The battle between the world’s two largest smartphone makers, Apple and Samsung, is escalating and could turn into an all out war.
Last week a top Samsung executive announced that the Korean tech giant will be taking a much tougher stance against Apple in their ongoing legal dispute. Then yesterday, news emerged from a Dutch courtroom indicating that Samsung thinks that Apple should pay royalties for their 3G technology; found in all Apple’s iPhones and iPads.
As this particular dispute is fought in the Netherlands, Samsung’s Galaxy 10.1 is currently banned in Australia and Germany and faces legal obstacles to launching in various other markets worldwide.
So, where did it all start and where will it end?
The current battle started back in April in the US. Apple sued Samsung accusing them of slavishly copying Apple’s product design, user interface and even packaging in their Galaxy range of phones and tablets.
Unfortunately for Apple, they happen to buy a number of microchips off Samsung for their iPhones and iPads. Understandably, Samsung’s upped the ante and sued Apple for violating some of their intellectual property, of which Samsung holds several key industry-wide patents. An example of this is Samsung’s patent covering the ability for a user to talk on the phone while simultaneously receiving an email. This is a key feature on modern smartphones and Samsung believes Apple hasn’t been paying them their fair share of royalties.
Last week Lee Younghee, Samsung’s Head of Global Marketing for Mobile Communications said in an interview, “We’ll be pursuing our rights for this in a more aggressive way from now on”. True to their word, it has emerged that Samsung has taken Apple to court in the Hague, Netherlands and asked for a court injunction to prevent the sale of Apple’s iPhone and iPad in the Netherlands. Other details have emerged that Samsung wants an increased royalty for every iPhone and iPad that uses Samsung’s patented 3G chips.
According to unofficial reports from the Dutch courtroom on Monday, Samsung is now pursuing a royalty of 2.4% of the price of its transceiver chips. Samsung has four such patents that are widely used in Apple products meaning a 9.6% increase in patent fees.
Taking the example of the iPhone 4: according to analysts, Apple indirectly pays Samsung around $12 for each transceiver. Apple ships approximately 80 million iPhones per year which translates to an additional cost to Apple of $92 million. This doesn’t include 3G iPads and the upcoming iPhone 5 while will undoubtedly carry the same technology.
The problem with this whole patent battle is that modern smartphones have reached a point where almost every phone carries a number of similar features, from the standard rectangular size and shape, to the way the user navigates the interface. While a company may hold a patent for one tiny aspect of this, this puts incredible pressure on manufacturers to be aware of such aspects. Phone makers must then make the decision to go ahead with a particular design or feature and risk a lawsuit, or modify the design to something less risky – but perhaps worse for the user.
Apple has taken a rather large gamble and has stirred up a hornet’s nest. As Ms Lee, Senior Vice President at Samsung explains it, “We’ve been quite respectful and also passive in a way [referring to Samsung’s patents], however, we shouldn’t be … anymore”. This has shaken up the industry and has forced players to become very defensive. Android maker Google for example, has been quick to realise this by acquiring Motorola Mobility, which holds thousands of such patents related to smartphones. This was a shrewd move by Google, allowing them space to create their own hardware in the future, acquire their own set of patents and potentially collect royalties from rival hardware makers.
It is hard to see Apple or Samsung walking away from this quietly and the war looks set to enter into an unpredictable and perhaps costly phase for both parties. There is also a chance that the current Dutch court battle may mean a delay to the launch of the much anticipated iPhone 5, not only in the Netherlands, but potentially across Europe.
Sources: WSJ, The Globe and Mail