The verdict finally came in last week in Apple’s patent infringement case against Samsung’s mobile phone design—and what a verdict it was. While $1 billion in damages is substantial—though certainly less than the $2.5 billion initial demand request—perhaps the most fascinating outcome about Apple’s complete victory over Samsung in San Jose in late August was to ban the import of specific Samsung phones.
Of course, the damages awarded have to be ratified by the presiding judge. She could reduce them, strike them down entirely or even raise them; then the case will no doubt proceed to the patent appellate court in Washington DC (Court of Appeals for the Federal Circuit or “CAFC”), where the award will again be reviewed.
But damages are not the big issue here.
What’s Really at Stake
As Apple has fought its global war against Android, what is really at stake is the company’s ability to exclude competition it believes is infringing on its substantial patent rights. A patent (utility or design) is a temporary legal right granted to an inventor by the government to prevent others from manufacturing, selling, importing or using an invention/ product. IF Apple is granted the injunction it wants and the CAFC upholds the decision (which is by no means certain), will Apple seek a ‘generous’ licensing fee from Samsung or do they bar Samsung’s phone from entering U.S. ports? How long will it take Samsung to design a “work around” solution?
Google’s Next Move
The decision was a major defeat for Android developers and users. In order for Android to continue as an operating system, Google might need access to more patents. Patents are now openly bought and sold. Intellectual property—like patents—are now as significant, if not more so than tangible plant or products. When Google paid $12.5 billion for Motorola Mobility last summer, it attributed $5.5 billion of that to “patents and developed technology” (more than 17,000 patents)—a crucial weapon in an intellectual arms race with Apple and others to gain more control over the increasingly lucrative market for mobile devices.
All that said, though, it is important to remember that we are nowhere near done with this case. Even then there is an outside chance that the Supreme Court may take things into overtime. Apple won the first battle royal and, for now, stands triumphant. It is by no means certain that this will be the case in a couple of years’ time when everything is finally done and settled.
Intellectual Property Risks
The multibillion-dollar battles fought over IP rights have exposed the high levels of risk associated with IP-driven industries. Although the significant value and risk of IP is well-understood by executives and board members, companies often only react to IP risk when threats are imminent and adopt reactive tactical approaches to deal with them. It is the oversight of IP risk and perhaps limited appreciation of its implications that can lead to severe consequences for companies.