Patent wars end with a whimper as Apple-Samsung fizzles

Patent wars end with a whimper as Apple-Samsung fizzles

Summary: Apple's latest courtroom drama fizzled, with the company winning a verdict against Samsung that didn't even come close to paying its legal bills. Is it time for Apple to end its proxy war against Google's Android?

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When the definitive history of Apple is finally written, it will be filled with courtroom scenes. With and without Steve Jobs, Apple has never been afraid to haul its rivals into court and accuse them of stealing its ideas.

The most recent episode in this never-ending courtroom drama is Apple’s victory last week over Samsung. The long-running series of patent infringement suits began in 2011 and shows no sign of ending soon. In the most recent verdict, a jury saw fit to order Samsung to pay Apple $120 million for illegally copying some of Apple’s smartphone technology.

That would be a lot of money for you or me, but it's chump change for Samsung, and the verdict is a profound disappointment for Apple.

bigbomb
Apple-Samsung battle turned out to be a dud. Image: iStockphoto.com

It’s reminiscent of another long-running Apple legal adventure from a different era, but the outcome looks like it will be completely different this time.

More than 20 years ago, after kicking out Steve Jobs, Apple filed a copyright-infringement lawsuit against Microsoft and HP. The company alleged that Windows and HP’s New Wave desktop shell for Windows illegally copied the Mac’s look and feel.

That lawsuit, Apple Computer, Inc. v. Microsoft Corp., went on for four years and ended in a convincing defeat for Apple. In a preview of the current dispute, the court ruled, "Apple cannot get patent-like protection for the idea of a graphical user interface, or the idea of a desktop metaphor [under copyright law]..."

That defeat became part of Apple’s DNA. And when Steve Jobs returned to Apple, he made sure the company patented every page of every engineer’s notebook. At the launch of the original iPhone in 2007, Jobs famously showed off the new device’s touchscreen, ending with this pointed remark: “And boy, have we patented it.”

Those patents, and some related ones associated with the iPad, are at the heart of Apple’s case against Samsung.

But there’s one crucial difference between the acrimonious 1990s-era argument with Microsoft and the current battle with Samsung: Microsoft was willing to negotiate.

When Windows 1.0 was released, Apple complained that it was a little too much like the Mac. In response, Bill Gates and Company sat down to negotiate. In 1985, they signed a license agreement with Apple that turned out to be key in the later copyright-infringement cases. (It’s not the first time Bill Gates negotiated a deal that turned out to be even better for Microsoft in the long run than it looked at first blush.)

And in 1997, when Steve Jobs returned to a bloodied and fiscally unsound Apple, the first thing he did was cut a deal with Gates to end all the litigation. The deal put cash on Apple’s balance sheet. It came with a commitment from Microsoft to support the then-struggling Mac with its flagship Office suite. And it included a broad cross-licensing agreement between the two companies that made future lawsuits unlikely.

That deal was accompanied by a rare glimpse at a conciliatory Steve Jobs. When Bill Gates appeared on a giant video screen while Jobs was onstage at the Macworld Expo tradeshow, Jobs told the crowd: "We have to let go of a few things here. We have to let go of the notion that for Apple to win, Microsoft has to lose."

Samsung, on the other hand, pointedly turned down repeated offers to license Apple’s technology, according to an excellent recap of the Apple-Samsung conflict in the latest issue of Vanity Fair.

Samsung’s response was basically, “You want to negotiate? Great. We’ll do it in court. It’ll cost you billions and you’ll wind up losing money in the long run.”

And you know what? They’re right.

These days, lawyers are the only ones who win in patent lawsuits.

Every player in the elite levels of the technology marketplace has loaded up on patents. Some are homegrown, some are acquired. Some are purchased in bulk, like the cache of smartphone patents that Google acquired when it acquired Motorola Mobility and kept when it sold the hardware business to Lenovo last year.

Samsung has its own cache of patents. Lost in the headlines of last week's verdict is the dmall detail that the jury found Apple guilty of infringing a Samsung patent and ordered them to pay $158,000 (that's thousands, not millions) in damages.

