is Next


News that a jury of nine handed down an industry altering victory to Apple Inc. reverberated through the tech world this week in their high-stakes court battle against Samsung Electronics Co., The Silicon Valley company was awarding $1.05 billion in damages and providing ammunition for more legal attacks on its mobile-device rivals.

To state it loud and clear, Apple’s $1-billion legal victory sends a warning to other companies manufacturing similar devices, the biggest marketplace threat to Apple.

Jurors Friday found that Samsung infringed all but one of the seven patents at issue in the case—a patent covering the physical design of the iPad.

They found all seven of Apple’s patents valid—despite Samsung’s attempts to have them thrown out.

They also decided Apple didn’t violate any of the five patents Samsung asserted in the case.

The damage award is shy of Apple’s request for more than $2.5 billion, but much larger than Samsung’s estimates and still ranking among the largest intellectual-property awards on record.

“Today’s verdict should not be viewed as a win for Apple, but as a loss for the American consumer,” Samsung said. “It will lead to fewer choices, less innovation, and potentially higher prices.”

An Apple spokeswoman said, “The Mountain of evidence presented during the trial showed that Samsung’s copying went far deeper than even we knew.”

Among other findings, the jury at the U.S. District Court found that many of the Apple patents were willfully infringed by Samsung. That means that Judge Lucy Koh now has the discretion to triple Apple’s damages award, said Brian Love, an assistant professor at Santa Clara University School of Law, who has been tracking the case. “This is a huge, crushing win for Apple,” he said.

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On Friday, Apple filed a motion seeking a preliminary injunction against Samsung’s products. Judge Koh asked Apple to submit data on what products Apple wants covered by an injunction and how each is covered by the jury verdict.

While the ruling won’t affect the companies’ latest products, it could shape how smartphones and tablets are designed and the fortunes of companies that make them.

Apple’s legal campaign is partly aimed at trying to beat back the gangbuster growth of Android, the operating system created by Google Inc. GOOG +0.27% that is used by Samsung and other device makers. In the second quarter, Android phones—which are made by many phone makers—represented 68% of smartphone shipments, while Apple’s represented 17%, according to market research firm IDC.

Google had no immediate comment.

Friday’s jury decision that the six infringed Apple patents—including three covering the shape of the iPhone and on-screen icons—are valid may make it harder for handset makers to enter markets with gadgets that look and work too much like a market leader’s.

Jury Verdict Form

That means that Apple could find it easier to defend its market position and lofty profit margins, while consumers may see a bit less choice and higher prices—as fewer competitors court buyers with me-too models and pass along costs of damage awards in price their products.

The lengthy verdict was read in court Friday afternoon after 22 hours of deliberation, a quicker process than some observers anticipated. In many cases, the jury found that all or the preponderance of the Samsung devices accused of violating a particular patent did so.

The only patent the jury found Samsung didn’t infringe relates to design of a tablet. Throughout the trial, Samsung’s lawyers frequently remarked that Apple shouldn’t be given a monopoly on a rectangle with rounded corners.

Apple, which cited 28 Samsung products in the case, sued Samsung last year and ultimately accused the South Korean company of infringing seven patents. Samsung fired back, alleging some iPhone, iPad and iPod Touch models infringed up to five of its patents.

Global smartphone revenue is expected to reach $207.6 billion in 2012 and $252.7 billion in 2013, according to estimates from Credit Suisse. The Apple-Samsung case has shattered records on the amount of evidence, number of claims, experts and potential fees, say lawyers observing the case.

The verdict launches the next phase of the patent battle. Several lawyers following the case predict Apple and Samsung, among the world’s largest and richest technology companies, could take appeals all the way to the U.S. Supreme Court.

“There will be many issues brought up on appeal by Samsung,” including the damages award, said Daniel Ravicher, executive director of the Public Patent Foundation, which advocates for patent reform.

The courtroom was tense nearly from the outset. Samsung sparked controversy quickly, vigorously objecting to Judge Koh’s decision to exclude evidence it believed showed Apple was influenced by Sony in developing the iPhone. She threatened Samsung with a sanction as the drama continued as both sides raised objection after objection. By the end, the level of tension had become a joke, with Judge Koh expressing surprise on matters where the two sides didn’t disagree.

The trial has already shaped the debate about reform of U.S. intellectual-property law. Critics complain the U.S. Patent and Trademark Office grants too many patents and say patent litigation is clogging the courts.

Many have questioned whether such complex cases can be decided by juries, while a federal judge recently threw out a high-profile case between Apple and Motorola, saying the patent system was in “chaos.” Lawyers and judges warn that mounting patent litigation—including cases that encompass everything from smartphones to videogame consoles, will mean mounting costs for consumers.

“Software patents are clogging the system at every possible point,” says Christal Sheppard, an assistant professor of law at the University of Nebraska College of Law. “This could be the bellwether case that goes to the Supreme Court to decide what invention in the 21st century really means for software.”

The trial, which arose from Apple’s April 2011 suit against Samsung, has been particularly complicated. It involved different types of intellectual property claims that are rarely combined in one case: patents that cover software features, hardware design and high-speed communication features, as well as “trade dress,” a claim to the overall look and feel of a device.

Apple, which prides itself on the style of its products, broke new ground by heavily relying on patents covering the physical design of its iPhones and iPads. Tech companies have more commonly relied on what lawyers call utility patents, which cover the way products work rather than how they look.

Apple is the largest customer for components manufactured by Samsung, a fact that both companies raised at trial. Both are among the most recognized consumer brands on the planet and the trial has been taken up by a range of media, including late-night talk show host comedian Conan O’Brien.

The decisive win decreases the likelihood that a settlement could be reached. The other alternative is that they shift the focus to a future case in future countries and “try to land that knockout blow somewhere else,” Mr. Love said. Cases in South Korea, Australia, Europe and elsewhere have been moving slowly, with Apple scoring some small wins but nothing particularly decisive.

Apple was willing to muster much to fight it, including putting key executives who rarely speak in public on the stand. Its general counsel, Bruce Sewell, watched much of the trial from the front row.

The trial itself veered through all types of subject matter from arcane telecommunications standards to stories about Apple’s industrial designers huddled around a kitchen room table brainstorming secretive designs. One witness tried to make the technical subject matter more accessible to the jury with examples like comparing sending data from a phone to a cell tower to packing items in a FedEx box.

Few surprises came out during the case itself. Most of the key evidence—including Samsung internal strategy documents and designs of other devices that Samsung says proves Apple didn’t develop the ideas first—were discussed prior to the start of the trial and foreshadowed heavily in each side’s opening statement.

Apple put two senior executives, Scott Forstall, head of its mobile software, and Phil Schiller, head of marketing, on the stand. It also trotted through an accountant, designers and a graphics specialist to parse through matters like what constitutes copying an icon. Samsung put forth of its U.S.-based strategy executives, a Korean designer who testified via translator, the inventor of a e-reader for newspapers and others.

The testimony was fairly tame relative to the sideshows when the jury wasn’t around.

Samsung’s lawyers sparked a debate by sending some media evidence the Judge Koh had excluded from the trial. Apple was quick to seize on the action as grounds for Judge Koh to decide the case in Apple’s favor, which she refrained from doing.

Up until the end, she urged the parties to try to settle warning both faced risks. “It is time for peace,” she said, saying each side had made their point.

The verdict will severely impact Samsung for years to come; and will  ehance apples ability to compete in the market.

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