As Samsung looks to settle, Apple will fight on to the bitter end

As Samsung looks to settle, Apple will fight on to the bitter end

Summary: Apple and Samsung are hours away from discussing a potential patents settlement. Samsung will still manage to walk away from the amicable talks with a bloody nose.

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TOPICS: Apple, Legal, Samsung
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Apple and Samsung remain locked in an acrimonious series of lawsuits over patents. But enough was enough, the courts decided, and pushed the two battling companies into a room for two days to discuss settlement options was the last ditch effort to prevent a full-blown trial.

The 50 cases in 10 different countries could be wrapped up today and tomorrow --- May 21 and 22 --- and the two smartphone and tablet makers could return to their corners and cease fighting.

They won't. Apple will likely stand its ground as Samsung faces a long and lengthy trial ahead of it. Though Samsung has made a series of claims of its own, Apple will walk away with a clean fist while Samsung stumbles away with a bloody nose.

Apple kicked off the battle by suing Samsung in April last year for "slavishly" copying the iPad's design. The Korea-based smartphone giant fired back with its own set of complaints saying that Apple infringed its hardware and networking patents.

But the mood shifted when Apple's chief executive Tim Cook said during Apple's Q1 earnings call:

"I would highly prefer to settle than to battle. But it's important that Apple not become the developer for the world. But the key thing is that it's very important that Apple not become the developer for the world. We need people to invent their own stuff."

I saw this as Cook extending almost a hand of friendship by "sending a strong signal that Apple could be ready to end the patent war, started by the late Apple co-founder Steve Jobs."

AllThingsD's John Paczkowski saw it as quite the opposite:

"If Samsung is willing to concede to that, then these two days of court-ordered settlement talks ought to go quite smoothly. But that seems unlikely, which means this battle will probably roll on for a good long time."

It all falls down to which company has the upper hand. In this case: Apple does.

In one of the cases, Apple was given the all clear by a U.S. appeals court to seek a ban on Samsung's Galaxy Tab 10.1. What Apple would do next would entirely shape the outcome of the settlement talks.

Naturally, Apple took the ban option. There was hope the iPad and iPhone maker would hold off until at least the talks were over to file a motion to seek a U.S. ban of Samsung's flagship tablet, but instead Apple filed a motion on Friday seeking the immediate ban on the rival product.

It's looking likely from here that the settlement talks will go ahead as per the court order, but Apple will likely not play ball and fight until the bitter end.

Apple has carefully and strategically placed itself into a can't-lose position.

Many of the patents used in Samsung's ground assault are licensed under ‘fair and reasonable' (FRAND) terms, meaning the royalty charge cannot be so extortionate that the company needing those patents can't afford them --- or would lose out to such an extent it would be pointless licensing them.

Apple may well be using Samsung's patents illegally, but Apple doesn't have to license its patents under FRAND terms. If it comes to it, Apple can spend a little on licensing patents from Samsung but not enough to cause a huge hole to burn in its pocket, while in reverse, Apple can license its patents to Samsung for as much as it wants under its own, and if need be on 'unfair' terms. Apple doesn't even have to license its technology at all. It can keep all its patents to itself and there's nothing Samsung can do about it.

But in a war of patents, Apple has the straight flush and always has done. It's all but clear to me that Apple will continue to exploit its position as the stronger leader in this case, while Samsung attempts to deliver settlement options to its opponent.

There is one slight kickback if Apple rages on.

Samsung supplies over a quarter of all components to Apple's iPhone and iPad despite the companies' fierce litigation spectacular. Samsung acts as Apple's component backbone; without the company selling its chips and memory, Apple would not have succeeded in claiming first-place in the tablet market.

Samsung may be contractually bound to supple components to Apple for now, but it could cut ties with the iPhone and iPad maker, detrimentally affecting its supply chain.

However, if Samsung does decide to part ways with Apple based on mutually assured destruction, it risks losing a massive chunk of its revenue stream. It would be a lose--lose situation, but Apple would likely suffer more.

Samsung remains stuck between a rock and a hard place. Samsung will likely want to settle, but it would not surprise me if Apple continued its assault regardless.

"There is still a big gap in the patent war with Apple but we still have several negotiation options including cross-licensing," Samsung's mobile division chief JK Kin told reporters on Sunday on his way to the talks.

And negotiations there will be, at least from one side of the table.

Apple's representatives will likely sit and twiddle their thumbs. It has nothing it needs to bring to the table. Not if, but when the settlement talks fail, Apple's patent position means it will likely prevail when the case reaches a jury.

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Topics: Apple, Legal, Samsung

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16 comments
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  • Court documents showed that in 2010 Apple wanted to settle, and Samsung did

    ... not want that.

    Before starting the legal war, Jobs personally tried to settle things peacefully.

