Apple patent win a wake-up call for industry

It was not a good start to the weekend for Samsung chief executive Kwon Oh Hyun. Sixteen hours and almost 6,000 miles away, a nine-person jury in San Jose, California, was delivering a sweeping victory for Apple in its long-running legal fight against Samsung.

The South Korean company was found to have violated six of the seven patents Apple had sought to protect in court, with the jury also upholding the validity of all seven of them. They covered aspects of the design of Apple's iPhone as well as software that is also used in Android, the operating system created by Google that Samsung uses.

It could get worse for Samsung. District Judge Lucy Koh, who presided over the four-week trial, will decide in the next few weeks whether to ban any of Samsung's phones from the US market - which remains the most lucrative in the world. Given that the jury also concluded Samsung willfully infringed five of the patents, Koh could also triple the $1.05bn (664m pounds) damages that were awarded to Apple.

Hyun, who only took the helm at Samsung in June, spoke to Apple chief executive Tim Cook last week in an effort to reach a settlement before the jury began its deliberations. Samsung has consequently indicated that it intends to fight the ruling and has already told the judge it intends to ask her to overturn the verdict.

"This decision should not be allowed to stand because it would discourage innovation and limit the rights of consumers to make choices for themselves," Samsung lead lawyer John Quinn said.

While Hyun is now grappling with a fine, the bad publicity of being branded a copycat and the threat of some of Samsung's products being banned, Cook is likely to have had a restful weekend.

"The jury has now spoken," Cook told staff in a memo shortly after the verdict was delivered on Friday. "An important day for Apple." There is little doubt that for a company in which marketing is embedded deep in its DNA, the publicity of being legally vindicated as an innovator in the $200bn smartphone market will be savoured.

"It's gained a lot of recognition for something we already know - that they created this market," said Al Hilwa, a technology analyst with IDC Research. "The jury decided that if you're first to market, you get some protections."

Whatever the respective satisfaction and disappointment in the boardrooms of Apple and Samsung over the last 48 hours, the verdict also has broader implications for a smartphone market that over the last five years has been a fight between Apple and a handful of manufacturers, including Samsung, HTC and LG Electronics, which use the Android system developed by Google.

Although patent law is designed to encourage innovation, legal experts are sceptical the victory will spur any more innovation from Apple than it might anyway have done. Brian Love, a patent specialist at the University of Santa Clara in California, says the blow dealt to Samsung and, potentially, the other makers who use Android, weakens their need to innovate.

Nor, say analysts, is the verdict likely to see Apple increase its market share substantially even if some of Samsung's phones are banned from the US market. "Will it give them greater market share?," asks Hilwa of IDC. "No. There is a glass ceiling of how much of the market Apple can achieve because it is more concerned with the profitability of their phones." In the second quarter of the year, Samsung had a 32.6pc share of the global market compared with 16.9pc for Apple.

Most are agreed that the most telling and important response for the smartphone market will be from those who lost on Friday. Samsung and other manufacturers who use Android are likely to want Google to offer better patent protection on Android in what will be a departure from historical practice.

Google has already been sharpening its efforts to bulk up patent protection for the Android technology in the increasingly litigious smartphone world. The strongest evidence was last August's $12.5bn acquisition of Motorola Mobility, which as well as handing Google a phone manufacturer, also gave it hundreds of patents.

Love of the University of Santa Clara says the verdict could prompt Google to take further steps. "You could see Google coming up with changes to the Android operating system to cut off future claims from Apple at the pass," he said.

For consumers, the potentially most interesting consequence will be if Samsung and other manufacturers try to deliver radically new designs to avoid further accusations from Apple that they are copying its efforts.

"What this is going to do is send a wake-up call to the Asian industry that they should spend a bit more time on differentiation and design," says Hilwa of IDC.

Indeed, analysts at UBS reckon that defeat for Samsung could ultimately prove a victory for it and other competitors of Apple because it will force them to do something else. "The likelihood of Apple being leapfrogged or a rival creating a new category [of device] is greater if they have to think out of the box," according to UBS. "If they just copy Apple, like Coke, Apple can claim to be 'the real thing'."