Apple: A licence to bully?

With unexpected and rather unseemly haste given the often sluggish nature of judicial deliberations in civil cases in the US, a nine-person (7 men, 2 women) jury in the Federal District Court in San Jose, California, (a stone's throw from Apple's HQ) took just two and a half days to debate more than 600 questions posed during the hearing and decide that Samsung of Korea had violated a sufficient enough number of Apple patents that it should be made to pay more than a billion dollars in damages.

The jury included individuals who actually own their own patents or had worked for the likes of AT&T and such was their expertise and impartiality that each question got an average of less than two minutes consideration. The whole process must have been like speed dating - on speed.

The jury duly decided that some iterations of Samsung smartphones and tablet devices contravene a number of Apple patents including, astonishingly, the "rectangular shape " and "rounded edges" of the iPhone as well as the now ubiquitous "pinch-to-zoom" hand movement that magnifies images on handsets.

If the decision goes un-appealed (and that's rather unlikely given that Samsung is spitting enough feathers to line the nest of every bald eagle in North America) some industry observers, as well as worried manufacturers, are concerned that the decision will provide Apple with additional impetus to dissuade, deter and otherwise scare-off other companies, (such as HTC and LG), that make mobile comms devices based on Google's Android operating system.

Given that none of the combatants in the patent wars that are so distorting the global comms markets have particularly clean hands or unblemished records, it would be perfectly understandable for consumers to disdainfully tar the lot of them with the same brush - after all, the public are consistently the losers in this expensive one-sided game where the only players are super-rich multinationals that buy-up patent portfolios for "protection" purposes and drive smaller, fleeter and more innovative competitors to the wall, thus limiting consumer choice and keeping prices high.

Apple is now the most valuable publicly-traded company in history but Samsung  has overtaken it in the smartphone stakes (at last reckoning the Korean company had a 32.6 per cent share of the market whilst Apple had 16.9 per cent) and Apple is very bitter and angry about it.

Apple avers that Samsung has shipped 22.7 million mobile comms devices that illicitly use Apple-patented technology. It claims that since June 2010 the sales of the devices have made Samsung US$18.6 billion and wants sales of Samsung products be prohibited not only in the US market but also in other parts of the world as well. It also wants Samsung's monetary penalty to be tripled to more than $3 billion - that's about 4.5 per cent of Samsung's annual revenues.

Yesterday, Apple's lawyers filed a demand with the court, seeking a ban on eight Samsung mobile phones now on sale in the the US market. The devices on the list include handsets currently being sold by AT&T, T-Mobile and Verizon. On Apple's wish list are the Galaxy S 4G, Galaxy S2 AT&T model, the Galaxy S2 Skyrocket, Galaxy S2 T-Mobile model, the Galaxy S2 Epic 4G, Galaxy S Showcase, Droid Charge and Galaxy Prevail.

The list does not (as yet) include Samsung's newest Galaxy S III, which is the subject of yet another court case.

For its part, Samsung counter-alleges that many of the innovations claimed by Apple as its own were originally the brainchild of other companies such as Sony.

In a statement Samsung wrote "This [the San Jose] verdict is not the final word and should not be viewed as a win for Apple, but as a loss for the American consumer".

It added, "It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies. There has yet to be a company that has won the hearts and minds of consumers and achieved continuous growth, when its primary means to competition has been the outright abuse of patent law, not the pursuit of innovation”.

And what effect will all this have on Google? Well, the Cookie Monster first got into smartphones when its erstwhile CEO, Eric Schmidt, was actually a member of Apple's board of directors. At the time it seemed perverse in the extreme to have him there and privy to what Apple was planning. Unsurprisingly, the  late Steve Jobs got shot of Schmidt as soon as he was able.

Then, when Google's Android OS was unveiled, Jobs went ballistic, deeming it to be a a "stolen product" and a "blatant copy" of aspects of the iPhone. Indeed, so angry was the sainted Steve, (he became more incanedescent with foul-mouthed rage when he discovered that Google was to make Android available free-of-charge to any company that wanted to use it) that he vowed to spend every penny of Apple's money and his own on destroying Android and declared "thermonuclear war" on the OS and its adherents.

Few seem to remember that Android was being developed well before the iPhone hit the market and the headlines.

Meanwhile, Google is not standing idly by and has already spent $12.5 billion on buying Mororola Mobility. Thus it already owns a phone manufacturing company and a raft of patents and is likely to continue to collect as many others as it possibly can.

Android is popular with consumers and manufacturers alike (for example, all Samsung devices use it) and Google is completely dependent on the OS to drive mobile traffic to its site and to sell more advertising to consumers and so increase its revenues. It will fight, especially as Apple is steadily reducing its reliance on Google services (YouTube, for instance) and features on the iPhone and iPad.

Meanwhile Microsoft (and to some extent Nokia as well) can sit back and watch with a smile as their rivals kick the bejasus out of one another. Windows phones aren't involved in this spat and its an ill wind and all that.

Apple's newish CEO Tim Cook hasn't done himself any favours by emulating the sort of triumphalist vindictiveness sometimes exhibited by his predecessor. In a memo to Apple staff he writes, "We told Samsung we wanted a tablet tax of $30 per unit, based on the fact that we have enough patent filings in the tablet and smartphone arena to make life difficult. We control at least 75 per cent of the tablet market and have the world's sexiest smartphone. Bring it on."

He continues, "The willful verdict sets down case law that's going to prove very lucrative. Yes, there'll be appeals, but in the meantime there'll be lots of opportunities for IP revenues to boost the bottom line and lock out any competition. Have you seen our stock price lately?"

How's that for hubris?

This is a war of attrition and it has a long way to go. As bemused consumers watch monster companies kicking lumps out of one another, there could be a backlash coming, one that Apple might come to regret in the longer term. No empire lasts forever.

Meanwhile US protectionism (always lurking there in the background) is back with a vengeance and with South Korean politicians now weighing in to the matter an already deeply political economic case could soon go diplomatic. And there's a US presidential election in November. What larks!