By: Krishnamurthy Subramanian
Friday’s $1.05-billion verdict for Apple against Samsung ranks as the largest surviving jury verdict in a patent litigation. Following the verdict, Apple stock reached a new all-time high as it rose 1.9% to $675.68 on Monday. Google fell 1.4% while Samsung fell by 7.5%. The litigation resulted because Apple accused Samsung of ripping off the feel of its iPhone and iPad among various other patent violations.
The patent war dates back to June 2010, shortly after the first release of the Galaxy phones by Samsung. Apple’s then-CEO, the late Steve Jobs, had alleged that Samsung had “slavishly copied” the design for the phones.
Apple claimed that Samsung infringed on its “product trade dress”, which defines the features that create the product’s particular appearance. These features included the product’s rectangular shape with all four corners uniformly rounded, the front surface of the product being dominated by a screen surface and a grid of colourful square icons with uniformly-rounded corners being displayed on the screen.
Apple also sued Samsung for infringing on its patents for “bounceback-scrolling”, “pinch-to-zoom”, “one-finger-scroll” and “tap-tozoom” features found in the iPhone and the iPad. Since then, the dispute has snowballed across the globe with new suits and countersuits being filed across the world.
The verdict would significantly affect not only Samsung but also the smart phone industry. Many Samsung devices are affected by the verdict: Galaxy S, Galaxy S II, Nexus S, Mesmerize, Vibrant, Fascinate, Skyrocket, Continuum, Prevail, Infuse, Gem, Indulge, Replenish, Epic 4G Touch, Droid Charge and Nexus S smart phones and the Galaxy Tab and Tab 10.1 tablets.
The jury found that the patents for pinch-to-zoom, one-finger-scroll and zoom-navigation features in Apple products were copied in every other Samsung device except the Galaxy Ace, Intercept and Replenish. Patents for tap-to-zoom feature were copied in every other Samsung device except the Captivate, Indulge, Intercept, Nexus S 4G, Transform and Vibrant models. The verdict will now be reviewed by the Court of Appeals for the Federal Circuit.
If it is upheld, Samsung will have to license the infringed features from Apple. Though the Android operating system itself is not directly affected by the verdict, the costs for Android users will increase because of the substantial licence fees that Samsung will have to pay. Post this verdict, Samsung could possibly move to the Windows 8 platform since it employs a tile interface instead of the icons.
However, persisting questions about the stability of the Windows 8 platform make this a remote possibility. Furthermore, the costs related to such switching may be quite high. Therefore, it is quite likely that Android users will continue to receive the same functionality albeit at a considerably higher cost. The increase in costs may also lead many Android consumers to move over to Apple, which explains the decline in Google’s stock price. Important public policy questions relating to intellectual property rights arise in the context of this verdict.
The most controversial one relates to the validity of patents for product trade dress. Since rectangles with rounded corners are a universal concept, granting of property rights to products/processes that replicate such universal concepts is questionable in the first place. The verdict upholding the patents to the product trade dress, therefore, set a bad precedent in upholding property rights in areas where property rights should possibly not be granted at all.
On the other hand, the pinch-tozoom, one-finger-scroll and zoomnavigation features are genuine innovations that require considerable technological expertise and creativity.
Since property rights to such innovations are bona fide, the jury must be commended for upholding these property rights. Another important public policy issue relates to whether the 20-year monopoly accorded by a patent is optimal across all industries. Should the monopoly period be lower in industries where the technology becomes obsolete very quickly?
In my opinion, this is not necessary since the process of renewal of patents takes care of differences in technological obsolescence across industries. To keep a patent in force for the full 20 years, the patentee must pay renewal fees of $880 after 3.5 years, $2,020 after 7.5 years and $3,100 after 11.5 years. If the pinch-to-zoom technology becomes obsolete in 3.5 years, for example, then Samsung and other licensers of this technology would not license it. In turn, Apple would not renew it.
In contrast, if the onefinger-scroll technology continues to remain relevant for 20 years, for example, Samsung and other licensers would continue to license it and Apple would continue to renew it. So, these options to renew the patent ensure that the effective period over which a patent provides monopoly rights correlate well with the period of obsolescence of a technology.
