Ap­ple, Sam­sung take patent fight to cru­cial Cal­i­for­nia trial

The Pak Banker - - COMPANIES/BOSS -

Ap­ple Inc and Sam­sung Elec­tron­ics Co Ltd take their bat­tle for mo­bile supremacy to court in one of the big­gest-ever tech­nol­ogy patent tri­als, a case with the po­ten­tial to re­shape a faste­volv­ing mar­ket they now dom­i­nate.

The tech ti­tans will lock horns in a fed­eral court­room in San Jose, Cal­i­for­nia, just miles from Ap­ple's head­quar­ters. The stakes are high, with Sam­sung fac­ing po­ten­tial U.S. sales bans of its Gal­axy smart­phones and tablet com­put­ers, and Ap­ple in a piv­otal test of its world­wide patent lit­i­ga­tion strat­egy. Both sides are seek­ing fi­nan­cial dam­ages from the other. Sam­sung has rapidly over­taken Ap­ple, cre­ator of the iPhone and iPad, and Nokia to be­come the world's largest smart­phone maker. To­gether, Ap­ple and Sam­sung ac­count for more than half of smart­phone sales glob­ally.

Ap­ple sued Sam­sung last year in San Jose, claim­ing its smart­phones and tablets slav­ishly copied the iPhone and iPad. The South Korean com­pany coun­ter­sued. Since then, the two have ex­panded their fight to court­rooms in nearly a dozen other coun­tries. At this trial, Ap­ple is seek­ing at least $2.53 bil­lion in dam­ages, though U.S. Dis­trict Judge Lucy Koh could triple that fig­ure if she finds Sam­sung will­fully in­fringed Ap­ple's patents. The dis­pute has reached deep into the tech sec­tor, with com­pa­nies in­clud­ing Mi­crosoft Corp, IBM Corp, Nokia and Re­search in Mo­tion Ltd fil­ing court pa­pers this week to try to keep their own patent li­cens­ing agree­ments from be­ing dis­closed dur­ing the trial.

A loss for Sam­sung could lead to per­ma­nent sales bans against prod­ucts in­clud­ing the flag­ship Gal­axy S III phone, said Nick Rodelli, a lawyer and ad­viser to in­sti­tu­tional in­vestors for CFRA Re­search in Mary­land. While the S III is not at is­sue in the trial, if Ap­ple pre­vails the com­pany could later ask Koh to block sales of that prod­uct. Up­ward of 20 per­cent of Sam­sung's global con­sol­i­dated profit could be af­fected if it loses this case, he said. "Sam­sung is a big com­pany with oper­a­tions all over the world, but this is ac­tu­ally a nee­dle-mover for them on the bot­tom line," Rodelli said.

Ap­ple will try to use Sam­sung doc­u­ments to show its ri­val know­ingly vi­o­lated the iPhone maker's in­tel­lec­tual prop­erty rights, while Sam­sung ar­gues Ap­ple is try­ing to sti­fle com­pe­ti­tion to main­tain "ex­or­bi­tant" profit. In a state­ment, Sam­sung said Ap­ple has been "free-rid­ing" on its tech­nol­ogy "while us­ing ex­ces­sive le­gal claims against our prod­ucts in their at­tempt to limit con­sumer choice and dis­cour­age in­no­va­tion." An Ap­ple spokesman re­it­er­ated the com­pany's pre­vi­ous state­ment that it wasn't a co­in­ci­dence Sam­sung's latest prod­ucts looked a lot like the iPhone and iPad, and that Sam­sung bla­tantly copied its prod­ucts. A loss for Ap­ple could be sig­nif­i­cant, not only if it were or­dered to pay fi­nan­cial dam­ages but also be­cause of the com­pet­i­tive threats. That is be­cause the Gal­axy S III is a bet­ter phone than the latest iPhone 4S, said Michael Yoshikami, chief ex­ec­u­tive of Des­ti­na­tion Wealth Man­age­ment.

"Ap­ple is all about slow­ing Sam­sung down," said Yoshikami, whose fund holds Ap­ple shares. "Ap­ple will try to buy time un­til iPhone 5 launches," which is ex­pected in Oc­to­ber. Ap­ple shipped 26 mil­lion iPhones in the quar­ter ended in June, fewer than in the pre­vi­ous quar­ter and well be­low the 28 mil­lion to 29 mil­lion that Wall Street had pre­dicted. Sam­sung is es­ti­mated to have in­creased sales to around 50 mil­lion smart­phones. That helped the South Korean gi­ant to re­port a record quar­terly profit of $5.9 bil­lion. In the past few days, the com­pa­nies have supplied some de­tailed fi­nan­cial data in court fil­ings, such as a dis­clo­sure that Ap­ple's gross mar­gins for its iPads are about half of those for the iPhones. The in­for­ma­tion was in­cluded in newly un­sealed pa­pers and was not pre­vi­ously known, giv­ing Wall Street a rare glimpse into Ap­ple's fi­nan­cial break­down for spe­cific prod­ucts.

The com­pa­nies had ini­tially sought to keep many doc­u­ments from public view, but Judge Koh re­jected the bulk of the re­quests on July 17. Her or­der came hours af­ter filed court pa­pers op­pos­ing the com­pa­nies' ef­forts to seal the doc­u­ments. The lawyers on both sides are well known: Ap­ple is rep­re­sented by law firm Mor­ri­son & Fo­er­ster, which led Or­a­cle Corp's patent case against Google Inc ear­lier this year over the An­droid op­er­at­ing sys­tem. Sam­sung, whose prod­ucts run on An­droid, hired lawyers from Quinn Emanuel Urquhart & Sul­li­van, which also rep­re­sents Google and which led Ya­hoo Inc's short-lived patent law­suit against Face­book this year.

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