Apple won a judgment of $1 billion in damages from Samsung. A billion dollars is a lot of money, but in context it is as if Steve Jobs’s threat to "go thermonuclear" on Samsung has been delivered by Austin Power’s nemesis Dr. Evil: “In a few moments you will notice that the Kreplachistani warhead has gone missing. If you want it back you are going to have to pay me…ONE MILLION DOLLARS.”
According to IDC analyst Ramon Llamas, these damages are applied to 21.3 million Samsung smartphones shipped in the United States during the two-year period ending in the second quarter of 2012. That amounts to about $47 per phone, making the ruling pricey on a bill-of-materials basis. Keep in mind, however, that this judgment only affects the United States. Since 2009, Samsung has shipped over 187 million Android smartphones worldwide. The Apple damages amortized over all these phones amounts to $5.35 per phone.
You may have noticed on Friday that judges in Seoul decided in separate patent litigation between the companies that Apple had infringed on two patents held by Samsung, while the Korean technology giant had violated one of Apple's. The court ordered each company to pay damages to its competitor, netting Samsung 10 million won, or $9,000. The Korean judgment brings to focus the global business of smartphones and the challenges Apple faces in asserting its patent claims throughout disparate worldwide legal venues. One can assume patent litigation in China, India and much of Asia will produce unrewarding results.
If Asia is not a venue for Apple to assert its patent claims, what about Europe? According to European patent attorney Arnoud Engelfriet:
"A verdict by a U.S. court is not enforceable in Europe. Patents are a strictly national affair, which means a verdict in one country such as the U.S. or another European country never applies in another European country.” To win a similar verdict to the verdict Apple won in U.S. Northern District Court of California in the European Union, according to Engelfriet, "Apple would first already have had obtained patents in each country, then bring a separate lawsuit in each country, produce evidence and deliver arguments as required by each European country law (e.g. German law or Dutch law) and hope to prevail in each country."
Not only is the playing field different in Europe, the rules are different. Oftentimes it is more difficult to win a patent dispute in Europe. In comparison to U.S. patents, Engelfriet said "European patents tend to be more specific and limited in scope, so it's easier to avoid a patent. Moreover, there may not be a patentable invention under European patent law that corresponds with the U.S. patent in question."
This verdict is just the first skirmish in the battle between Android and Apple. Samsung is the accidental defendant because it boasts the largest market share. Samsung can be expected to appeal the decision, which will take years, and, with the scope of Apple’s claim narrowed by this judgment, Samsung will probably negate portions of the verdict and reduce the damages.
At the same time, Samsung and Android will engineer software changes to eliminate some of the infringing features. For example, both Android and iOS use a "bounce" effect to indicate that the user reached the bottom of the page. Samsung’s implementation was determined to be infringing. Newer versions of Samsung phones now emit a non-infringing blue glow in place of the "bounce" to indicate the end of the page has been reached.
Samsung can also license other non-infringing technology and replace the infringing technology. Google, Oracle, IBM and Microsoft have large patent portfolios from which Samsung might acquire licenses that could ameliorate Samsung’s infringement.
The most vexing patent infringement Samsung will need to resolve is Apple’s multitouch patent, because certain gestures, such as “expand” and “shrink,” that depend on this patent have become the lingua franca of the mobile user interface. According to Linda Kennedy, patent attorney with the Law Firm of Butzel Long PC, “Samsung will need to develop a novel user interface or it may need to negotiate a license or cross-license with Apple. Samsung may have or could acquire commercially important patents to precipitate such a deal."
So what did Apple win? They won a billion dollars and the challenge of defending its claims in the appeal and of asserting its claims in many different countries against many different entities. Samsung, Google/Motorola and the other Android OEMs are not going to exit this business because of this verdict. The exclusion of the Galaxy Tab 10 from the infringement verdict validates their business strategy. Google and the OEMs will fight to reduce the damages they may have to pay Apple while they minimize the court-confirmed infringements. Apple has a difficult course of litigation in Europe and a nearly impossible course of litigation in much of Asia.
There is only one big risk for Samsung at this moment. Apple and Samsung are due to return to court in California in late September to argue over an injunction that may prevent the sale of eight current and obsolete Samsung phones from being sold in the U.S. If Judge Lucy Koh rules against Samsung, it will be difficult for the company to maintain shipment volumes while it resolves the infringing issues.
The International Telecommunications Union reports that there are about 6 billion mobile phone subscribers in the world and more than 5 billion subscribers outside of the U.S. and European Union, many of whom have yet to upgrade to smartphones. Many of these 5 billion subscribers live in countries where it is challenging to litigate patents. Samsung and other OEMs are likely to endure litigation in the U.S. as the price of innovation through direct competition with Apple in order to reap the revenues from the world markets for smartphones.