With patent litigation that is fast turning into the technology industry favorite pastime, the ongoing legal battle between mobile handset giants, Apple and Samsung, which began in April 2011, now extends to several countries around the world with several different lawsuits being filed between the two companies. According Kane and Sherr (2011), in an article in the Wall Street Journal entitled Apple: Samsung Copied Design “Apple filed a lawsuit in the US District Court of Northern California that alleged that Samsung copied the look, product design, packaging and user interface of its products, violating its patent and trademarks. Apple in its 38 page law suit claimed that “Rather than innovate and develop its own technology and a unique Samsung style for its smart phone products and computer tablets, Samsung chose to copy Apple's technology, user interface and innovative style in these infringing products. ” This case marked the beginning of a legal battle between the two that is currently on going. Samsung actively responded to the case and later filed a law suit against Apple. The two companies have filed several other lawsuits against each other which are resulting in a back and forth legal battle.
The lawsuits between Apple and Samsung are centered on the issue of patents. The legal battle began when Apple claimed Samsung had “violated their patents covering things like the “bounce back” effect when a user scrolls to the end of a list on the iPhone and iPad, and a way to distinguish between one-finger scrolling from two-finger gestures like the pinch-to-zoom that magnifies an image. Samsung was also found to have infringed Apple patents covering the physical design of the iPhone. (Wingfield, 2012) In this specific case the jury, after deliberating for three days at a federal courthouse in San Jose, California returned a verdict stating that they found Samsung infringed on a series of Apple’s patents on mobile devices, awarding Apple over $1 billion in damages, which was one of the largest award ever in a patent case according to Wingfield. Apple and Samsung are at odds in an effort to protect their intellectual capital, which in this case are patents.
One can’t help but wonder, with such high level of attention on patents and who infringed on another company’s patents, what are the international standards for protecting intellectual capital. The World Trade Organization website, under the section entitled Intellectual Property: Protection and Enforcement gives the rules regarding protecting patents. According to the World Trade Organization “If a patent is issued for a production process, then the rights must extend to the product directly obtained from the process. Under certain conditions alleged infringers may be ordered by a court to prove that they have not used the patented process. This is exactly what happened in the lawsuit where Apple was awarded over $1 billion in damages. Samsung, who were the alleged infringers, could not prove that they did not use Apple’s patents.
The legal battle between Apple and Samsung went beyond the American borders as there are either pending or concluded lawsuits in Japan, Germany, South Korea, France, Italy along with other countries. The United States Patent and Trademark Office on their website, under the section entitled Office of Policy and External Affairs - Protecting Intellectual Property Rights (IPR) Overseas spoke about patents overseas. According to uspto. ov patents and trademarks are territorial and must be filed in each country where protection is sought. A United States of America patent or trademark does not afford protection in another country. This fact explains why both Samsung and Apple have so many other lawsuits in other countries. A market economy allows and encourages competition between industrial and commercial organizations. As competitors are out to win, they may sometimes be tempted to use malicious means to gain an unfair advantage such as making a direct attack against a competitor or misleading the public to the detriment of a competitor.
According to the World Trade Organization any act or practice carried out in the course of industrial or commercial activities contrary to honest practices constitutes an act of unfair competition; the decisive criterion being contrary to honest practices. It is not easy to find a clear-cut and worldwide definition of what constitutes an act contrary to honest practices. Standards of honesty and fairness may differ from country to country to reflect the economic, sociological and moral concepts of a given society. Therefore, the notion of ‘honesty’ has to be interpreted by the judicial bodies of the country concerned.
Conceptions of honest practices established by international trade should also be taken into consideration, especially in cases of competition between organizations in different countries. This is evident in the different cases that exist between the two mobile handset giants. What constitutes fair and unfair competition varies from country to country; for example Apple was awarded over $1 billon in awards for Samsung infringing on their patents in San Jose, California. While in South Korea, A three-judge panel in Seoul Central District Court said Apple infringed two Samsung technology patents, while Samsung violated one of Apple's patents. Ramstad and Sun Lee, 2012)
The court awarded small damages to both companies and said they must halt sales of the infringing products in South Korea. With all the legal battle between Apple and Samsung, the nearly $300 billion industry has been roiled by more than three years of expensive litigation in courts from California to South Korea. (Jones, 2013) The patent war has captured the attention of the technology industry, not only because of revelations of juicy and secret details of product development, but also for its potentially far-reaching ramifications for reshaping the competitive landscape of smartphones and tablet computers.