Patents are messy and confusing and expensive to defend. Small companies are occasionally able to pull off a David and Goliath victory, like the one Eolas won against Microsoft for a patent that was eventually invalidated.

Non-practicing entities like Nathan Myrhvold’s Intellectual Ventures are also able to work the system, buying up patents and then working out licensing deals with companies that decide it’s easier to pay up than to fight. (Nest, later purchased by Google, is a famous example.) Based on that behavior, Intellectual Ventures and similar companies get branded as “patent trolls.” The characterization is, arguably, spot on.

But in the elite circles of tech — the ones inhabited by Apple and Google and Microsoft and Amazon — these suits rarely result in a knockout punch. Microsoft and IBM long ago settled on a defensive strategy for patents, one that involves broad cross-licensing agreements with their rivals aimed at specifically avoiding this sort of courtroom drama.

Indeed, many of the accusations leveled at Samsung in the latest trial should really be aimed at Google’s Android, which has freely cloned features from Apple, so far with impunity. Google even paid some of Samsung’s legal bills in the current round of trials, suggesting it’s well aware of its behind-the scenes role.

Before his death, Steve Jobs infamously told his biographer, Walter Isaacson, of his loathing for Android. In another of Apple’s many lawsuits, this one against Motorola Mobility, which had recently been purchased by Google, the judge allowed Motorola Mobility’s lawyers to use his angry words in court.

In the biography, Jobs is quoted as saying, "Google, you f***ing ripped off the iPhone, wholesale ripped us off." And he promised, "I will spend my last dying breath if I need to, and I will spend every penny of Apple's $40 billion in the bank, to right this wrong. I'm going to destroy Android, because it's a stolen product. I'm willing to go thermonuclear war on this."

Four years later, Apple has even more billions in the bank, but so does Google. And all-out war between the two companies isn’t likely to result in destroying Android, even if it does succeed in transferring some dollars from a bank in Cupertino to one in Mountain View.

If that lawsuit does come to pass, it will probably make for high drama, but once again the lawyers will be the only winners.

Update: For those who are curious about the amount of legal fees in the battle between Apple and Samsung, Kurt Eichenwald in his thorough piece for Vanity Fair estimates that the two sides have spent a total of more than $1 billion so far. And the war is far from over.

Topics: Patents, Android, Apple, Google, Microsoft

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141 comments
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  • "patenting every page of an engineers notebook"

    doesn't make any valid device patents...

    Though it might work for design patents.

    All it really does is give lawyers money for nothing.
    jessepollard
    • Here, Jesse, you might want to read this

      http://en.wikipedia.org/wiki/Hyperbole
      Ed Bott
      • What part is hyperbole? Or are you referring to yours?

        All you get (been there) is the engineers notebooks getting stamped for copyright (which is actually more effective than a patent).

        Most pages from an engineers notebook is worthless - initial ideas, random comments, some diagrams...

        A device patent is supposed to be something that actually works.
        jessepollard
        • Are you completely humorless?

          Don't answer that. It's a rhetorical question.
          Ed Bott
          • That's got to hurt Samsung!

            Ed Bott: "winning a verdict against Samsung that didn't even come close to paying its legal bills"

            Speaking of "hyperbole", it's hard to believe that Apple spent anything close to $120 Million on legal fees for this case. But lets assume that Apple did spend more than $120 Million on this case... logically Samsung spent an equal amount.

            If that were substantiated, then the verdict against Samsung stung that company a lot more than we think!

            That would mean that Samsung is really down by at least $240 million ($120 million for the remuneration it must pay to Apple PLUS at least another $120 million for legal fees similar to what Apple paid). That is close to a quarter of a Billion dollars over all!

            Samsung's recent quarterly showed reduced profits for the company, so a loss like this is going to make their next quarter that much more difficult to make gains.

            Apple on the other hand, is sitting on almost $200 Billion dollars worth of assets, so the $120 million that they spent on legal fees is just a drop in the bucket for them.

