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Apple's victory could mean fewer phone options

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Aug. 25, 2012, 11:49 a.m. | Science & technology — by Associated Press

Samsung Electronics' Galaxy S III, right, and Apple's iPhone 4S are displayed at a mobile phone shop in Seoul, South Korea, Friday, Aug. 24, 2012.
© AP

Associated Press

Associated Press

SAN JOSE, California — A jury's conclusion that Samsung stole the innovative technology used by Apple to create its revolutionary iPhone and iPad could mean fewer smartphone options for consumers to choose from, analysts said. 

Apple Inc.'s $1-billion (€800-million) legal victory sends a warning to other companies manufacturing similar devices, the biggest marketplace threat to Apple.

A federal jury's found Friday that Seoul-based Samsung Electronic Co. stole Apple's technology to make and market smartphones using Google's Android software.

"Some of these device makers might end up saying, 'We love Android, but we really don't want to fight with Apple anymore,'" said Christopher Marlett, CEO of MDB Capital Group, an investment bank specializing in intellectual property. "I think it may ultimately come down to Google having to indemnify these guys, if it wants them to continue using Android."

That's if the verdict stands. Samsung, the global leader among smartphone makers, vowed to fight. Its lawyers told the judge it intended to ask her to toss out the verdict.

"This decision should not be allowed to stand because it would discourage innovation and limit the rights of consumers to make choices for themselves," Samsung lead lawyer John Quinn said. He argued that the judge or an appeals court should overturn the verdict.

Apple lawyers plan to formally demand Samsung pull its most popular cellphones and computer tablets from the U.S. market. They also can ask the judge to triple the damages from $1.05 billion to $3 billion.

U.S. District Judge Lucy Koh will decide those issues, along with Samsung's demand she overturn the jury's verdict, in several weeks. Quinn said Samsung would appeal if the judge refuses to toss out the decision.

Apple Inc. filed its patent infringement lawsuit in April 2011 and engaged the country's highest-paid patent lawyers to demand $2.5 billion from its top smartphone competitor. Samsung Electronics Co. fired back with its own lawsuit seeking $399 million.

The jury on Friday rejected all Samsung's claims against Apple, but also decided against some of Apple's claims involving the two dozen Samsung devices at issue.

It found that several Samsung products illegally used such Apple creations as the "bounce-back" feature when a user scrolls to an end image, and the ability to zoom text with a tap of a finger.

The U.S. case was the latest skirmish in a global legal battle between the two tech giants. Its outcome is likely to have ripple effects in the smartphone market. Other device makers relying on Android, the mobile operating system that Google Inc. has given for free to Samsung and other phone makers, may be more reluctant to use the software and risk getting dragged into court.

During closing arguments, Apple attorney Harold McElhinny claimed Samsung had a "crisis of design" after the 2007 launch of the iPhone, and executives were determined to cash in illegally on the success of the revolutionary device.

Samsung's lawyers countered that it was legally giving consumers what they want: smartphones with big screens. They said Samsung didn't violate Apple's patents and alleged innovations claimed by Apple were created by other companies.

Samsung said after the verdict that it was "unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners."

"This is by no means the final word in this case," Quinn said in a statement. "Patent law should not be twisted so as to give one company a monopoly over the shape of smartphones."

The jurors' determination that Samsung took Apple's ideas probably matters more to the companies than the monetary damages, Marlett said.

"I don't know if $1 billion is hugely significant to Apple or Samsung," Marlett said. "But there is a social cost here. As a company, you don't want to be known as someone who steals from someone else. I am sure Samsung wants to be known as an innovator, especially since a lot of Asian companies have become known for copying the designs of innovators."

Apple and Samsung combined account for more than half of global smartphone sales. Samsung has sold 22.7 million smartphones and tablets that Apple claimed uses its technology. McElhinny said those devices accounted for $8.16 billion in sales since June 2010.

Samsung's Galaxy line of phones run on Android, and ISI Group analysts viewed the verdict as a blow to Android as much as Samsung.

If Android lose any ground in the mobile computing market, that would hurt Google, too. That's because Google relies on Android to drive mobile traffic to its search engine and services to sell more advertising.

Google entered the smartphone market while its then-CEO Eric Schmidt was on Apple's board, infuriating Apple co-founder Steve Jobs, who considered Android to be a blatant rip-off of the iPhone's innovations.

After shoving Schmidt off Apple's board, Jobs vowed that Apple would resort to "thermonuclear war" to destroy Android and its allies.

The Apple-Samsung trial came after each side filed a blizzard of legal motions and refused advisories by the judge to settle the dispute out of court. Legal experts and Wall Street analysts had viewed Samsung as the trial's underdog. Apple's headquarters is just 10 miles from the San Jose courthouse, and jurors were picked from the heart of Silicon Valley, where Jobs is a revered technological pioneer.

A verdict came after less than three days of deliberations, surprising observers who expected longer deliberations because of the case's complexity.

While the issues were complex, patent expert Alexander I. Poltorak has said the case would likely boil down to whether jurors believed Samsung's products look and feel like Apple's iPhone and iPad.

Samsung's lawyers argued that many of Apple's claims of innovation were either obvious concepts or ideas stolen from Sony Corp. and others. Experts called that line of argument a high-risk strategy because of Apple's reputation as an innovator.

Apple's lawyers argued there is almost no difference between Samsung products and those of Apple, and presented internal Samsung documents they said showed it copied Apple designs. Samsung lawyers insisted that several other companies and inventors had developed much of the Apple technology at issue.

Apple and Samsung have filed similar lawsuits in South Korea, Germany, Japan, Italy, the Netherlands, Britain, France and Australia.

"This is not the final word in this case or in battles being waged in courts and tribunals around the world, some of which have already rejected many of Apple's claims," Samsung said in its statement.

Samsung won a home court ruling earlier Friday in the global patent battle against Apple. Judges in Seoul said Samsung didn't copy the look and feel of the iPhone and ruled that Apple infringed on Samsung's wireless technology.

But like the jury in California, South Korean judges said Samsung violated Apple's technology behind the "bounce-back" feature. Both sides were ordered to pay limited damages.

The Seoul ruling was a rare victory for Samsung in its arguments that Apple has infringed on its wireless technology patents. Samsung's claims previously were shot down by courts in Europe, where judges ruled that Samsung patents must be licensed under fair terms to competitors.

The U.S. case is one of some 50 lawsuits among myriad telecommunications companies jockeying for position in the burgeoning $219 billion market for computer tablets and smartphones.

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