Apple’s Win: Great Today, But Tomorrow …

Tech 'copycats' might just be forced into innovation

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A California jury on Friday afternoon awarded Apple (NASDAQ:AAPL) $1.05 billion in damages, ruling that rival smartphone and tablet maker Samsung had infringed on six of its patents.

And while Samsung undoubtedly will appeal the decision, Judge Lucy Koh still hasn’t had her final say on the matter. Things could get significantly worse for Samsung, since Koh has the ability to triple the damages awarded by the jury, as well as to ban the sale of Samsung’s patent-infringing devices on U.S. shelves.

Samsung’s reaction to the ruling, as quoted in The Verge:

“Today’s verdict should not be viewed as a win for Apple, but as a loss for the American consumer. It will lead to fewer choices, less innovation, and potentially higher prices. It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners …”

Outside of the rhetoric, though what does this case mean for consumers and investors?

Short-Term Impact

The fallout has been predictably swift. Samsung shares shed 7% of their value today, knocking $12 billion off the company’s market value. AAPL, meanwhile, gained 2% and continued to forge new all-time highs.

Samsung is sitting on a $21 billion cash pile, so any damages that are ultimately paid to Apple — even if they’re tripled to $3 billion — won’t seriously harm the company. Even a U.S. sales ban won’t be the end of the world. Samsung has repeatedly proven itself a nimble competitor, able to quickly churn out variations of products with minor adjustments if needed. Plus, while the U.S. market is big, Samsung is a global competitor — one that sells a ton of products other than smartphones and tablets.

The timing of all of this is bad from Samsung’s perspective (and pretty good from Apple’s), however, as it could result in Apple’s iPhone 5 having a fall launch window clear of its chief rival — Samsung’s Galaxy III S smartphone. That could turn what’s already expected to be a record product launch for Apple into a rout. If Samsung is allowed to continue selling its smartphone, there’s a good chance it will end up paying $10 to Apple for every unit sold in licensing fees. Either way, Apple is set to win in the short term.

The other major impact of this court case is the sense of insecurity it has sent through Google’s (NASDAQ:GOOG) Android camp. Samsung isn’t the only manufacturer selling smartphones and tablets that resemble the iPhone or iPad; it’s just the biggest. And don’t forget the “killer” patent Apple was awarded in July covering smartphone user interfaces.

If Apple decides to go all-out on the legal front — which is something it has shown a willingness to do — HTC, LG and others could be vulnerable. Smaller manufacturers lack Samsung’s cash reserves for paying off any damages, and with Samsung and Apple raking in 90% of smartphone profits, a $10 licensing fee could result in selling smartphones at a loss.

Google itself released a statement claiming that the patents don’t relate to the “core Android operating system” in an attempt to calm the waters, but its stock still dipped at Monday’s market open and was down more than 1% in afternoon trading.


Article printed from InvestorPlace Media, http://investorplace.com/2012/08/apple-win-great-today-but-tomorrow-samsung-aapl-patent/.

©2014 InvestorPlace Media, LLC

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