What Apple's Patent Victory Means for Broader Smartphone Market

More Diversity in Design, Plus Potential Blow to Google, Win for Microsoft

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Apple scored a clear victory in its patent dispute with Samsung Electronics Friday, increasing pressure on smartphone makers around the world to create handsets that stand apart from the iPhone and deliver more choices for consumers in a $219.1 billion market.

A jury awarded $1.05 billion in damages after finding that Samsung infringed six patents for mobile devices, a defeat for Apple's biggest opponent in smartphones.

The verdict strengthens Apple's hand as it seeks to discourage Samsung and competitors such as HTC and LG Electronics from making devices that mimic the iPhone. While it's a blow to efforts by Samsung and its software partner Google Inc. to challenge Apple in smartphones, the outcome will probably mean a broader range of devices and more options for consumers as rivals seek to avoid costly legal tussles, said Carl Howe, an analyst at Yankee Group.

"This is a big win for Apple," said Mr. Howe. "It's good for innovation. It says that if you create something new, others can't just piggyback on it. From a competition point of view, it says create your own stuff. It says copying is not OK."

Apple would add to its victory over Samsung should U.S. District Judge Lucy Koh, who presided over the trail, decide to ban Samsung mobile devices from the U.S. based on the jury's findings of infringement. Judge Koh, who could also triple the damages awarded, will consider the injunction request at a later date.

"The more significant issue is whether or not Apple is entitled to an injunction," said Colleen Chien, an assistant law professor at Santa Clara University. "If it is , expect to see some new phone designs emerge, quickly -- not only by Samsung but all other handset makers selling designs similar to Apple's."

Apple sought $2.5 billion to $2.75 billion for its claims that South Korea-based Samsung infringed four design patents and three software patents in copying the iPhone and iPad. Jurors found infringement by all 21 Samsung devices that Apple claimed had copied its so-called rubberbanding technology, the way an iPad or iPhone screen seems to bounce when a user scrolls to the end of a file.

The nine-member jury in San Jose, California, rejected Samsung's patent counterclaims against Apple and its request for damages. The jury also determined that all of Apple's patents at stake in the trial were valid.

Rising stakes
Samsung will ask the judge to overturn the verdict and, if she doesn't, will appeal the case, Mira Jang, a spokeswoman for Samsung, wrote in an email. "Today's verdict should not be viewed as a win for Apple, but as a loss for the American consumer," Samsung said. "It will lead to fewer choices, less innovation, and potentially higher prices."

"There's a huge gap between the verdict and reality," said Kevin Restivo, an International Data Corporation analyst in Toronto.

"Samsung is not likely to cede the smartphone market leadership to Apple or anyone else in the short term," Mr. Restivo said. "Short of an injunction, meaning no sales of a Galaxy-series smartphone around the world, that 's not going to change."

The four-week trial underscores rising stakes in the smartphone market, where sales surged 62% last year, according to data compiled by Bloomberg Industries. While Samsung is the leading smartphone manufacturer, Apple's iPhone is the best-selling single device. Google's Android operating system is the most-used mobile software, with 61% share.

The verdict also hands a defeat to Google, which may need to scale back or change features of Android, said Kevin Rivette, founder of 3LP Advisors LLC and former VP-intellectual property strategy for International Business Machines Corp.

"Google is in a position that it didn't want to be in," he said.

Google competitors, including Microsoft Corp., stand to benefit if manufacturers seek alternatives to Android to avoid being sued by Apple, Mr. Rivette said. "Microsoft is a big winner," Rivette said. "The licensees will start moving away from Android. They're business people."

Battle on four continents
Apple sued Samsung in April 2011, and Samsung countersued as part of a battle being waged on four continents over a smartphone market valued at $219.1 billion, according to Bloomberg Industries. The companies have also sued each other in the U.K., Australia and South Korea.

At the San Jose trial, Apple's lawyers argued that following the introduction of the iPhone in 2007, Samsung experienced a "crisis of design" -- a phrase from an internal email at the South Korean company -- and set about copying the features and look of Apple's "revolutionary" devices.

Samsung's attorneys countered that Apple's innovations were obvious and that its own phones and tablets evolved out of natural competition rather than mimicry. The patent disputes between Apple and Samsung are far from over.

The patent disputes began when Samsung released its Galaxy smartphones in 2010. Apple co-founder Steve Jobs, who died Oct. 5, initiated contact with Samsung over his concerns that the Galaxy phones copied the iPhone, according to trial testimony.

A hearing for Apple's request for an injunction is scheduled for Sept. 20.

"We've seen the first big win in a long battle," Mr. Rivette said.

~~~Bloomberg News~~~

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