Apple’s $1 Billion Patent Win Over Samsung Rattles Google’s Cage

The billion-dollar verdict is the largest victory yet in Apple's global proxy war against arch-rival Google. But what does the decision mean for mobile innovation?

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Ahn Young-joon / AP

Samsung Electronics' Galaxy S III, right, and Apple's iPhone 4S are displayed at a mobile phone shop in Seoul, South Korea, Aug. 24, 2012.

Apple‘s huge intellectual property victory over Samsung last Friday night was both dramatic and overwhelming. South Korea-based Samsung was hit with a $1.05 billion verdict after a federal jury of nine California residents found that it had infringed Apple’s smartphone patents. In other words, the jury found that Samsung ripped off the iPhone. Apple is now asking U.S. District Judge Lucy Koh, who presided over the trial, to bar Samsung, the world’s largest mobile phone manufacturer, from selling eight of its popular mobile devices in the United States. That’s a big deal.

Apple’s already-soaring stock price rose nearly 2% to an all-time high Monday. Samsung, meanwhile, plunged to a four-year low, wiping out some $12 billion in market valuation. (For perspective, that’s almost what Google paid to purchase Motorola Mobility, Samsung’s smaller rival.) Despite Apple’s victory, this dispute is far from over. Samsung has said it will appeal the verdict, and the two giants are squaring off over intellectual property in several other jurisdictions around the world. (TIME‘s Jared Newman breaks down the specific hardware implications of the decision here.)

Any billion-dollar jury award will grab headlines, but this case is about much more than just money. The judgement represents 2% of Samsung’s global revenue. This is a drop in the bucket — a rounding error — for global corporate giants like Samsung and Apple. So, if not money, what’s this story about? It’s about market dominance in the exploding global smartphone race. Apple’s victory is the most high-profile outcome thus far from Silicon Valley’s escalating intellectual property war. The biggest winners? Lawyers. Can you imagine the litigation fees on a $1 billion jury judgement?

The verdict was also a big win for the spirit of Steve Jobs, who raged against Google for stealing his ideas. Jobs was convinced that Google ripped off most of the Android OS and form-factor from the iPhone. The rift caused Google chairman Eric Schmidt to be politely dismissed from Apple’s board of directors three years ago this month. Google has invested heavily in Android in order to give it a foothold in the mobile space, which is the next great battle in the web advertising wars.

(READ MORE:  Patent Wars!)

This case should be viewed as just one (admittedly huge) front Apple is waging against Google worldwide, by proxy. Google’s Android OS has been the subject of speculation about its IP-weakness for some time now. That’s why Google purchased Motorola Mobility for $12.5 billion. Google wisely opened the platform to mobile-phone makers and developers. Today, Android is activating nearly one million phones per day worldwide. Last quarter Samsung sold twice as many units — many running Android — as Apple.

There’s just one problem, as nine jurors in Apple’s home jurisdiction of Silicon Valley concluded on Friday. Samsung violated Apple’s intellectual property. In plain English, the jury found that Samsung stole Apple’s smartphone designs. That’s a major problem. “In a few years, the San Jose jury verdict may — I repeat, MAY — be remembered as the tipping point that sent Android on a downward spiral,” tweeted patent expert Florian Mueller of FOSS Patents. (Mueller is a consultant to two Google rivals, Microsoft and Oracle.)

Beyond the consequences for tech-giants like Apple and Google, this case says a lot about the terrible state of the current U.S. patent law regime — a system many observers feel is woefully broken. In addition to this billion-dollar case, all the major tech giants are engaged in litigation and counter-litigation in dozens of jurisdictions worldwide. There’s an arms race gripping the tech world right now. The weapons of choice are patents.

(READ MORE: Apple Stock Jumps on $1B Samsung Verdict)

Generally speaking, there are two schools of thought coming out of this verdict. This first is that Apple’s decisive victory means that its competitors — ie. Samsung, HTC, and Google-owned Motorola — will have to redouble their efforts at innovation now that a jury has told them to stop ripping off Apple’s designs. In other words, the decision will benefit consumers by fostering a diversity of designs and products in the smartphone market.

