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

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.
Written by Zack Whittaker, Contributor

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.


Editorial standards