            Apple's goal was achieved. It not only received financial compensation for the intellectual property that Samsung infringed, but it also made a clear statement to Samsung, Google, and any other companies that infringe Apple's IP that if they refuse to either desist or to pay licensing fees, they will end up losing financially in court (as well as losing some of the confidence of its investors and customers).
            Harvey Lubin
          • Crime fighting costs money

            If someone breaks into your house and steals your TV, is the budget for handling the crime report, finding the culprit, taking them to court and locking them up, to be limited by the cost of the TV?

            No. These things are an investment in making it unprofitable for the culprit to offend.

            Samsung is a serial habitual IP thief.

            If Apple broke even ($120 million in costs and a $120 award for), and Samsung were down $240 million ($120 million in costs and a $120 award against), then Apple would have achieve a lot.

            It is noticeable, for instance, that Samsung's newer devices look much less like iPhones that they older ones did. So it seems to be working.
            Henry 3 Dogg
          • In theory

            In practice, patent infringment is a civil tort, not a criminal offence, and while the constitutional purpose of patents (in the US anyway) is encouragement of new inventions (ie. patents are a pragmatic issue, not a moral one), enough questionable patents have been grated during the past 20 years to make the system at least as much about competition prevention and extortion as they are about fostering innovation.

            Regardless, patent infringment is wrong because it's illegal, not because it's morally repugnant. Auto theft would be a crime even if were completely legal; so would be murder; so would be assault. Copying someone's invention (real or imagined) does not fall into that category; rather it falls into the same category as driving without auto insurance.

            Mind you, I'm not speaking against the law, and in fact, I'm in favor of both patent and copyright laws, but they need to be about promoting "progress in science and the useful arts", and allowing people to make writing or inventing their full time jobs; not providing cash cows and anticompetitive weapons for established businesses; or returns on investment for speculators.
            John L. Ries
          • Apple just a big bully!

            Of course they may well look less than iPhones, samsung improved on them! Despite what Apple thinks they haven't invent anything really new, not even the 'i' prefix that went to HP with their iPax touch smartphones phones. Oh did I say touch smartphones, Apple didn't even those either..... They are a brilliant technology and marketing company but no better than others, just a bigger bully!
            brianm101
          • However, I suspect that this case has achieved a lot more than that.

            There is this foolish view that because the award was only $120M, it is pretty irrelevant.

            What People seem to be conveniently forgetting is that this recent trial, while establishing a principle, covers only older named devices sold between two historical dates.

            In fact there were only 37 million devices in total covered by this trial.

            And Apple was only allowed to bring 5 patents to trial, of which it got awards on 3 of them.

            3 patents were in fringed, but not all devices infringed all three of them. For a rough calculation, lets guess that each device infringed 2 to them.

            So $120 million is $2 per patent, per infringing device.

            So the jury has set a price. Apple has lots more patents to add to the battle, and a lot more devices that have infringed the patents in the already considered patents.

            Samsung sold 300 million phones last year. almost all of them infringed 2 of these patents, and probably another 40 that Apple has up its sleeve. (If Samsung had anything but it's arm up it's sleeve, then it would have fielded it already).

            Suppose Apple got similar awards on half of those patents. Samsung could easily end up paying Apple 300x2x40 = $24 Billion a year based on the level of award in last weeks case.

            Still feel that $120 was a lose for Apple?

            Samsung's own lawyer (Quinn) said that Apple would be dancing in the street for anything over $100m
            Henry 3 Dogg
          • You are a frog

            A big one at that .... you're making massive logic leaps. No wonder you dont have a woman at your side . You poor lonely man Harvey
            impost
          • It's people like you...

