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Apple Vs. Samsung Trial: What's At Stake

Jul 26, 2012 (04:07 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=240004353


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Apple sued Samsung in the U.S. back in April 2011, accusing the company of "slavishly copying" the design and technology in products such as the iPhone and iPad. Apple charged that Samsung's smartphones and tablets stole their appearance from Apple's products, which predated many of Samsung's.

"Samsung cannot change the central fact that its products are strikingly similar to Apple's patented designs," said Apple in its briefs.

Samsung responded by filing lawsuits of its own in Germany, the U.K., and Korea. Then Samsung went to the U.S. International Trade Commission, and so did Apple. Where Apple's initial complaints focused on trade dress and design elements, Samsung's lawsuits pertained to wireless networking and other technologies.

[ A German court bans Samsung from selling the Galaxy Tab 7.7 across the EU. Read more at Apple Wins EU Ban Of Smaller Samsung Tablet. ]

The two companies have been trading barbs, filing paperwork, seeking injunctions, and appealing decisions ever since. Though the scope of the battle between Apple and Samsung is far greater than just the U.S. market, next week's trial, which will be held in San Jose and presided over by Judge Lucy Koh, could produce consequences for both companies in the U.S. and beyond.

As things stand today, Samsung is not allowed to import its Galaxy Tab 10.1 tablet into the U.S., thanks to an initial injunction filed at Apple's request. Samsung was also blocked from importing its Galaxy Nexus smartphone, but that injunction was waived temporarily ahead of the trial.

So what's going to happen next week? Both companies get 25 hours of time to present testimony to the 10-person jury, which will then decide the fate of these two smartphone giants.

Apple is seeking $2.5 billion in damages, which includes a wide array of factors such as lost income, unjust enrichment, royalties, and more. Samsung hasn't offered a dollar amount, but its underlying patents could be worth hundreds of millions in licensing fees if they are found to be valid and Apple is found to be violating them. Samsung is looking for 2.4% of the total sales price of each infringing device, which Apple says is "multiple times more than Apple has paid any other patentees for licenses to their declared-essential patent portfolios." The average selling point of the iPhone (forget the contract pricing, we're talking raw retail) is about $600.

If Samsung wins its 2.4% claim, Apple could have to fork over $14 for each iPhone. Apple sold 26 million of them in the last quarter alone. That's $375 million for the devices sold just in the last three months.

The possible outcomes of the trial are numerous. Samsung could be exonerated of copying Apple, and Apple could be exonerated of violating Samsung's patents. Or they could both be found guilty. More important than the actual legal ramifications will be the economic ones tied to any punishment meted out by the court.

Judge Koh has indicated time and again over the last year her frustration with the two companies. It's impossible to tell what final rulings she might make once the jury delivers a verdict. (Earlier this year, a Chicago judge tossed completely a trial between Apple and Motorola over patents. Judge Posner argued that neither company could prove damages and cancelled the trial.)

One thing is certain, however: the future competitiveness landscape of the smartphone market is at stake. Apple and Samsung together own 54% of the worldwide smartphone market in terms of device sales, and 90% of the profits. The financial devastation that can be wrought on either or both companies is significant. If Apple wins based on its trade dress and design complaints, it could impact other trials that are yet to get underway.

With billions of dollars in sales up for grabs, Apple and Samsung both want their share, no matter the cost to their competitors.

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