Quick Thoughts on Why Apple Fights Its ‘Losing’ IP Battle With Samsung

To quickly recap, Apple v. Samsung I (in the US court system) saw something close to “total victory” for Apple, but with damages (ultimately fixed at $900 million) that do very little harm to a fellow heavyweight company, and with no injunctions so far against Samsung’s infringing products (which they had already moved on from selling for the most part anyway).

Apple v. Samsung II saw a less favorable outcome. Certain of Apple’s patents were found infringed by Samsung but not others, and damages for Apple are “only” about $119 million (and even if trebled, would be less than half than the Apple v. Samsung I damage award). And this time around, the jury found for Samsung on an “apparatus for recording and reproducing digital image and speech” software patent, assessing Apple a “token” $158,400. Apple literally generates that much in less than two minutes of cash flow based on its last earnings report.

While it’s not accurate to say Apple’s lost either round, it is accurate to say that Apple hasn’t been able to stop Samsung from its recent past copying activities. You can quite fairly say that $1 billion in total damages is a relative pittance to Samsung, considering the overall success of the Galaxy S line.

So, sure, saying something like winning the battle but losing the larger war would be “in bounds”, if you’ll pardon my semantics. Apple might even have anticipated this type of outcome up front.

Then why bother? Was this a pointless endeavor?

As others have mentioned, Apple was sending a message.

And these lawsuits should have some amount of deterrent effect on competitors considering a Samsung-like strategy.

What doesn’t get pointed out – not lately, anyway – is how this tiresome fight that Tim Cook has often said he’d rather avoid probably rises to the level of crusade (“holy war”, if you will) by Apple’s corporate culture/belief standards.

While Vanity Fair harks back to Steve Jobs’ Stanford commencement address in 2005 (in general, the article’s a good read), they should really be looking around five years later, in June 2010 – after the events leading up to Apple v. Samsung I began to unfold. Jobs’ remarks are similarly indirect, but much more telling and relevant.

From about 1 hour, 3 minutes in, Steve’s final interview at the D conference:

Kara Swisher:  What do you imagine – this has been the past ten years of bringing back Apple – ten, twelve, years -what do you imagine the next 10 years of your life is [sic] gonna be about?

Jobs: [long pause]

Um…you know…

… this is probably a bad example, but I’m gonna use it.

When this whole thing with Gizmodo happened, I got a lot of advice from people that said “You’ve gotta just let it slide. You can’t … you shouldn’t go after a journalist because they bought stolen property, and they tried to extort you. You should let it slide. Apple’s a big company now. You don’t want the PR. You should let it slide.”

And I thought deeply about this. And I ended up concluding that the worst thing that could possibly happen as we get big and we get a little more influence in the world is if we change our core values and start letting it slide.

I can’t do that. I’d rather – quit.

Y’know, you go back 5 years ago what would we have done if something like this happened – you back 10 years ago …

… We have the same values now as we had then. We’re maybe a little more experienced  – certainly more beat up … but the core values are the same. And we come into work wanting to do the same thing today as we did five or ten years ago, which is build the best products for people.

… I don’t see why you have to change if you get big.

I imagine Apple had some advisors, not just journalists, say something like this about Samsung:

“You’ve gotta just cross-license or settle. You can’t, you shouldn’t go after Samsung for using your IP, they’re leveraging their existing multi-billion componentry deals with you. You should just let the lawsuit go. Apple’s a big company now. You don’t want the PR. You should let it slide.”

Clearly, Apple did not. Is not. Will not. Considering the scale of perceived wrong was exponentially greater than with Gizmodo, certainly not.

But for naught?

If Samsung’s and Apple’s diverging operating profit trends in the December 2013 and March 2014 quarters are any indication…maybe not.

Two key metrics in the broader Apple-Samsung marketplace war are still “playing out” – (1) relative financial performance, and (2) the extent Samsung is or isn’t drawing functional inspiration from Apple.

For that first point, Apple has grown operating profits year-over year for two straight quarters, even with higher deferrals impacting gross margins. Samsung’s operating profits have slightly declined YOY in that same period, with iPhone 6 looming a few months in the distance.

For the second point, notice how Samsung still outsources so many of its SoCs while actually fabricating Apple’s unique 64-bit dual-core architecture? And that none of Samsung’s latest products (S4, S5, Note III, Tab Pro 10.1, etc.) have suspiciously-similar-looking Apple connectors, instead using USB 2/3 standards? And that Samsung hasn’t used a metal backing in any of its key tablet/smartphone offerings? And that Samsung, which surely had the ability to create a one-touch fingerprint authentication mechanism for the S5, went with a uni-directional swipe-scan model instead?

But it’s still early. So maybe I’ll revisit them in a few quarters.

4 thoughts on “Quick Thoughts on Why Apple Fights Its ‘Losing’ IP Battle With Samsung

  1. I’m new to Twitter and stumbled on you there and on to this blog. I’ll be following both.

    I agree that Apple-without-Jobs still does not want to “let it slide”. But I’m wondering if Cook now realizes the courts are not going to offer protection against thieves. The folks at Apple are cunning enough to find other ways to exact retribution from their frenemies. It’s going to be a long war and Apple is patient.

    • Thanks.

      Yep, Apple probably knows the “futility” but it has to play in the system is has…and of course is probably using some of its new lobbying resources to strengthen IP protections

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