Apple’s victory in its epic legal spat with Samsung has raised eyebrows among techies and lawyers alike

Apple

A good Cook

Tim Cook’s first year as the technology giant’s boss has been a success. But the toughest test lies ahead

Aug 25th 2012 | SAN FRANCISCO | from the print edition

TALK about a hard act to follow. When Tim Cook replaced an ailing Steve Jobs as Apple’s chief executive on August 24th last year, he took over from the nearest thing the tech world had to a rock star. Some people wondered out loud how Jobs’s more humble second-in-command would fare in the absence of the firm’s brash and brilliant co-founder, who died in October. They need not have worried. As Mr Cook celebrates his first anniversary at Apple’s helm, the company continues to smash records.

On August 20th Apple’s market capitalisation reached over $623 billion, making it the most valuable listed company (if you ignore inflation) of all time. That title was previously held by Microsoft, another tech titan, whose market worth hit $615 billion in December 1999. Much of the credit for Apple’s phenomenal success goes to Jobs, the father of the iPhone and the iPad tablet computer. But Mr Cook also deserves praise for the way he has handled a tricky transition.

The process has not been without hiccups. In July Apple’s share price fell sharply after the company’s quarterly earnings disappointed investors, even though its net profit rose by 21%, to $8.8 billion. And earlier in the year Apple was lambasted for its use of Foxconn, a supplier under fire from labour activists for failings such as excessive working hours at its Chinese facilities. Mr Cook promptly went on a highly publicised tour of a Foxconn factory in China. Apple and Foxconn subsequently pledged to improve workers’ conditions there. This week the Fair Labour Association, a non-profit group that audits workplaces, said progress had been made, but more still needed to be done to cut overtime hours without unduly harming workers’ incomes.

Veteran Apple-watchers say this and other episodes are a sign that Mr Cook is more likely to pay attention to opinions outside Apple than his pr e decessor. “I think he’s a little bit more sensitive to criticism than Steve Jobs was,” says Tim Bajarin of Creative Strategies, a consultancy. Apple’s boss has certainly listened to calls from Wall Street for the company to hand back some of its cash hoard (запасы наличности), something Jobs was notoriously reluctant to do (делать с неохотой). Earlier this month, Apple paid its first dividend since 1995.

In addition to disarming critics and delighting investors, Apple has been dishing out lawsuits (подавать иски слишком часто). As The Economist went to press, a testy court battle in America between the firm and Samsung over various patents connected with smartphones and tablet computers was drawing to a close (подойти к концу). Like his mentor, Mr Cook is clearly not afraid of a fight. He also seems to be developing other Jobs-like traits, including a penchant for pithy put-downs. Asked on an analysts’ call whether personal computers and tablets could one day merge into a single device, Mr Cook shot back: “You can converge a toaster and a refrigerator, but those things are probably not going to be pleasing to the user.”

The big question is whether Apple’s boss has also learnt enough from his predecessor to keep the creative juices at the company flowing freely. In a blog post earlier this year George Colony, the boss of Forrester, a research firm, noted that the fortunes of companies such as Sony and Disney faded after their charismatic founders departed. He predicted that Apple would suffer a similar fate after coasting for a while on the back of existing products. But if Mr Cook can keep the firm’s talented senior executives on board and inspire them to conquer new markets like digital TV, where Apple has yet to make much of an impact, the firm could buck this trend(to appose a trend) – противостоять тенденции. His big screen test awaits.

Why The Apple vs Samsung Verdict Is A Big Mistake - http://www.forbes.com/sites/haydnshaughnessy/2012/08/26/why-the-apple-vs-samsung-verdict-is-a-big-mistake/

Apple versus Samsung

Copy that

Aug 25th 2012, 10:13 by M.G. | SAN FRANCISCO

AFTER a jury in a federal court in California ruled on August 24th that Samsung had violated some of Apple’s patents, one wag online began referring to the South Korean company as “Samesung”. But for Samsung, the verdict is no laughing matter. As well as vindicating Apple, the jury awarded it $1 billion in damages—an amount that could be tripled because Samsung is deemed to have “willfully” copied some aspects of Apple’s wildly popular iPhone and its iPad tablet computer.