            ... that give humanity a bad name. ;-))

            Fortunately, not everyone in the world has the ignorance you have just demonstrated.
            Harvey Lubin
          • Aw, don't kick Harvey

            he cannot help it, he is either so in love with all things Apple or just hates all things Samsung. Hopefully he will find that there is treatment for both those ailments. Unless you happen to own the companies, who cares about all this crap. Just remember, it does not matter who wins, who loses, how much anyone pays to who.. YOU are the one that they get that money from.. so I hope you are happy paying your favorite for your share of those $500.00 a hour lawyers (and who said you cannot spend a measley $120 Million on a court case like this?) they spend so freely on. The next phone will just be that much more expensive. Only the Lawyers win...
            Putertechn
          • In response to your insults:

            impost: "You are a frog"

            Wrong! I am English Canadian. But I would advise you not to insult a French Canadian or someone from France that way, as you may end up losing some teeth. ;-))

            impost: "you're making massive logic leaps"

            I realize that "logic" and "facts" may be alien to you, since you are only capable of responding irrationally.

            impost: "No wonder you dont have a woman at your side . You poor lonely man Harvey"

            Wrong again! I happen to be happily married. I can only assume that your comments about not having a woman, and being lonely, are your own problems and that you are assuming that everyone else shares your unfortunate situation.
            Harvey Lubin
          • Mindreading is usually highly inaccurate

            Thanks for the example.
            John L. Ries
          • Apple won the battle, but is losing the war

            The dollar amounts you state are also peanuts for Samsung. Samsung's profits are in the billions of dollars even in this last quarter where they were down slightly.

            The issue is what did Apple get out of these lawsuits? It certainly wasn't the blocking of selling Samsung devices in the US. In this case, Apple accused Samsung of infringing on 5 patents. The jury said it was only two, and then proceeded to award Apple $120 million. Apple was looking to get over $2 billion. So Apple didn't get that either.

            The bigger issue here is that Apple didn't do anything to mitigate the increasing market share of Samsung and Android in the war of mobile device dominance.

            Android and Google will continue to eat away at Apple market share and therefore profit as well. The huge slowdown of Apple iPads is only the beginning.
            laequis
          • Market Share is not related to profit

            @laequis: "Android and Google will continue to eat away at Apple market share and therefore profit as well."

            Pop quiz: the day GM filed for bankruptcy -- who had a higher market share Porsche or GM? Until you figure that one out, you might want to stop posting on the Internet. You also might look into Mac market share/profit share vs. Wintel PC industry market/profit share.
            Ted T.
          • You're halfway there

            I'm one who believes that these lawsuits are a form of non-contact collusion between The Two Big Guys to scare everybody else out of the market. By "non-contact" I mean that they don't ever meet in secret to say, "Let's collude," but they don't have to. Both managements understand the benefits of paying each other some chump change now and then to scare banks and VCs away from funding anybody who might upset the Apple-Samsung oligopoly. Who else could afford to lose $100 million in one of these lawsuits? Microsoft maybe, or Google, but nobody else.

            Since it was mentioned in the story, I would like to identify myself as one of the eight or nine people who bought and used HP's "New Wave" shell. It never reminded me of the Mac interface at all, and at that time I had spent six years with a company that had nothing but Macs.
            Robert Hahn
          • hmmm considering . . .

            Considering Apple was asking for over 2 Billion in damages, even if your assumptions are correct, Samsung comes out 1.75 Billion ahead.
            gwartnet
          • @Harvey Lubin

            "Apple on the other hand, is sitting on almost $200 Billion dollars worth of assets, so the $120 million that they spent on legal fees is just a drop in the bucket for them."

            Samsung has almost $600 Billion worth of assets but you think the legal fees would be harder for Samsung? $240 million is nothing to Samsung and not even a drop in the bucket for them.
            William79
          • Re: That's got to hurt Samsung!

            Google have already agreed to pick up most of Samsung's costs for this set of patent disputes, so Samsung don't really lose much.

            The real problem is what happens to reputations and in this respect Apple may have more to lose. I suspect Samsung are more than happy to entertain Apple in US courts, especially if they are playing with someone else's cash.

            In one failed case Apple were forced to print an apology to Samsung on its own website, which is advertising you just can't buy!
            dcarmi