    But it is too late now; Apple will settle only if Samsung will cease their copycat practices. But Samsung can not do this (look at Galaxy Ace, Galaxy Y series, overall Galaxy packaging, power-charger, cord design, some UI elements and even a Siri copycat), because without this they will be as "successful" as HTC.
    DDERSSS
    • so where's the source?

      so which document would that be and on what terms and condition?
      poppypig
  • Few additional points

    1) the threat of SGT ban is minor thing, since Samsung only has few percentages of the market. Apple would have more leverage if they would be given opportunity to ban Samsung's smartphones, which sell in huge volumes;

    2) Cease-supply discussions and theories are pointless. There is no way that either Apple or Samsung would refuse of this highly stable and mutually profitable partnership. The probability of this to happen is [b]bold zero[/b];

    3) patents quality arguments are applicable. But not only most of Samsung's claimed patent are FRAND-conditioned, Apple argues that most of fees are actually already paid by cellular controller manufacturers such as Broadcom, Qualcomm, et cetera. On Apple's side, patents are plenty but many of them are hard to prove -- even though the success is this company's side.
    DDERSSS
  • apple must settle

    in order to avoid further angering of the FOSS community.
    Otherwise, Google can intervene and put apple out of business with patent claims.
    The Linux Geek
    • Yeah those two guys who get together to play D&D

      are a force to be recognized and that force is known as FOSS!!! FEAR the FOSS!!!! And when this force gets into a situation they can not handle they always have Big Brother to call upon. The dreaded wearer of the extra thick horned rimmed glasses known as google! Still all in all I think Apple is well equipped to handle the "ahem" threat:)

      Pagan jim
      James Quinn
      • we are millions

        and we can't be ignored! That's the truth and this is why your post is being down voted.
        The Linux Geek
      • You ar millions? And that amounts to a -1 on my post?

        The Linux Geek
        So that begs the question you are millions? If so then are you not terribly effective?

        Pagan jim
        James Quinn
      • Hey I play D&D

        and I resent you lumping me and my friends in with those FOSS trolls. While I like open source software for some things, I don't mind paying for well-written software that serves my needs even if it is closed source.
        ssaha
      • Why would FOSS play D&D?

        D&D is proprietary and Wizards of the Cost does a great many things in order to force people into buying the campaign books.
        nab123
    • Google has it's own battles to fight

      Oracle and the EU are the first ones that come to mind.
      NonFanboy
  • Samsung may be Apple's supply backbone.

    But, Apple is Samsung's biggest customer. Apple can likely find new suppliers, even if it has to fund them (which has additional advantages), but losing Apple's business could be [b]very[/b] costly to Samsung.
    matthew_maurice
    • Short term pain

      Losing Apple as a client would be VERY costly, but in the long run, depending on other things, could be more profitable.
      mheartwood
      • nope try again

        a quick google search will provide you the following information:
        http://www.samsung.com/us/aboutsamsung/ir/ireventpresentations/earningsrelease/IR_Earnings2011.html

        Samsung annual Corporate earnings 2010: $143.22 Billion
        Samsung annual Corporate earnings 2011: $140.7 Billion
        Samsung Q1 2012 corporate earnings: $38.87 Billion
        liquid cash end of fiscal year 2011: $230.9 Billion
        Apple's contract with Samsung value all of 2010: $5.69 Billion estimated+
        Apple's contract with Samsung value all of 2011: $7.8 Billion*
        Apple's liquid cash end of fiscal year 2011: $81.6 billion^

        please note I used wolfram alpha to convert the currency to USD.

        + 2010 apple contribution to samsung's revenue data from:
        http://www.theregister.co.uk/2011/04/19/samsung_responds_to_apple_lawsuit/
        * 2011 apple's contribution to samsung's revenue data from:
        http://www.mobiledia.com/news/96263.htm
        ^ apple's cash reserves for 2011 data from:
        http://www.pcworld.com/article/242785/apple_by_the_numbers_sales_stores_staff_all_grew_in_2011.html


        Losing the money from apple would be like finding an item in walmart for the same price as it is on amazon, but buying it in walmart so you can have it now (less than sales tax, for those living where amazon does not yet charge for state sales tax). An inconvenience, but not that big of a deal.
        just thought I should put that out there...
        aiellenon
    • Oh yeah...

      Do tell us how much of Samsungs total revenue Apple amounts to! I doubt you have a clue what Samsung do worldwide and 'being a biggest customer' means jack shitt when you've hundreds of big customers. There's a point of principle here and if Samsung see fit to lose Apples revenue/profit and make it up by competing (in some form) then there's a decision to be made. For me; seems odd everyones patents are FRAND except Apples.... I like my ipad, I like my Asus Transformer, I don't think bad of Asus but I do hate the arrogant Apple ethos.
      pjmckay
  • I still want to see Apple

    patent something "new" and of value. Patenting a rectangle is neither.
    Daughain
    • Apple is the developer for the world.

      I agree with you %100!!!! Patenting a rectangle.
      I look at my Samsung digital photo frame that i got back in 2007, and wow it looks like an ipad! but an ipad didn't exist at this point... so how could it be?? Slide to unlock was also out before the iphone, and yet they got a patent for that as well.
      Pept68