The second school of thought is that Apple is big-footing its way around the U.S. IP system, obsessively patenting hundreds, if not thousands, of ticky-tack features like a square with rounded edges, or the flick-of-a-finger on a touch-screen. In this view, the current U.S. IP system — in which the big winners always seem to be high-priced IP lawyers and tech firms with deep pockets — is stifling innovation, because it allows one powerful company, Apple, to essentially have a monopoly on basic mobile smartphone features. Like a square with rounded edges.

The truth is that the US intellectual property regime is in desperate need of reform. Inventors should be protected — otherwise what’s the incentive to create anything? On the other hand, there is general agreement inside the tech community that the current method of adjudicating patent disputes is badly broken. “The patent system is in crisis, and it endangers the future of software development in the United States,” according to the Electronic Frontier Foundation, a West Coast digital rights group that’s been at the forefront of patent reform advocacy. EFF is not proposing that we eliminate patents altogether, obviously, but the group is calling for a smarter, more streamlined approach. But with so many powerful forces interested in maintaining the status quo — from patent-rich companies like Apple to the legal community — it’s unlikely that reform will happen anytime soon, and certainly not during an election year.

35 comments
ONchannel.Net
ONchannel.Net

iphone better than Samsung, Samsung better than Iphone, you know why this is the argument? just because we like it..yes just because we like to argue, to cofront each other, sometimes with good arguments and reasons and sometimes with bad. I own a Samsung Galaxy S3 and to be honest i love the smartphone, i had iphone 3G and also Iphone 5 but ...i think it`s all about the way you can manage to use the phone, Android or Apple...just like that.


From my point of view...both phones are incredibily awesome....witch reminds me of an movie i watched the other days on http://www.onchannel.net about the examples of different task from these phones.

Oilwars
Oilwars

All knew expensive Apple has suffered bankrupt caused by higher wages amp; higher costs of production. What ever the case the products were produced by Samsung.

There is No same apple in this world.

If Apple wants them then Apple has to Buy them from Samsung or Partnership.

lrd555
lrd555

I can't wait to see Apple assert its next round of multi-touch patents against Samung amp; others. All the opponents will come patent-less and Apple will have another 10 patents to wield like an axe.

Peter Mutiso
Peter Mutiso

 I didn't even get why Apple went to court. I thought they would come up with better strategies to outsmart Samsung in the Smartphone industry. Were did the spirit of competition go?

Apple should create a superior product

http://www.mybusinesstricks.co...

Danyz
Danyz

I think there's a worm in this Apple...

dru_down
dru_down

"The biggest winners? Lawyers."

What about Apple and the rule of law?

Gary McCray
Gary McCray

Jobs and Apple both value(d) style, but the concept that they have manged to basically patent their stylistic choices is rubbish.

Patent was designed to protect inventions, not artistic design or types of expression.

Apple has a lot of American lawyers in an American Court with an American Jury.

Their winning this thing is straight out of the courtroom scene in "Chicago".

A lot of song and dance and the stupid American jury bought it.

Sometimes I am ashamed to be American.

JohnOBX
JohnOBX

The scary thing is that somehow 9 random people from off the street are chosen to make decisions of this magnitude.  Do they have the technological background to fairly understand the arguments from both sides?  I wouldn't.  

oceanspear
oceanspear

ANDROID IS DOOMED!!.... APPLE WISHES ANDROID IS  DOOMED... THAT IS NOT GOING TO HAPPEN.. PEOPLE WANT CHOICES AND FREEDOM TO DO WITH THEIR PHONES WHATEVER THEY WANT...UNLIKE APPLE THAT WANTS TO CONTROL WHAT YOU DO WITH THEIR PHONE.

Sergio Barbosa Villas-Boas
Sergio Barbosa Villas-Boas

Apple won over Samsung the legal battle, and I will hate Apple deeply for it.

