Samsung Electronics Co. (005930) won one patent case brought by Apple Inc. (AAPL) because its tablet computer was found “not as cool” as the iPad. The next legal test in the smartphone wars revolves around a 1970s comedy routine.
U.S. International Trade Commission Judge Thomas Pender is scheduled to announce Oct. 25 whether he believes some of Samsung’s phones and tablets are substantially similar to Apple’s. Or, as the judge said in court last May, whether “it looks like, smells like” an Apple product, recalling a routine by the comedy duo Cheech and Chong about identifying dog waste.
The loser probably won’t see the humor. If the judge finds a violation and the commission agrees, the agency can block Samsung products from the U.S. market. As it’s done in the past, though, the commission probably would give Samsung time to make changes to its phones so that service carriers aren’t caught lacking devices to sell to customers.
“I don’t think you can grant an exclusion order against Samsung without disruption to the U.S. market,” said Rodney Sweetland, a lawyer with Duane Morris in Washington who specializes in cases at the trade agency. “Just because Samsung is given time to do a workaround or given some other special consideration, it’s still going to have a dramatic impact on their business. It won’t cripple them, but it will harm them.”
The judge also is reviewing Apple’s claim that Samsung infringed patents for touch-screen technology co-invented by Apple co-founder Steve Jobs and features such as the user interface and headset plugs.
Samsung has submitted documents to Pender related to a design-around, although the papers are confidential so it isn’t known what changes are involved. Apple is seeking to block U.S. imports of more than a dozen models of Samsung phones and tablets, including Galaxy Tab, Galaxy Nexus, Galaxy SII, and Galaxy Note.
The ITC case is one of more than three dozen that span four continents. Apple’s iPhone is the top-selling smartphone in the U.S., with 34 percent of the U.S. market in August, compared with Samsung’s 18 percent, according to market researcher Comscore. Samsung is the world leader in mobile phones sales, with more than a quarter of the global market to Apple’s 17 percent.
At stake is a market that Bloomberg Industries said grew 62 percent last year to $219 billion. One in seven people worldwide has a smartphone, with the global number exceeding 1 billion in the third quarter, according to an Oct. 17 report by researcher Strategy Analytics. While it took 16 years to reach that milestone, the research group estimates another billion people will have smartphones within the next three years.
The Oct. 25 ITC decision, though preliminary, takes on heightened importance after a U.S. appeals court limited the authority of federal trial judges, in civil patent-infringement lawsuits, to block sales based on the infringement of one feature of a multi-component part.
The U.S. Court of Appeals for the Federal Circuit in Washington, which specializes in U.S. patent law, on Oct. 11 overturned an order that would prevent Samsung from selling the Galaxy Nexus phone in the U.S. while another Apple patent case is pending. The appeals court said that such orders could be imposed only if the patented invention that’s in dispute is something that would influence a consumer’s choice of which product to buy.
The same court, which also handles appeals from the ITC, said in December that the trade commission’s authority to block imports isn’t constrained by the same legal rules that apply to trial courts. The ITC’s job is to protect U.S. markets from unfair trade practices, including infringement of intellectual property rights.
“For now, the ITC is going to be more important,” said David Long, a lawyer with Dow Lohnes in Washington. “The only form of relief they can give is an exclusion order. It’s a different standard. The district court can say ‘I won’t enjoin you but I’ll give you some money.’ The ITC can’t do that.”
The trade agency has twice forced companies to alter their smartphones. HTC Corp. (2498)’s phones were held up at the border in May after Apple won a trade case. The iPhone maker has an enforcement action pending that accuses HTC of violating that exclusion order.
Google Inc.’s Motorola Mobility unit was ordered to remove a feature to coordinate schedules from its phones after it was found to infringe a Microsoft Corp. patent.
The ITC is scheduled to make a final decision in the Apple case against Samsung in late February. By then, Apple should know whether it has persuaded a trial judge to block sales of some Samsung products under the new, more stringent appeals court standard. Its request for a sales ban is based on a $1 billion jury verdict Apple won against Samsung on Aug. 24 in a San Jose, California, federal court.
While the verdict vindicated Apple’s claim that Samsung copied some aspects of the iPhone and iPad, “what is more important at this point is something more practical born from a litigation victory,” said Nick Rodelli, head of Rockville, Maryland-based CFRA’s Legal Edge research service. The appeals court ruling “puts them behind where they were,” he said.
Cupertino, California-based Apple hasn’t been able to halt Samsung’s growth. In the “not as cool” case it lost in the U.K., in which a court said Samsung’s Galaxy tablet didn’t infringe a design patent, Apple was ordered to place advertisements apologizing for charges that Samsung copied Apple’s product.
Apple’s lawyers have argued it revolutionized the smartphone industry when it introduced the iPhone in 2007, only to see copycats from Samsung and other companies making handsets that run on Google Inc.’s Android operating system.
Samsung’s lawyers contend the designs are obvious, and the shape of the device is determined by its function. The Suwon, South Korea-based company has been the second-highest recipient of U.S. patents for the past five years, and smarts at allegations that it’s copying Apple. It’s been running a television advertisement mocking people who stand in line for the next Apple product.
Samsung lost the first round in its own ITC case against Apple when trade judge James Gildea said Sept. 14 that Apple didn’t infringe four Samsung patents. Samsung is seeking a review of those findings by the full commission.
The Apple case against Samsung is In the Matter of Electronic Digital Media Devices, 337-796, and Samsung’s case is In the Matter of Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, 337-794, both U.S. International Trade Commission (Washington).
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