Apple Scores a Landmark Victory That Will Shape Mobile Competition

Just as Tim Cook was celebrating his one-year anniversary of becoming CEO of Apple (NAS: AAPL) , he saw quite an anniversary gift: $1.05 billion awarded to the company. In the iPhone maker's high-profile patent war with frenemy Samsung, the jury sided with Apple in a major blow to its South Korean competitor and component supplier and also importantly to the Google (NAS: GOOG) Android army.

Apple: 6, Samsung: 0
It was a landslide victory for Apple, with jurors finding that Samsung had infringed on six out of seven of Apple's patents. The verdict was reached in about 21 hours, spanning over three days, which was faster than most observers were expecting. The patents covered both software and interface components as well as hardware designs.

Apple iPhone 3GS (left) vs. Samsung Galaxy S I9000 (right). Sources: Apple, Samsung.


Apple iPhone 3GS (left) vs. Samsung Galaxy S I9000 (right). Sources: Apple, Samsung.

The jury was tasked with sorting through a slew of accused Samsung devices and deciding whether each one violated various patents. With such a broad product lineup, this was a daunting task, but here's a summary.

Apple Patent

Infringed?

Utility patent '163: Tapping to zoom Yes, 16 out of 24 accused devices
Utility patent '381: "Rubber-band effect," bouncing back when scrolling to end of a page Yes, 21 out of 21 accused devices
Utility patent '915: "Pinch-to-zoom," distinguishing between single-touch and multitouch gestures Yes, 21 out of 24 accused devices
Design patent '087: iPhone design, rounded corners and front face Yes, 3 out of 8 accused devices
Design patent '305: Icon interface and grid layout Yes, 13 out of 13 accused devices
Design patent '677: iPhone design, edge-to-edge glass and display borders, front speaker Yes, 12 out of 13 accused devices
Design patent '889: iPad design, rectangular shape with rounded corners No, 0 out of 2 accused devices

Source: The Wall Street Journal.

The one iPad-related patent that didn't score any votes involved what Samsung had been calling Apple's "black rectangle problem," saying the iPad maker couldn't simply patent geometric shapes, because the patent amounted to little more than a rectangle with rounded corners.

Regarding Samsung's countersuit, alleging infringement on five of its patents, the jury gave Sammy a big fat goose egg. Sifting through accused Apple's devices was a bit easier for the jury, since Apple has only a handful of models.

Samsung Patent

Infringed?

Standards-essential patent '516: Power-limiting technology to reduce 3G data interference No, 0 out of 2 accused devices
Standards-essential patent '941: E-bit technology that transfers data more efficiently No, 0 out of 2 accused devices
Feature patent '711: Playing music in the background while multitasking No, 0 out of 4 accused devices
Feature patent '460: Sending emails, with or without photos, from a phone with a camera No, 0 out of 5 accused devices
Feature patent '893: Changing from photo and image display modes. No, 0 out of 4 accused devices

Source: The Wall Street Journal.

Samsung's attempt to use its standard-essential patents was unsuccessful, because Apple argued that it purchased wireless baseband chips from Intel (NAS: INTC) , which pays a licensing fee to Samsung. That covers Intel's customers in what's called patent exhaustion, and since Samsung had already effectively been paid for the usage of its IP, it can't turn around and sue Intel's customers further down the supply chain to get paid twice.

Another important aspect was that the jury found Samsung's infringement willful, which also means that Judge Lucy Koh can potentially triple the monetary award, which theoretically could put Samsung on the hook for $3.15 billion. There was ample evidence of willful infringement -- such as the 132-page internal Samsung document all about how the Galaxy S1 would be better if only it were more like the iPhone.

In an exclusive interview with CNET, one of the jurors added, "The emails that went back and forth from Samsung execs about the Apple features that they should incorporate into their devices was pretty damning to me."

Can't complain
The monetary award was shy of the $2.5 billion that Apple had originally been shooting for, but I don't think you'll hear any complaints coming out of Cupertino. On the contrary, here's Cook memo to employees in the wake of the verdict:

Today was an important day for Apple and for innovators everywhere.

Many of you have been closely following the trial against Samsung in San Jose for the past few weeks. We chose legal action very reluctantly and only after repeatedly asking Samsung to stop copying our work. For us this lawsuit has always been about something much more important than patents or money. It's about values. We value originality and innovation and pour our lives into making the best products on earth. And we do this to delight our customers, not for competitors to flagrantly copy.

We owe a debt of gratitude to the jury who invested their time in listening to our story. We were thrilled to finally have the opportunity to tell it. The mountain of evidence presented during the trial showed that Samsung's copying went far deeper than we knew.


The jury has now spoken. We applaud them for finding Samsung's behavior willful and for sending a loud and clear message that stealing isn't right.

I am very proud of the work that each of you do.

Today, values have won and I hope the whole world listens.

Tim

Source: 9to5Mac.

Samsung's response naturally couldn't be more to the contrary: "Today's verdict should not be viewed as a win for Apple, but as a loss for the American consumer. It will lead to fewer choices, less innovation, and potentially higher prices."

The next step, beyond the inevitable appeal that Samsung will file, is a preliminary hearing on sales injunctions for infringing devices. That could potentially lead to sales bans on infringing devices. That hearing is set for Sept. 20, which incidentally is the day before Apple's rumored iPhone launch.

"Windows Phone is looking gooood right now."
The whole mobile world has been watching the trial, because it carries heavy implications for Android OEMs. Many of the software features that Apple scored victories on are also characteristics of Android itself. That means consumers can expect to see some interface changes coming to Android to design around these patents. The victory sends a battle cry against Android OEMs that are likely to be shuddering upon hearing the news.

Samsung is one of the most powerful electronic conglomerates in the world, but many in the Android camp are smaller OEMs that simply can't afford such a costly and drawn-out legal battle, much less billion-dollar damages if they're also found guilty.

This is potentially a major boon for Microsoft (NAS: MSFT) Windows Phone if OEMs become disenchanted with Android as a result. Instead of just paying Microsoft Android-related royalties, OEMs could just pay Microsoft a Windows Phone licensing fee.

They could also feel safer knowing that Apple isn't likely to come after Windows Phone. Through the course of the trial, it was also revealed that Apple and Microsoft have a cross-licensing agreement dating to 1997 that covers a broad range of patents, although there are specific provisions against copying each other's products. Some of the dated legalese is vague, but chances are good that Apple won't be patently attacking Microsoft or its OEMs anytime soon over its mobile devices.

In the words of Microsoft marketing exec Bill Cox, "Windows Phone is looking gooood right now."

The Motley Fool has just recently launched premium ticker-specific reports that lay out everything you need to know. They all come with free updates included at no additional cost. Make sure to grab the one on Apple and the one on Microsoft today!

The article Apple Scores a Landmark Victory That Will Shape Mobile Competition originally appeared on Fool.com.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Google, Intel, Microsoft, and Apple and creating a synthetic covered call position in Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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