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Apple seeks ban on Samsung phones

The effect on Samsung’s US sales will be negligible

  • Bloomberg
  • Published: 12:20 August 28, 2012
  • Gulf News

Samsung Galaxy Nexus
  • Image Credit: .
  • Apple, which won more than $1 billion (Dh3,67 billion) on August 24 after a jury found Samsung infringed six of seven patents at stake in the trial, named the phones it wants barred in a filing on Monday with US District Judge Lucy Koh in San Jose, California. The list includes several devices in the bestselling Galaxy lineup.

San Francisco: Apple is seeking a US sales ban on eight models of Samsung Electronics smartphones and the extension of a preliminary ban on a tablet computer after winning a patent trial against the South Korean company.

Apple, which won more than $1 billion (Dh3,67 billion) on August 24 after a jury found Samsung infringed six of seven patents at stake in the trial, named the phones it wants barred in a filing on Monday with US District Judge Lucy Koh in San Jose, California. The list includes several devices in the bestselling Galaxy lineup.

The effect on Samsung’s sales will be negligible because its newest smartphones aren’t on Apple’s list of devices, which will account for less than 1.4 per cent of the Korean company’s profits next year, said Mark Newman, an analyst at Sanford C. Bernstein who used to work at Samsung. The impact would be 6.3 per cent if Apple manages to broaden a ban to newer devices and block 80 per cent of all Samsung phones, he said.

“Samsung can live to fight another day,” Newman said in a phone interview.

The Suwon, South Korea-based electronics maker gained 1.7 per cent to 1,200,000 won as of 12.45pm in Seoul trading, while the benchmark Kospi index fell 0.3 per cent. The stock dropped 7.5 per cent on Monday. Apple, the world’s most valuable company, rose two per cent to $675.68 in Nasdaq trading on Monday.

‘Necessary measures’

“We will take all necessary measures to ensure the availability of our products in the US market,” Nam Ki Yung, a Seoul-based spokesman for Samsung, said in an emailed statement on Tuesday.

Samsung may have to delay the release of new devices to change their designs as it seeks to compete with Apple’s new iPhone and possibly a smaller iPad, said Chang In Whan, president of Seoul-based KTB Asset Management Co.

Apple, based in Cupertino, California, won a ban on US sales of Samsung’s Galaxy Tab 10.1 tablet in June that the South Korean company said wouldn’t have a significant effect on its business. Apple, which seeks to make that ban permanent, said in a court filing on Monday that Koh should also bar US sales of a version of the tablet that runs on mobile networks, even though the product wasn’t covered by the August 24 verdict.

Device ban

Samsung sought to have the ban on the Tab 10.1 lifted on August 26 after the jury found the company’s tablet computer didn’t infringe the Apple design patent on which the June 26 court-ordered sales ban was based. The jury instead found that the Galaxy Tab 10.1 infringed three of Apple’s software patents.

Koh hasn’t ruled on any of the requests since the verdict. She scheduled a September 20 hearing for arguments on the potential bans, adding that the date may change depending on the scope of Apple’s request.

Of the 28 Samsung devices Apple says are infringing, the eight targeted for a US sales ban include the Galaxy Prevail, which was the list’s top seller by units in the US from mid- 2010 to mid-2012, generating revenue of $378 million, according to data submitted by Samsung in a court filing.

Apple’s list includes the Galaxy S II Epic 4G, ranked by Samsung as the third-best seller by units in the US among the disputed products; the Galaxy S 4G, the fourth-best; and the Galaxy S II T-Mobile, the eighth-best seller in the U.S. during the past two years.

The other devices include the Galaxy S Showcase, the S II AT&T, the S II Skyrocket and the Droid Charge.

Of the $1.05 billion in damages awarded against Samsung, the eight phones accounted for $461 million. Combined sales of the models totalled 9.1 million units from mid-2010 to mid-2012.

Galaxy S III

The US accounted for about 12 per cent of Samsung’s smartphone sales in the second quarter, according to SK Securities Co. The company’s biggest market in the first half of this year was Western Europe at about 23 per cent, followed by the Asia-Pacific region at 22 per cent and China at 16 per cent, according to HMC Investment Securities Co.

Samsung’s latest Galaxy S III wasn’t targeted by Apple in the trial and isn’t on the proposed sales ban list submitted on Monday. The model’s exclusion is “a positive for Samsung,” Newman said.

In a related case in San Jose, Apple is seeking to block sales of the S III. In that case, also before Koh and scheduled to go to trial in 2014, Apple has won a preliminary order blocking US sales of Samsung’s Nexus smartphone.

Royalty payments

Samsung has asked the US Court of Appeals for the Federal Circuit in Washington to overturn the Nexus ban.

With Apple asking for Samsung to pay a $30 licensing fee for each handset the company sells, losing the sales of the handsets Apple is trying to get banned would be less harmful to the company’s financial performance than paying the licensing fee, he said.

“If that was applied globally, it would have a massive impact on Samsung,” Newman said of the royalty.

A royalty of $5 per device would cost Samsung about $1.2 billion a year, Newman said.

Apple won less than half of what it sought in damages in the first lawsuit to go before a US jury in the fight to dominate the global smartphone market, though Koh may later triple the damages against Samsung under federal law. Samsung avoided a finding of damages for antitrust law violations or breach of contract.

The injunction will probably be more important than the monetary damages award, Mark Lemley, a Stanford Law School professor, said after the verdict.

“The real question is whether this is enough to derail the momentum the Android ecosystem has gained in the marketplace,” Lemley said.

Android system

Samsung has used Google’s free Android operating system to build phones that propelled it to the number one spot in the phone market. Samsung, which also counts Apple as its biggest customer for phone components, began selling its first Android-based smartphone in 2009.

The nine-member jury rejected Samsung’s patent counterclaims against Apple, the world’s largest company by market capitalisation, and its request for damages. The jury also determined that all of Apple’s patents at stake in the trial were valid. Apple also won findings that Samsung devices diluted the value of its so-called trade dress, or how a product looks.

Samsung said in a statement on August 24 it will ask the judge to reverse the verdict. If Koh doesn’t overturn the award, Samsung said it will appeal. Samsung on Monday asked Koh to suspend final judgment in the case — which is required before any sales ban can take effect — until she rules on the company’s filings challenging the verdict.

The verdict is the largest jury award of the year, according to data compiled by Bloomberg. It’s the fourth-largest jury award in a patent case in US history.

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).

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