(The author teaches finance at the Indian School of Business)
Friday’s $1.05-billion verdict for Apple against Samsung ranks as the largest surviving jury verdict in a patent litigation. Following the verdict, Apple stock reached a new all-time high as it rose 1.9% to $675.68 on Monday. Google fell 1.4% while Samsung fell by 7.5%. The litigation resulted because Apple accused Samsung of ripping off the feel of its iPhone and iPad among various other patent violations.
The patent war dates back to June 2010, shortly after the first release of the Galaxy phones by Samsung. Apple’s then-CEO, the late Steve Jobs, had alleged that Samsung had “slavishly copied” the design for the phones.
Apple claimed that Samsung infringed on its “product trade dress”, which defines the features that create the product’s particular appearance. These features included the product’s rectangular shape with all four corners uniformly rounded, the front surface of the product being dominated by a screen surface and a grid of colourful square icons with uniformly-rounded corners being displayed on the screen.
Apple also sued Samsung for infringing on its patents for “bounceback-scrolling”, “pinch-to-zoom”, “one-finger-scroll” and “tap-tozoom” features found in the iPhone and the iPad. Since then, the dispute has snowballed across the globe with new suits and countersuits being filed across the world.
The verdict would significantly affect not only Samsung but also the smart phone industry. Many Samsung devices are affected by the verdict: Galaxy S, Galaxy S II, Nexus S, Mesmerize, Vibrant, Fascinate, Skyrocket, Continuum, Prevail, Infuse, Gem, Indulge, Replenish, Epic 4G Touch, Droid Charge and Nexus S smart phones and the Galaxy Tab and Tab 10.1 tablets.
The jury found that the patents for pinch-to-zoom, one-finger-scroll and zoom-navigation features in Apple products were copied in every other Samsung device except the Galaxy Ace, Intercept and Replenish. Patents for tap-to-zoom feature were copied in every other Samsung device except the Captivate, Indulge, Intercept, Nexus S 4G, Transform and Vibrant models. The verdict will now be reviewed by the Court of Appeals for the Federal Circuit.
If it is upheld, Samsung will have to license the infringed features from Apple. Though the Android operating system itself is not directly affected by the verdict, the costs for Android users will increase because of the substantial licence fees that Samsung will have to pay. Post this verdict, Samsung could possibly move to the Windows 8 platform since it employs a tile interface instead of the icons.
However, persisting questions about the stability of the Windows 8 platform make this a remote possibility. Furthermore, the costs related to such switching may be quite high. Therefore, it is quite likely that Android users will continue to receive the same functionality albeit at a considerably higher cost. The increase in costs may also lead many Android consumers to move over to Apple, which explains the decline in Google’s stock price. Important public policy questions relating to intellectual property rights arise in the context of this verdict.
The most controversial one relates to the validity of patents for product trade dress. Since rectangles with rounded corners are a universal concept, granting of property rights to products/processes that replicate such universal concepts is questionable in the first place. The verdict upholding the patents to the product trade dress, therefore, set a bad precedent in upholding property rights in areas where property rights should possibly not be granted at all.
Since property rights to such innovations are bona fide, the jury must be commended for upholding these property rights. Another important public policy issue relates to whether the 20-year monopoly accorded by a patent is optimal across all industries. Should the monopoly period be lower in industries where the technology becomes obsolete very quickly?
In my opinion, this is not necessary since the process of renewal of patents takes care of differences in technological obsolescence across industries. To keep a patent in force for the full 20 years, the patentee must pay renewal fees of $880 after 3.5 years, $2,020 after 7.5 years and $3,100 after 11.5 years. If the pinch-to-zoom technology becomes obsolete in 3.5 years, for example, then Samsung and other licensers of this technology would not license it. In turn, Apple would not renew it.
In contrast, if the onefinger-scroll technology continues to remain relevant for 20 years, for example, Samsung and other licensers would continue to license it and Apple would continue to renew it. So, these options to renew the patent ensure that the effective period over which a patent provides monopoly rights correlate well with the period of obsolescence of a technology.
(The author teaches finance at the Indian School of Business)