The outcome of the case will have significant repercussions in the tech world. For a start, it will encourage Apple to lob even more lawsuits at firms it believes are ripping off its intellectual property. It will also encourage other companies that make smartphones and tablets either to license patents from Apple or to modify the design of products to minimise the risk they will be hit with lawsuits too. And the whopping size of the damages will intensify the debate over whether or not America’s system for protecting innovations needs revamping.

Samsung has already made clear that it intends to appeal against the ruling, a process that could take months or, more likely, years. But legal experts think the chances of getting it overturned are slim. The jury concluded that the company had violated a number of Apple’s patents covering things such as a “rubber-banding” feature in its firm's operating system, which makes lists jump back when pulled beyond their limit, and a “pinch-and-zoom” feature which is now found in a wide range of mobile devices. It also upheld Apple’s claim that Samsung had infringed on its design patents by copying aspects of the iPhone's design, such as the system used to display icons.

At the same time, the jurors tossed out Samsung’s charge that Apple owed it money for violating several of its patents, including one that allows a user to listen to music in the background while carrying out another task on a device. On the same day that the American ruling came out, a court in South Korea that had been hearing a similar case between the two firms concluded that both were guilty of violating patents and banned some of their devices from being sold in the country. But because America is the world’s largest market for consumer electronics, the Californian ruling will have a far bigger impact.

The fight between the two companies had been brewing for some time and was a litmus test for Apple’s determination to thwart the progress of Android, a rival mobile operating system championed by Google and embraced by Samsung and a host of other mobile-device makers. (Gartner, a research firm, says that more than two-thirds of the smartphones shipped in the second quarter of 2012 were powered by Android.) Before his death last year, Apple’s co-founder, Steve Jobs, told his biographer Walter Isaacson that he believed Android had stolen important features from Apple’s iOS operating system and said he would wage “thermonuclear war” on it.

His successor, Tim Cook, who celebrated his first year at the helm of Apple on the same day that the court ruling came out, isn’t about to declare a truce. During the trial, the notoriously secretive American firm revealed details about its design process and put on the stand a couple of its most senior executives. It also crowed about the verdict. In a statement the firm thanked the jury for sending “a loud and clear message that stealing isn’t right” and said that the evidence presented in court “showed that Samsung’s copying went far deeper” than even Apple had suspected.

Samsung, unsurprisingly, had a different view of the outcome, describing the ruling as “a win for Apple, and a loss for the American consumer”. “It is unfortunate,” it added, “that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies.” The South Korean firm did, however, have a couple of consolation prizes: the jury found that its Galaxy Tab tablet computer had not copied the iPad’s design, as Apple claimed, and it refused to grant Apple the full $2.5 billion in damages it had asked for.

Robert Scoble, a tech pundit, has even argued that the outcome of the case could be seen as a victory for Samsung on the ground that the penalty is a small price to pay for copying stuff that has helped the firm become a powerhouse in mobile devices. But other experts have pointed out that Apple has a huge stash of patents that it is now likely to defend more aggressively. And it is bound to step up its efforts to have offending Android devices banned from sale. The firm has already asked for a preliminary injunction against Samsung to stop it selling the products that infringe on Apple’s patents in America. A hearing is set for September 20th.

As a result of all this, makers of Android devices will either have to fork out money to license Apple’s technology, which will push up the price of their gadgets, or alter the design of their products sufficiently to shield them from legal challenges. That could slow the roll-out of new devices in the short term. But it could also spark a new round of innovation in the long run, as firms in the Android ecosystem seek to differentiate their offerings to protect them from more legal strikes by Apple.

The case will also stir up further debate about the way America’s patent system operates. Its fans are already hailing the California ruling as proof that the patent system protects inventors and that its benefits outweigh the costs. But critics will seize on the ruling as evidence that the litigation frenzy and a proliferation of software patents are having a chilling effect on innovation, leaving society worse off. If Samsung pursues its appeal all the way through the America's legal system, the Supreme Court may end up having to decide which camp is right.