Apple is poisoning the information technology environment with

a flood of sues about intellectual property infringement.

Most of what is being alleged is ridiculous.

We are entering a very bad scenario.

Attorneys are making money while entrepreneurs, engineers an developers are anxious.

The final user will suffer with lack of innovation and competition, and high prices.

We should hate deeply Apple for that.

The best way to hate them is to campaign to boycott their products.

It does not matter if the products are attractive or not.

We should choose the alternative for a matter of principle;

because we love fair competition and innovation.

No one should be allowed to ban competitors like Apple is doing.

Karl Klept
Karl Klept

Great reporting. How in the world were you able to get Mueller to reveal that Android is doomed?

TheNewGuy523
TheNewGuy523

This is the most pointless lawsuit ever... why

doesn't apple just win the "Smartphone Battle" by creating superior

products instead of kicking and screaming like a baby about similarities. It's

a Smartphone!  They will all be similar!

It's stupid, everyone's afraid of competition these days. Let your product

speak for itself!

gcsnipe
gcsnipe

What a ridiculous article. 1 Billion dollars us nothing to Samsung. All the devices that infringe on the patents are older models that Samsung doesn't sell anymore. Its not a major problem, Samsung current models are not effected at all. This case really means nothing.

Michael Blane
Michael Blane

I wonder if the Anti-Trust Division of the DoJ will look into Apple's perceived monopoly of "smartphones". Hmmmm?

Gentler_Reader
Gentler_Reader

 When did Apple ever enjoy the spirit of competition? Not during the Jobs years, that's for sure.

Gentler_Reader
Gentler_Reader

 I'm not certain that the lack of technological background of "people off the street" is the problem. I think that people these days are suffering from malfunctioning or missing BS detectors and can be easily lead to believe that whoever says that he's the victim the loudest, whether he is a victim or not and whether he's behaving in a victim-like manner or not, deserves to win. Apple under Jobs was like a pack of wolves ready to tear apart anything that irritated it, and it still functions with that directive today. Jobs was a semi-hermit and social retard, and most likely a sociopath. He denied the very existence of his own children for many years, rejecting anything that could possibly make a claim to something that he wanted all for himself. Would you expect him to run a company any differently?

Oilwars
Oilwars

There is No same apple in this world.

What ever the case the products were produced by Samsung.

If Apple wants them then Apple must Buy them from Samsung or Partnership.

Wikileaks is Democracy
Wikileaks is Democracy

Wrong. The Samsung smartphones pre-Iphone were kludgy and over-engineered while Samsung smartphones post-iPhone were elegant in appearance and user interface, and easily mistaken for iPhones. Samsung even breathlessly admits to copying the iPhone in its internal documents. See? Dude, you are done with your disinfo.

LoudRambler
LoudRambler

 To add insult to an injury, it is Apple who "borrowed" heavily from LG smartphone design.

 As far as "rectangle with rounded edges" go, there were multiple Palm-like devices that, basically, predated Apple for a number of years.

masterdebater
masterdebater

$1B plus $12B off on market valuation is definitely something.

Tamerafda
Tamerafda

like Louise implied I'm taken by surprise that some people can profit $5932 in one month on the network. did you see this(Click on menu Home)

JohnOBX
JohnOBX

Agree about the BS detector malfunction.  

Of course when one side throws their "expert" with a list of credentials as long as your arm, and the other side throws their "expert" with a list of credentials as long as your leg, it sometimes gets confusing.

I wish there were some sort of unbiased, nonpartisan entity like the CBO or FactCheck that could be brought in to help balance things out.  

Lisahas
Lisahas

like James implied I am dazzled that anyone able to earn $7056 in four weeks on the network. did you see this(Click on menu Home)

Gentler_Reader
Gentler_Reader

 Only some monopolies are legal in the US. Monopolies such as Apple's, like the monopoly that bundled service carriers Verizon, Comcast, ATamp;T, et al are trying to put over on the public, seek to eliminate competition and are not legal.