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Clash of the tech titans

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Samsung and Apple are currently embroiled in a bitter war in a US court. And at stake is a multi-billiondollar industry, the future of smartphones, the rights of innovators and the notion of competition. TOI-Crest takes a look at the patent trial of the century.

Steve Jobs was not one to bite back strong words. But he made one statement that was radical even by his standards. About Android, Google's operating software for smartphones, he had said to his biographer Walter Isaacson: "I'm willing to go to thermonuclear war on this (Android). " This was after Apple filed a case against HTC, the firm that makes Android devices, in 2010.
He added: "Our lawsuit is saying, 'Google you f*** ing ripped off the iPhone, wholesale ripped us off' ... I will spend my last dying breath if I need to, and I will spend every penny of Apple's $40 billion in the bank, to right this wrong. I'm going to destroy Android, because it's a stolen product. "

Two years later, Apple has over $120 billion in bank and its "thermonuclear war" is in full swing. But the prime enemy is not HTC anymore. Instead, Samsung is in the dock. The Korean company has not only managed to withstand the mighty iPhone in the smartphone market with the help of Android in the last two years but has even surpassed Apple in terms of the number of smartphones sold worldwide.
"I believe this lawsuit has a lot to do with Steve Jobs's desire to get back what he believes was stolen with Android phones. Apple must feel, in a sense, that it is fulfilling the wishes of its leader, " says Patrick Moorhead, a technology industry veteran who was a vice-president at AMD before he set up his own consulting firm.

BATTLE FOR THE PRESENT


Of course, what Jobs felt about Android has nothing to do with the way the court sees the case between Apple and Samsung. The law isn't moved by sentiments even if they are those of the legendary Jobs.
In this case, the first shot was fired by Apple in February 2011. The strong business ties between the two companies notwithstanding - many components found in Apple products are made by Samsung - Apple claimed the Korean company has "slavishly" copied the technology found in iPhone and iPad. Samsung hit back with its own lawsuit, claiming that Apple's products violate several patents that it owns.
After much tussle between the crack team of highprofile lawyers that both Apple and Samsung have hired, the trial started on July 31 in a San Jose court in the US. There are several claims and counterclaims in the case but essentially the 9-member jury has to find whether Samsung is a copycat and whether Apple infringes on Samsung's patents or not. Additionally, the jury also has to decide on whether the intellectual property held by the two companies is valid or not.

In terms of damages, Apple wants the court to rule that Samsung has copied the work of Apple engineers and has profited from it. It then wants the offending Samsung devices - there are many - blocked for sale in the US and over $2. 5 billion in damages. Apple's lawyers argued in their opening statement in the trial that after iPhone debuted, a competitor like Samsung could not make the same kind of phones it made in 2006. "Samsung had two choices - accept the challenge of the iPhone, come up with its own designs, and beat Apple fairly in the market, or it could copycat it... it's easier to copy than innovate, " Harold McElhinny, an attorney representing Apple, told the court.

Samsung denies all the charges, claims that Apple patents are anyway invalid and has asked the jury to declare that Apple products infringe its wireless patents. It is demanding around $500 million in damages.
After nearly two weeks of arguments and testimony by witnesses 'hired' by Samsung and Apple, the case is nearing its end. The jury has started deliberations and some sort of verdict is likely soon.
The real issue, however, is not about the monetary compensation. The amount is peanuts compared to the money both Apple and Samsung are minting from smartphones and tablets.

The case is just one aspect of the fight that Apple and Samsung are waging for domination in the smartphone industry. According to the latest figures from IDC, a research firm, Samsung and Apple jointly hold a share of over 50 per cent in the smartphone market. More startling is the share that the two companies have in the profits generated through the sale of smartphones. Horace Dediu, an analyst, believes that in Quarter 4, 2011, Apple cornered nearly 73 per cent of the total profit generated in the smartphone market. He puts Samsung's share at nearly 26 per cent. The other players are obviously competing for the crumbs, if any.

