Apple's $1 Billion Damage Award Against Samsung Is Patently Meaningless

 
 
By Wayne Rash  |  Posted 2012-08-29
 
 
 

Apple's $1 Billion Damage Award Against Samsung Is Patently Meaningless


If the jury verdict in a California federal court accomplished anything beyond spending millions of your tax dollars needlessly, it also served to sow confusion. Worse, the confusion started with the jury itself, which was so bewildered about its own verdict that it awarded damages for things that the jury itself had decided didn't infringe on Apple's patents. Then it went downhill from there.

Leaving aside the likelihood that the jury conducted an unseemly rush to judgment and the foreman of the jury apparently had an interest in a related patent, the fact is that the jury made so many errors that its decision is nearly certain to be overturned on appeal. The jury was apparently so confused with the concept of "prior art" that it finally decided just to move on and ignore the issue.

Then the confusion spread. Samsung stocks dropped about seven percent the next day. Google stock prices dropped because of the association with Android. Investors spent a day running scared. But then somebody stopped to think.

What is a billion dollars to Samsung? Chump change. It's Samsung's version of pizza money. It's a rounding error in the annual report. And it means even less to Apple because Apple is so obscenely cash-rich that a billion more or less will never be noticed. So why the angst? Won't Apple force all of those Samsung phones off the market?

Well, perhaps, but for the most part those Samsung phones are models that are two years old or more. Many aren't even being sold any more. And Samsung's hot-selling Galaxy S III isn't affected by the verdict, nor is the Galaxy Note. In other words, none of the current Samsung smartphones is affected by the verdict and won't be subject to any injunction the federal court might grant, which at this point is a highly unlikely prospect.

The reason any injunction against selling old phones by Samsung is unlikely is actually twofold. First, Samsung is appealing and there's a good chance its appeal will be upheld, at least to the point of granting a second trial on the grounds of jury misconduct. The second reason an injunction probably won't be granted is that the federal judge in the case is aware that the jury in the case didn't follow her instructions and that it may have shirked its duty.

In addition, Judge Lucy Koh has announced that she will not grant a preliminary injunction demanded by Apple, but will instead hear arguments on a permanent injunction in December. Samsung, meanwhile, is asking that the injunction Koh did grant stopping sales of the Galaxy Tab 10.1 be lifted because the jury found that it didn't infringe on Apple's patents.

The Trial Was All About Competitive Advantage


If all of this sounds like a mess, that's because it is. Apple and Samsung have been suing each other in courts worldwide. Neither side has gotten the upper hand, and in many cases the rulings are contradictory. But that hasn't stopped the confusion.

For example, there was a rumor that Samsung had decided to pay the jury award to Apple in nickels. This one made the rounds on the Internet and was taken as true by some prestigious news organizations. Of course it was totally baseless and was apparently the product of a comedy site on the Web. But let's face it, a billion dollars in nickels is almost as many as are in circulation in the world. It would take something like 5,000 tractor-trailers to carry them.

Of course, there will be no payment on the jury award any time soon. Even in the unlikely event that the verdict isn't overturned, any payment would be months in the future. And that payment might never happen. Samsung might reach agreement with Apple to pay royalties to Apple on the order of a couple of dollars per phone, and the problem would go away.

Remember, this whole patent litigation campaign was purely for competitive reasons. Apple and Samsung are business partners. When Apple ships its iPhone 5 in September, remember that Samsung made the screens. Neither company has any interest in taking out the other. The recent trial really wasn't about innovation or any of the other things that patents are supposed to be about. It was purely about getting a competitive edge in sales.

And Judge Koh knew that the whole patent trial wasn't really about patents. This is why she suggested repeatedly that the two companies work things out. She even offered to send the negotiators a box of candy to help the process.

So even if the verdict is finally upheld, and Samsung has to pay Apple $1 billion or even $3 billion if the court grants Apple's motion to triple the damages, the award is meaningless. It will have no effect on either company's financial condition. It will do nothing to discourage innovation–or encourage it for that matter.

If it has any effect at all, it will likely boost the production of Windows 8 phones, if only because phone makers won't have to worry about an Apple suit over a Windows phone. There's that Windows look and feel, you know.

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