Wednesday, August 8, 2012

Samsung can hardly explain away all of Apple's smoking guns for intentional copying

The U.S. trial that started last week has gone fairly well for Apple so far. While jury trials are always somewhat unpredictable, this is an exceptional case in which there appears to be overwhelming evidence in favor of one party: Apple.

As a consumer, I like both companies, and own and use products from both of them. As a consultant, I don't have a working relationship in place with either one (if I had, I would have disclosed it proactively). As an analyst and blogger, I'm following this trial over the Internet and see Apple on the winning track. This impression is further strengthened by indications of unuual nervousness on the part of Samsung's legal team.

Samsung's denial of copying now even makes it the laughing stock of TV comedians. Mashable published Conan O'Brien's denial-of-copying video, which features a fake Samsung executive and juxtaposes certain Apple and Samsung products, culminating in a picture of "Samsung founder Stefan Jobes". Considering that this is a serious business issue, a fight over potentially billions of dollars in damages and market share in a market measured in the hundreds of billions of dollars, it's quite unusual for a company's defense to be ridiculed on television. Samsung tries to deny the undeniable. It's all too obvious what Samsung has done.

Among the evidence that Apple has put on the table so far, there were two items that I considered particularly impressive:

  1. according to Apple's trial brief, Google warned Samsung that its products looked too similar to Apple's and that this would provoke litigation; and

  2. in a 2010 internal report, Samsung compared the iPhone to its Galaxy phone and decided that the Galaxy would be more successful if it looked and operated more like the iPhone.

One can always try to explain away everything, and lawyers can be very creative in that regard. It's true that all large companies perform benchmarking, comparing their rivals' products to their own, but having looked at a certified translation of that Samsung document, I can't help but conclude that similarities between Samsung's subsequently-released smartphones and the iPhone were fully intended. Benchmarking, per se, is legal. Even copying is legal, but not if valid intellectual property rights are infringed. In this particular case, Apple even put Samsung on notice in the summer of 2010, to no avail.

I'm convinced that the only way Samsung can possibly avert a disaster by mitigating the damage is to focus the debate on details of its non-infringement and invalidity contentions. There's always the possibility of the jury being unable to agree on a particular claim, or of reluctance to render an infringement verdict. At the more general level of whether Samsung deliberately copied Apple's designs and technologies, Samsung has strategically lost this case in all likelihood. Its claims of being merely an independent innovator and competitor have been reduced to absurdity by the evidence. It would take a reality distortion field of unseen proportions to convince anyone that Samsung created iPhone and iPad lookalikes by mere coincidence. And there are various other device makers out there who prove that one can make products at least somewhat more distinguishable from Apple's.

Let me clarify the word "disaster" here, which came up at the start of the previous paragraph. The intellectual property rights that Apple asserts in this litigation can all be worked around, and Samsung won't be forced out of the U.S. market. But the disaster that Samsung is heading for is an overall decision that will probably be quite consistent with Apple's allegation that Samsung copied Apple's products all the way, from packaging design to physical appearance to user interface elements to operating system architecture. This is not a criminal case, but the outcome may be the next best thing to a "guilty as charged" verdict. That would affect the way Samsung is perceived not only by the market but also by judges who will have to decide on various other infringement claims Apple has brought against Samsung in multiple jurisdictions.

Even in the Northern District of California, Apple effectively has three cases pending already against Samsung:

  1. the one filed in April 2011, which is currently on trial;

  2. a long list of intellectual property rights that Apple withdrew from this case without prejudice, with the right to reassert those claims anytime after this trial; and

  3. the separate lawsuit Apple brought in February 2012 over eight technical patents.

If Apple convinces the court that Samsung infringed its rights willfully, I don't think it will take too long before the next California trial over another set of intellectual property rights asserted by Apple. In the meantime, cases will proceed in other jurisdictions, though there can always be delays such as this one in Australia. And there will likely be more delays, which suits Samsung. But sooner or later, Apple will have enforced enough intellectual property rights to have major leverage.

Getting back to the ongoing trial in California, some of the rebuttal evidence that Samsung would have liked to present was excluded by Judge Koh, but even those pictures of pre-iPhone phone designs that Samsung was contemplating or pictures from "2001: A Space Odyssey" or "Tomorrow People" wouldn't be too likely to save the day. To the extent that Apple can prove infringement, there can be no doubt that such infringement was intentional.

There must be a reasonable balance between intellectual property and competition. The scope of some of Apple's asserted intellectual property rights must be narrowed. Samsung must have a chance to modify its products in order to continue to compete. But Samsung made its bed and now has to lie in it. Samsung ignored Google's warnings, and determined that imitation, not independent creation, was the most promising way forward. It has stepped over the line. In the marketplace, that has paid off, but it's probably not going to be tolerated by the court.

Apple hasn't won this yet. But a week and a half after the trial started, Apple undoubtedly has the upper hand.

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