A couple of court decisions announced in Seoul, South Korea, this morning indicate that South Korea has decided to become a rogue state in connection with standard-essential patents, essentially telling foreign companies that in order to sell their technology products to the country's 50-million population, they must bow to extortion by Samsung and LG.
This is highly problematic and will have diplomatic repercussions. The victims of such abuse will be companies from the United States, Europe and Japan, and increasingly also Chinese companies. I don't know what Apple is going to do, but it would make sense to talk to both U.S. presidential candidates at the earliest opportunity.
As the media report (1, 2, 3), Apple was found to infringe two Samsung wireless patents (which have previously been identified as standard-essential ones), and Samsung was found to infringe one Apple patent. Both companies were ordered minor amounts of damages (chump change) and sales bans on older products, in Apple's case the iPhone 4 and the iPad 2. What appears at first sight to be a mixed ruling and will be subject to a de novo (from scratch) review by an appeals court is actually a declaration of a trade war. It would mean that foreign companies would either have to bow to Samsung's and LG's demands and, among other things, give up their own non-standard-essential intellectual property or stop selling in Korea. If I were Apple, I would defend myself vigorously and, if necessary, write off the Korean market until this issue is resolved through bilateral U.S.-Korea talks or at the level of the World Trade Organization. Also, Apple's products are very popular among a large part of the Korean population, though I guess the influence of "fanbois" is going to be very limited compared to the clout of the Samsung and LG conglomerates.
Even the 2:1 score in Samsung's favor is noticeably inconsistent with the track record these companies have against each other in litigation in countries in which neither one is headquartered. In such neutral countries, Samsung has won zero -- ZERO -- injunctions so far. It has failed miserably in Germany (three times already), in France, in Italy, and in the Netherlands. Now, all of a sudden, it wins two injunctions in a country in which about 20% of the GDP depends on the Samsung group (compared to that percentage, Apple means nothing to the U.S. economy). The only thing Samsung was able to win against Apple in a neutral country at all was an award of what will ultimately be very minor damages in the Netherlands.
While Samsung is now also formally subjected to an injunction, that one is not over a standard-essential patent. Samsung can modify the affected products and future products and simply work around that patent. But Apple cannot work around the 3G/UMTS standard.
Formally, only the iPhone 4 and iPad 2 are affected, but in practical terms, Apple now knows that (unless the appeals court reverses this ruling) Samsung may be able to quickly seek injunctions against newer Apple products over standard-essential patents.
Samsung and LG both have a history of aggressive enforcement of SEPs. LG has a history of very aggressive demands, and this week it just filed a lawsuit over DVD-related patents against ToshibaSamsung in Delaware. LG wants both: high royalties and a back-license to non-standard-essential patents. But if it can "only" get high royalties, it's fine with that. Samsung is not even interested in high royalties from Apple. All that it's interested in is a basis on which Apple will tolerate Samsung's and Google's infringement of its non-standard-essential patents, either on a royalty-free basis or on a basis on which net payments to Apple would be minuscule and on which Apple would not be able to impose restrictions, such as excluding certain patents from the scope of a deal.
What has to be said in all fairness to Korea is that the United States itself will have a credibility problem on standard-essential patents in the event that the ITC later today orders an import ban against Apple over a Motorola SEP (and if such ban is neither vetoed by the White House nor stayed by the Federal Circuit).
The stakes in this are getting higher and higher, but if Apple gives up its intellectual property only because of temporary issues such as the one it faces in Korea, the cost will be far higher than if it defends its rights. If the price to pay for access to the Korean market is unfettered commoditization, Apple should pull out of the market at some point, and return only after the issues have been resolved.
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