Vetoed: The Latest in the Apple/Samsung Courtroom Drama

by Brad Moon | August 5, 2013 1:50 pm

The news has been full of stories about unemployment (or underemployment) in the legal profession[1], with reports that law schools are continuing to pump out far more lawyers than there are jobs.

I suspect that schools offering programs in intellectual property law are the exception. The way consumer technology adversaries (and very strained partners) Apple (AAPL[2]) and Samsung (SSNLF[3]) continue to go at it in courtrooms around the globe, the two companies alone should be able to gainfully employ an entire generation of IP lawyers.

The latest development in this ongoing legal battle unfolded over the weekend when the Obama administration vetoed an International Trade Commission ruling[4] that would have banned Apple from selling some older generation iOS devices in the U.S.

Apple is certainly breathing a sigh of relief over this reprieve. Even though the products covered by the ITC ruling — devices like the iPhone 3GS, iPhone 4 and iPad 2 3G — are older and make up a small percentage of the company’s U.S. sales, by some reckonings the ban could have cost Apple as much as $1 billion in revenue[5]. An Apple spokesperson told AllThingsD[6]: “We applaud the administration for standing up for innovation in this landmark case. Samsung was wrong to abuse the patent system in this way.”

For Samsung, the veto is obviously disappointing, and the South Korean government is less than pleased with the outcome[7] and its implications for patent rights.

This must feel a bit like déjà vu for the consumer electronics giant, since the last time a U.S. president vetoed an ITC ruling was when Ronald Reagan did so in 1987 — and the loser in that case (about computer memory chips) was also Samsung.

A statement released when the veto was announced[8] said: “This decision is based on my review of the various policy considerations discussed above as they relate to the effect on competitive conditions in the U.S. economy and the effect on US consumers.”

Questions are already being raised about President Obama’s personal ties to Apple[9] and whether that might have spurred him to take action. And the veto doesn’t prevent Samsung from taking further legal action, so don’t expect this issue to simply fade away. The Verge continues to track the maneuvering from the blockbuster Apple lawsuit that saw Samsung slapped with a $1 billion penalty[10] a year ago and they are currently at update No. 162[11]:

In other words, the pattern of behavior between the two companies suggests this isn’t over.

While the Apple vs. Samsung fight is currently the most visible in the technology industry, the courts continue to be a regular destination for many tech companies. At the moment, there seem to be four main reasons these companies are lawyerin’ up:

  1. Buying up and using patent portfolios has proven to be an effective weapon for keeping competitor smartphones and tablets off store shelves, even if only for short periods of time and in limited geographic locations.
  2. Those same patent portfolios have been effectively leveraged in a number of cases to win licensing fees from competitors. Even if you can’t stop them from selling their product, at least you can profit from each device they sell.
  3. With technology companies such as Google (GOOG[12]), Microsoft (MSFT[13]) and Apple becoming so dominant, they are frequently faced with investigations over issues like competition and privacy.
  4. It’s a defensive necessity in such a competitive landscape, where the lines between proprietary technology and FRAND (fair, reasonable and nondiscriminatory) technology that becomes industry standard can be blurred. Add in licensing disputes and manufacturers from foreign nations that don’t necessarily recognize or enforce copyright law, and failure to defend your essential patents using the courtroom can be costly.

Outside of the Apple/Samsung war, we’ve recently seen a number of high-profile legal cases in the tech sector:

I could go on, but this article would become a book.

It’s possible that the veto of the ITC ruling could help throw a little cold water on the litigious technology landscape, but I have my doubts. Sad, because for a while there, it seemed as though we might be entering a more reasonable phase. After settling a patent dispute with HTC[22], Apple CEO Tim Cook said: “We are glad to have reached a settlement with HTC. We will continue to stay laser focused on product innovation.”

Big talk, but nothing has really changed. The technology industry is still locked into a phase where innovation takes a back seat to litigation.

 As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Endnotes:
  1. unemployment (or underemployment) in the legal profession: http://www.pbs.org/newshour/rundown/2013/05/headed-to-law-school-lower-your-expectations.html
  2. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  3. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  4. Obama administration vetoed an International Trade Commission ruling: http://online.wsj.com/article/SB10001424127887324136204578646192008412934.html
  5. as much as $1 billion in revenue: http://investorplace.com/2013/06/samsung-apple-heats-up-again-with-itc-import-ban/
  6. told AllThingsD: http://allthingsd.com/20130803/obama-vetoes-apple-product-ban/?mod=atd_homepage_carousel
  7. South Korean government is less than pleased with the outcome: http://www.bbc.co.uk/news/business-23578078
  8. statement released when the veto was announced: http://www.scribd.com/doc/157897822/Obama-Administration-ITC-Letter
  9. President Obama’s personal ties to Apple: http://gizmodo.com/obama-just-vetoed-a-proposed-ban-on-apple-products-1013423140/1014555596
  10. blockbuster Apple lawsuit that saw Samsung slapped with a $1 billion penalty: http://investorplace.com/2012/08/apple-win-great-today-but-tomorrow-samsung-aapl-patent/
  11. currently at update No. 162: http://www.theverge.com/apple/2011/11/2/2533472/apple-vs-samsung
  12. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  13. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  14. accusations of being “in cahoots” with the NSA: http://gigaom.com/2013/06/19/googles-legal-counsel-swears-on-a-stack-of-bibles-we-are-not-in-cahoots-with-the-nsa/
  15. rename its SkyDrive cloud storage service: http://gizmodo.com/microsoft-has-to-change-skydrives-name-because-of-a-la-976021224
  16. slapped with a lawsuit over MPEG-2 codec patents: http://www.fosspatents.com/2013/08/mitsubishi-philips-thomson-sue-googles.html
  17. DOJ investigation into e-book price fixing: http://investorplace.com/2013/07/apple-gets-another-legal-black-eye/
  18. address privacy concerns about its Project Glass: http://investorplace.com/2013/07/why-you-shouldnt-bet-on-google-glass/
  19. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  20. NOK: http://studio-5.financialcontent.com/investplace/quote?Symbol=NOK
  21. HTC One smartphone infringes on NFC patents: http://www.bloomberg.com/news/2013-05-24/nokia-files-patent-infringement-lawsuit-against-htc.html
  22. After settling a patent dispute with HTC: http://investorplace.com/2012/11/after-samsung-salvo-is-apple-over-the-litigation-war/

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