Apple v Samsung

IPhone, uCopy, iSue

Not every innovation deserves a patent. Not every copycat deserves a punishment

Sep 1st 2012 | from the print edition

WHEN Steve Jobs unveiled the iPhone in 2007, he changed an industry. Apple’s brilliant new device was a huge advance on the mobile phones that had gone before: it looked different and it worked better. The iPhone represented innovation at its finest, making it the top-selling smartphone soon after it came out and helping to turn Apple into the world’s most valuable company, with a market capitalisation that now exceeds $630 billion.

Apple’s achievement spawned a raft of imitators. Many smartphone manufacturers now boast touch-screens and colourful icons. Among them is Samsung, the world’s biggest technology manufacturer, whose gadgets are the iPhone’s nearest rivals and closest lookalikes. The competition and the similarities were close enough for Apple to sue Samsung for patent infringement in several countries, spurring the South Korean firm to counterclaim that it had been ripped off by Apple as well. On August 24th an American jury found that Samsung had infringed six patents and ordered it to pay Apple more than $1 billion in damages, one of the steepest awards yet seen in a patent case (see article).

Some see thinly disguised protectionism in this decision. That does the jury a disservice: its members seem to have stuck to the job of working out whether patent infringements had occurred. The much bigger questions raised by this case are whether all Apple’s innovations should have been granted a patent in the first place; and the degree to which technology stalwarts and start-ups alike should be able to base their designs on the breakthroughs of others.

It is useful to recall why patents exist. The system was established as a trade-off that provides a public benefit: the state agrees to grant a limited monopoly to an inventor in return for disclosing how the technology works. To qualify, an innovation must be novel, useful and non-obvious, which earns the inventor 20 years of exclusivity. “Design patents”, which cover appearances and are granted after a simpler review process, are valid for 14 years.

The dispute between Apple and Samsung is less over how the devices work and more over their look and feel. At issue are features like the ability to zoom into an image with a double finger tap, pinching gestures, and the visual “rubber band” effect when you scroll to the end of a page. The case even extends to whether the device and its on-screen icons are allowed to have rounded corners. To be sure, some of these things were terrific improvements over what existed before the iPhone’s arrival, but to award a monopoly right to finger gestures and rounded rectangles is to stretch the definition of “novel” and “non-obvious” to breaking-point.

A proliferation of patents harms the public in three ways. First, it means that technology companies will compete more at the courtroom than in the marketplace—precisely what seems to be happening. Second, it hampers follow-on improvements by firms that implement an existing technology but build upon it as well. Third, it fuels many of the American patent system’s broader problems, such as patent trolls (speculative lawsuits by patent-holders who have no intention of actually making anything); defensive patenting (acquiring patents mainly to pre-empt the risk of litigation, which raises business costs); and “innovation gridlock” (the difficulty of combining multiple technologies to create a single new product because too many small patents are spread among too many players).

Some basic reforms would alleviate many of the problems exemplified by the iPhone lawsuit. The existing criteria for a patent should be applied with greater vigour. Specialised courts for patent disputes should be established, with technically minded judges in charge: the inflated patent-damage awards of recent years are largely the result of jury trials. And if patents are infringed, judges should favour monetary penalties over injunctions that ban the sale of offending products and thereby reduce consumer choice.

Pinch and bloom

A world of fewer but more robust patents, combined with a more efficient method of settling disputes, would not just serve the interests of the public but also help innovators like Apple. The company is rumoured to be considering an iPad with a smaller screen, a format which Samsung already sells. What if its plans were blocked by a specious patent? Apple’s own early successes were founded on enhancing the best technologies that it saw, notably the graphical interface and mouse that were first invented at Xerox’s Palo Alto Research Centre. “It comes down to trying to expose yourself to the best things that humans have done—and then try to bring those things in to what you’re doing,” said Jobs in a television documentary, “Triumph of the Nerds”, in 1996. “And we have always been shameless about stealing great ideas.”

Swipe, pinch and zoom to the courtroom

Apple’s victory in its epic legal spat with Samsung has raised eyebrows among techies and lawyers alike

Sep 1st 2012 | from the print edition

NOT LONG after a jury in the Californian city of San Jose concluded on August 24th that Samsung should pay Apple just over $1 billion in damages for infringing six of the American firm’s software and design patents, stills from a year-old sitcom episode, in which a character demonstrates an absurd triangular tablet computer, began recirculating on the internet. The images were being used to poke fun at the jury’s ruling that the South Korean firm had copied the shape of Apple’s wildly popular iPhone, which (like most) is rectangular with curved corners.

