Patent Overreaction Follows Samsung Verdict

By Carol Kopp  AUG 28, 2012 8:55 AM

The jury verdict that Samsung violated Apple patents isn't the end of the smartphone world as we know it.

 


MINYANVILLE ORIGINAL Ah. So, it seems that Apple (AAPL) owns the whole concept of intuitive device design. Or, at least it owns that pinch-and-zoom action that has become second nature to users of smartphones.
 
Or not. At the risk of being disrespectful to nine angry jurors who happen to have been sitting 10 miles from Apple headquarters, maybe the company’s victory against Samsung (SSNLF) in a patent dispute battle isn’t the show-stopper it seems.
 
Samsung investors freaked out so bad that the stock dropped 7% on Monday, its worst loss since October 2008. In the US later, Google (GOOG) lost 1.39% on a pretty good day for technology stocks in general, because the devices in question use its Android operating system.
 
A second look suggests that Samsung, and by extension Google, may walk away practically unscathed if not actually strengthened by the jury’s ruling that Samsung swiped Apple’s technology.
 
First of all, what’s a $1 billion penalty between enemies these days? Samsung has $21 billion in cash, and the company brings in about a billion dollars every 2.4 days.
 
And, if Samsung makes a deal to pay royalties to Apple for certain functions or features of some smartphones, that apparently adds about $5 to each device, based on what it already pays Microsoft (MSFT) for other technology in other devices.
 
Also not a giant-killer.
 
Second, there’s the flaw that is inherent in the all-American practice of suing the pants off your technology industry competition for patent infringement: By the time a verdict comes down, the technology has moved on.
 
A patent attorney told Reuters that most of the smartphones covered by the ruling are “legacy products” anyway. This isn’t to say that Samsung’s newer models are or aren’t too much like the iPhone, but they’re too new to be covered by the suit that this jury just ruled on.
 
Adding insult to injury, Samsung may even benefit if the GSII is yanked off the market by court injunction, ZDNet suggests. Its GSIII, which isn’t named in the suit, is more expensive and newer. The company’s Galaxy Note product line isn’t affected either.
 
The smartphone industry is moving fast, and Samsung has been successful in part because its turnaround is faster than anybody else’s.
 
The case is seen as the opening salvo in an Apple patent war against Google and its Android operating system—the start of the “thermonuclear war” that the late Apple founder Steve Jobs vowed to wage against Google for what he saw as a copycat of Apple’s mobile operating system.
 
Google’s statement claims that the ruling is more about Samsung’s hardware than about the Android operating system software that runs it. Google would say that, but it seems to be true. The five major issues that the jury said violated Apple patents all appear to be inherent to the look and feel of the handset, not the operating system. Presumably, Apple’s thermonuclear war on Google will be scheduled for a later date, in another courtroom.
 


Samsung and others say they and other handset makers are simply building on and refining concepts that have been around for years, if not decades. That sounds pretty disingenuous. But smartphone design, at least at this stage, is like the fashion industry. For every real trendsetter there are a hundred copycats doing the same thing in another shade or fabric, a more luxurious version or a cheaper knockoff.
 
If so, it’s harder to judge the real impact on Samsung sales. Does it help or hurt to be seen as an Apple copycat? Consumers might insist on buying “the real thing.” Or, they might think it’s pretty smart to buy a phone that’s just as good but less expensive.
 
The impact on other device makers is tougher to call. Some suggest that they’ll all go into a dither trying to find alternatives to “pinch and zoom” and other basic functions that won’t get them sued. Or, they might just cough up the $5 per device to Apple for the rights and call it a day.
 
You’d think they’d be dancing in the streets at Microsoft headquarters, since the verdict came just as the company is about to launch a serious push for smartphone share with a revamped mobile version of its own operating system, Windows 8. And you’d be right. Bill Cox, marketing director for the company’s phone division, tweeted on Monday: “Windows Phone is looking gooooood right now!”  
 
Same goes for Nokia (NOK), which was up more than 5% yesterday, evidently because it has bet the farm on Windows 8 instead of Android.
 
More sober analysis suggests that the Apple court victory could be only “marginally beneficial” for Microsoft.
 
And that makes sense. It’s not like the patent police are going to come to our doors and pry the Samsung phones out of our cold dead hands. Are they?
Position in MSFT.

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