Brian X. Chen and Lisa Alcalay Klug in a New York Times article entitled A Verdict That Alters an Industry, addressed how the ongoing legal battle between Apple and Samsung will affect the Information Technology industry, with specific reference to the verdict for the trial in San Jose, California. Chen and Klug believed that the federal court jury’s decision in the smartphone patent lawsuit between Apple and Samsung is expected to alter the dynamics of the highly competitive mobile phone industry. For Samsung, they will have to be more cautious in how they design their products to avoid being accused of imitating Apple’s products.
According to industry experts, other makers may become more cautious, too. Google, which makes the Android software that runs at the core of Samsung phones, will clearly feel an impact through its hardware-making partner. Microsoft, however, which is attempting to enter the market with new software, will feel less of an effect. Companies in the future are going to have to consider how much they want their product to look and feel like their competitors’ products in terms of shape, size, the way it feels, the way it looks, how the icons are similar, or will the icons be quite dissimilar. Chen and Klug, 2012) Microsoft and its main hardware partner Nokia, at the very least, should have an easier time. For Microsoft and Nokia, which are trying to make a comeback in smartphones, this design distinction is a clear advantage in the internecine patent wars sweeping the industry as much as it is a marketing advantage. Things could get tougher, however, for Google, or any phone maker using its Android software. Android phones are the most common smartphones on the market today.
Samsung is the world’s largest maker of smartphones and it has been quickly gaining market share. Collectively, the various Android phones from Samsung and other makers easily outsell Apple’s iPhones. (Chen and Klug, 2012) Even though Apple and Samsung are the two direct companies that are involved, the repercussion of this legal battle extends much further than just these two companies, other major companies in the industry will be affected, if not immediately, sometime in the near future.
Apple and Samsung are not only at odds in the court room, but they are also the two rivaling companies where smartphone sales are concerned. They are both at the top of the table for smartphone sales, however Samsung now has almost doubled Apple‘s market share in smartphones. Samsung sales are up from 63 million in the fourth quarter of 2012, while Apple sales declined over the same period due to seasonal factors. Juniper Research estimates a 30% year over year increase in smartphone shipments with the first quarter 2013 total reaching almost 200 million.
Samsung increased its smartphone market share by shipping an estimated 68 million smartphones, accounting for approximately 34% of all smartphone shipments in the quarter, increasing from 30% in the previous quarter. (Shaughnessy, 2013) With all the legal issues between the two companies and with Samsung seemingly taking over the smartphone market, Apple needs to devise new plans and methods to fight back the actions of Samsung.
For starters they need to ensure they do not lag behind where new technology is concerned, they need to innovate as the next product release will be critical if they want to retain their position as innovation leaders. They need to ensure that they keep up with or try to get ahead of the game with new technology. For example Apple released the iPhone 5 in September 2012 with no hopes of releasing new devices until 2014. While Samsung released the Galaxy S4 in May of this year. This leaves the iPhone 5 to battle with the new GalaxyS4 for the next 5 months.
Apple will also need to ensure that they are attractive to emerging markets to retain their title as global brand leaders. They need to make improvements to their marketing plan. They have the perfect ammunition against Samsung when they won the law suit in San Jose, California. They need to capitalize on that fact and use it to taunt Samsung a bit. It could also be beneficially to Apple if they lowered their prices. From the sales numbers, it’s clear that Samsung sales keep climbing; it will be hard to compete against them with hopes of surpassing their sales numbers with their current prices.
Apple is the costlier and trendier of the two brands, however, Samsung’s mass market and lower cost appeal has beat out Apple in the smartphone shipments race so far this year. One important thing that Apple should take into consideration is to always ensure that whatever plan they devise, it’s fair and ethical. The legal battle is still ongoing where they are chastising Samsung for infringing their patents and partaking in unfair competition; they need to ensure they do everything right and compete in a fair manner because for sure Samsung will capitalize on the smallest opportunity they see.
The legal battle between Apple and Samsung began in April 2011 when Apple filed a 38 page law suit claiming that Samsung copied product design, packaging, user interface of its products as well as violated its patent and trademarks. This marked the beginning of a year to year legal battle between the two smartphone giants. According to the World Trade Organization, if under certain conditions alleged infringers may be ordered by court to prove that they have not used the patented process.
Samsung was unsuccessful in their efforts to prove that they did not use Apple’s patent and had to pay a record breaking $1 billion to Apple. Following this case were many other suits between the two companies in a whole host of other countries with mixed results for both companies. Having multiple law suits in the various countries are as a result of the fact that standards of honesty and fairness differs from country to country and it is left up to the judiciary of each country to decide the notion of honesty.
The legal battle between Apple and Samsung not only affect both parties, but the entire Information Technology industry. The lawsuits are expected to change the dynamics of the industry and the industry’s biggest companies. In order for Apple to get back into the game they need to devise new plans to fight back against the actions of Samsung. In devising these new plans they need to ensure they put proper business ethics and fair competition into play.