Given that Samsung is Apple's biggest competitor at the moment and has increased its market share at a stupendous rate, the US firm is likely using the court trials to slow it down. "For plaintiffs, lawsuits are necessary to protect their intellectual property, but some suits are designed to slow down their competitors, " says Moorhead.

BATTLE FOR THE FUTURE


More than anything, it is the future of the whole industry that is at stake. The smartphone and tablet industry is still growing at a very fast pace and by scoring a win or two in court, Apple and Samsung hope to consolidate their position so that they can dominate in the future. There are two reasons why the Samsung versus Apple battle has larger implications.

The case is essentially a proxy fight. Samsung is not the real target. Apple's main aim here is Android, which has registered an impressive growth in the last few years. Apple may have virtually invented the smartphone market in 2007 with the iPhone, but after 2010, it has been Android that has dominated. According to IDC, currently the worldwide share of Android is over 60 per cent. In comparison, Apple's iOS, which powers iPhones and iPads, has a market share of just around 17 per cent.

A decisive win against Samsung in this case will allow Apple to go after other Android vendors. At the end of the day, all Android phones have more or less similar software innards. This is the reason why Google as well all other smartphone makers are keeping a close watch on this trial.

Another reason to watch this war is the nature of the patents that Apple is fighting over. "Apple has very broad patents in utility, design and trade dress. This means they own elements of what a device does and how it looks. What makes this suit unique is just how much of the overall lawsuit is around design and trade dress versus a technological patent, " says Moorhead.

In other words, Apple holds a design patent that arguably gives it rights to a smartphone or tablet that has a rectangular shape and a touchscreen. At the moment, Apple has decided to go after Samsung because some of the latter's phones do look too similar to iPhone 3GS, which was launched in 2009. Theoretically the company can sue any smartphone or tablet maker out of the market and dominate the technology future.
The extremely broad nature of Apple's patents is the reason why Samsung has argued that a rectangular device with a flat screen is not exactly an innovation but just an obvious idea. "It's unreasonable that we're fighting over rectangles, that that's being considered as an infringement, which is why we're defending ourselves, " Kevin Packingham, Samsung's chief product officer, recently told Wired magazine.
Samsung is arguing that by acquiring and asserting such broad patents, Apple is not safeguarding its innovations but is effectively killing competition. The company's attorney has acknowledged in the court that Samsung was inspired by Apple products but says that companies are inspired by their competitors all the time. "Your decision, if you go Apple's way, could change the way competition works in this country, " Samsung attorney Charles Verhoeven told the jury in a closing statement on Tuesday. "Rather than competing in the marketplace, Apple is seeking a competitive edge in the courtroom. "

The smartphone industry is still in its nascent stages. "Typically, these waves of lawsuits coincide with a new market, and in this case, it is mobile computing. There were similar battles fought in the early days of cash registers, mainframes, mini-computers and PCs, " says Moorhead. "From an industry perspective, the outcome of the lawsuit will determine just how close a device can look and feel to another one before a company can sue and win a case. Specifically, this will determine how alike phones, tablets and even PC hardware and software can look and feel. "

The judge in this trial, Lucy Koh, ironically of Korean-American descent, has told both Apple and Samsung to settle. "I see risk for both sides, " she told attorneys last week, asking the two companies to explore the idea of a meeting between their top bosses.

But it is unlikely that a settlement will be hammered out. Apple and Samsung have come too far ahead in this conflict. There is so much riding on the case that both companies want to a fight to the finish. And then there are hurt sensibilities. Jobs was willing to empty his company's coffers to destroy Android. Apple would like to carry on just to prove him right. For Samsung too it has become a matter of pride - after all it has been accused of copying. As its attorney stated in court, "Samsung is an innovator, a competitor. " No doubt the company would like to prove this for once and all.

Reader's opinion (1)

Punit MalhotraSep 2nd, 2012 at 16:36 PM

what a beautiful article...even after death steve jobs is still in news...fantastic.

 
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