The titanic tussle between the two giants, which has led to one of the biggest penalties for patent violations in legal history, is far from over. On August 28th Apple said it wanted Lucy Koh, the judge presiding over the case, to ban the sale in America of eight of Samsung’s smartphones. Samsung, which is trying to persuade the judge to overturn the jury’s overall verdict, said it would “take all necessary measures” to keep its products on sale. Judge Koh has scheduled a hearing for September 20th to review an existing ban on sales in America of a version of Samsung’s Galaxy Tab tablet computer. Another hearing is set for December to consider imposing a ban on the phones targeted by Apple.

Even if these devices are blocked, the impact on Samsung’s bottom line should be modest because a ban will affect older devices, not the firm’s snazzy new Galaxy phones. But the case still has big implications for the tech industry, which is facing a tsunami of patent-related lawsuits. It shows how patents covering the look and feel of devices are increasingly being “weaponised” by their holders. It highlights the propensity of juries to award huge damages in intellectual-property disputes. And it will give added ammunition to those who feel that the current system of granting and policing tech patents in America needs to be overhauled.

The legal battle between Samsung and Apple is also intriguing because the archenemies work closely together. Samsung is one of the biggest suppliers of components such as memory chips for Apple’s gadgets. But its phones and tablets, which so far have used Google’s Android operating system, compete head-on with Apple’s iPhones and iPad tablets. The tension between the two firms has grown as competition in the smartphone arena has intensified (see article). Gartner, a research firm, says that more than half of the smartphones shipped worldwide in the second quarter run on Android. Apple’s late boss, Steve Jobs, promised “thermonuclear war” against what he saw as Android’s systematic copying of Apple features.

Samsung has been leading the charge of the Androids. To counter it, Apple has launched a bombardment of lawsuits against its rival around the world, claiming that Samsung’s devices breach various patents it holds. On the day that the jury in San Jose delivered its ruling, a court in South Korea hearing a similar case said both firms were guilty of patent violations against the other and banned some of their devices from sale in the country. But since America is the world’s largest market for consumer electronics, the Californian ruling will have a far greater impact.

The jury in San Jose concluded that Samsung had violated several of Apple’s utility patents covering things such as bounce-back scrolling, which makes such things as on-screen icons and web pages rebound if swiped too far, and tap-to-zoom functionality, which makes it easy to zero in on, say, an image or a map. It also said the South Korean company had copied the overall look of the iPhone, including the rounded corners of icons, thus breaching several of Apple’s design patents. To add insult to injury, the jurors tossed out the South Korean firm’s claims that Apple had ripped off some of its own innovations.

Samsung and other firms are likely to tweak the design of their devices to avoid further legal bombshells in America. Some patent lawyers say this is as it should be. “In many ways, the system is working well from an economic viewpoint,” says Wil Rao of McAndrews, Held & Malloy, a law firm. But other experts worry that design patents in particular are often drawn too broadly and granted too easily.

Whopping penalties imposed on patent infringers are also a cause for concern. Some experts blame these on the increased use of juries in patent cases. According to a study published last year by PWC, a consultancy, juries decided an average of 14% of such cases in America in the 1980s; since 2000 that figure has risen to 56%. The problem, says Brian Love, a law professor at Santa Clara University, is that jurors tend to have a gut reaction against patent violators and therefore often award damages that are vastly higher than the economic harm that has been done. Experienced judges tend to see things in a more nuanced light.

A well-known federal judge, Richard Posner, an outspoken critic of America’s patent system, has even suggested that the country’s Patent and Trademark Office be given the job of hearing patent disputes—and sufficient resources to handle a wider remit. Apple knows Judge Posner all too well. Earlier this year, he dismissed a lawsuit it brought against Motorola Mobility, mocking some of the claims Apple had made about the harm it had suffered. Samsung’s lawyers, trying to get the August ruling reversed, will be hoping Judge Koh looks closely at her colleague’s findings when battle resumes in San Jose.

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