Consumer electronics and cell phone companies frequently sue -- and counter-sue -- one another over patents, but the intellectual property battle between Samsung (SSNLF) and Apple (AAPL) has grown a bit more serious: Samsung has asked the U.S. International Trade Commission to block the importation of iPads, iPhones, and iPods into the United States. The Korean company claims the products contain technology that violates some of its patents, according to media reports.
Apple filed patent suits of its own against Samsung in California federal court two months ago. The ITC process to examine Samsung's allegations could take months, as could Apple's lawsuit.
Last year, Apple asked the ITC to ban the importation of Nokia (NOK) phones. But last month, Apple agreed to pay Nokia for the rights to use its patents, which shows how quickly fortunes can change in these situations. The deal cost Apple around $1 billion in upfront costs. And back in 2006, Apple paid Creative Technology (CREAF) to settle IP rights claims for iPod screen features.
These intellectual property suits can have extensive effects on large consumer products companies. Qualcomm (QCOM) asked the ITC to block the import of Nokia products in 2006. The ITC didn't agree, but anxiety over the dispute -- which could have affected a large part of Nokia's business -- led Nokia to settle a later lawsuit over the same issue with Qualcomm in 2008, agreeing to pay royalties.
The most serious dispute among chip companies, cellphone manufacturers and interface software companies came in 2007, and it offers evidence that a ban of iPhone and iPad imports could actually happen. In that case, the ITC did block the importation of a handset that contained Qualcomm chips because rival Broadcom (BCRM) said its patents had been violated. The decision was overruled by a federal court, but for a time, Verizon Wireless feared its business could be seriously impacted. It had a number of handsets that were powered by Qualcomm chips.
One thing is certain in these IP wars: This latest action by Samsung is not a hollow threat. The risk to Apple may be months away, but, it would be naive to think Apple's U.S. business is immune from such challenges, or that its U.S. customers would never have to face the consequences.
What is Short Selling?
Make a profit when stocks prices fall.View Course »