It is about time that Samsung had some good news in the patent infringement cases against Apple and in our view the reversal in the final US International Trade Commission (ITC) order to agree that Samsung patents had been infringed, was entirely justified and just the beginning.
We do understand that making patents in radio that make a mobile phone work are going to be reliant upon Frand conditions, and that this is because everyone that makes a mobile phone has to pay for these patents, and if a company didn’t agree to FRAND terms, it would never be allowed by a standards body to have the technology used in the first place. Samsung patents tend to be bestowed upon it by committee, so are Frand, while Apple’s are entirely its own. And this will inevitably lead to problems.
Samsung, which has contributed a huge amount to both 3G and 4G standards, will naturally try to bully any newcomer like Apple into ‘swapping’ patents, so that it can use things like touch screen multi-touch patents for nothing. Although the actual touch screen technology owes more to Samsung than to Apple, the last few UI steps that make modern phones so usable, were added by Apple and although we have always felt they may not really be patentable (defensible), we begrudge Apple nothing here. It should get paid.
But Apple’s stance has always been that no-one else should be allowed to make a phone like ours, not that it should get paid. So the result should be that Apple, if it fails to license the Samsung patents, however Frand their terms should be, it should not be allowed to make a phone at all. And that’s what we have said all along and that’s where we are starting to arrive.
There still need to be settlements between Motorola and Apple, and Ericsson and Apple, because they are the other players here that hold the large number of 3G and 4G patents. Nokia ended up cutting its payments to Qualcomm by challenging this and also ended up settling with Apple for a net payment in its favor. This was always going to happen.
So far Apple only faces a ban on imports of some older devices including the iPhone 4. As new challenges come to court, the iPhone 5 will go the same way. The problem isn’t the ban, because if it takes this many years to get a ban, Apple will have already moved on and the damage has already been done. The problem is the settlement. Samsung will hold out to get at least back from Apple what it paid in a farcical Californian Jury trial that is in the process, slowly of being reviewed, and in our opinion reversed.
The decision by the US ITC that Apple infringes a Samsung patent was posted on its website last Tuesday. Models affected include the iPhone 4, iPhone 3GS, iPhone 3, iPad 3G and iPad 2 3G. These variously run on the AT&T or T-Mobile networks and on those of two regional carriers, General Communication Alaska and CT Cube in Texas.
Though Apple had shown signs of wanting to slow down the IPR war, it did that because it thought it was winning. It is unlikely it will want to settle at this point until this ban extends to new models like the iPhone 5. At that point it would be all over for Apple, and we think it MUST begin to settle now and try to move back to what it used to do best, innovate. The ITC injunction is still subject to review by president Obama, though a president rarely overturns such a ban, but Apple can keep selling the device during that 60-day review period.
‘We believe the ITC’s final determination has confirmed Apple’s history of free-riding on Samsung’s technological innovations,’ said a fairly self-righteous Samsung.
The patent that turned the tables for Samsung concerns a widely used way to transmit data from a phone. Many believe standards essential patents should not be subject to injunctions, but the ITC has not taken that view. Apple had argued that its rival was demanding unreasonable royalties going beyond the Frand (fair reasonable and non-discriminatory) terms that should apply to technology used in standards. Samsung made it clear that it gave Apple every chance to come back with a counter offer, but it refused to negotiate. The request was for Apple to pay 2.4% of the average sales price of every iPhone and cellular enabled iPad.
Given how Microsoft patents are ALL software only and virtually none of them are enforceable in a court inside the US, never mind outside where software patents aren’t recognized at all, and it asked for 5% of a phone sales price, you can see how that might sound reasonable.
If you assume that each device is $600 and that around 300 million of those models were sold, that comes out roughly at $4.5 billion. Of course it won’t be that much. Will it?
Three other patents were involved in the ITC case but the final panel agreed, in these cases, with the preliminary ruling of Judge James Gildea, that Apple did not infringe the other three and that one was invalid.
All lawyers and spokesmen seem to think this one will run and run, but we don’t. This can eat a huge amount of management time, and for Samsung that’s what the execs are paid for, at Apple they are paid to invent, and right now this is stopping them.