Bloomberg News

Apple, Samsung Ordered Into Patent Settlement Conference

May 21, 2012

A Samsung Electronics Co. Galaxy Tab 10.1 tablet computer is displayed at the company's flagship store in Seoul, South Korea. Photographer: SeongJoon Cho/Bloomberg

A Samsung Electronics Co. Galaxy Tab 10.1 tablet computer is displayed at the company's flagship store in Seoul, South Korea. Photographer: SeongJoon Cho/Bloomberg

Apple Inc. (AAPL:US) and Samsung Electronics Co. are unlikely to resolve their worldwide fight over mobile device patents in court-ordered talks that started today between their chief executive officers, said lawyers following the case.

U.S. District Judge Lucy Koh in San Jose, California, ordered Apple Chief Executive Officer Tim Cook to meet face to face with Samsung CEO Choi Gee Sung. The general counsels of both companies also were directed to participate in the two-day mediation session to try settle Apple’s claims that Samsung’s smartphones and tablet computers infringe patents covering the design and feel of iPhones and iPads, as well as Samsung’s infringement counterclaims related to its Galaxy smartphones.

Koh is trying to avert a July trial that she said this month would amount to “cruel and unusual punishment” for a jury because of the broad scope of the dispute. While the meeting may lay the foundation for an agreement in months ahead, Samsung’s dominance in the market with Android-based devices, and Apple’s determined effort to protect its reputation for innovation, may leave the companies too far apart to settle the case this week.

“Nobody really expects the case be resolved on Monday or Tuesday,” said Steven J. Henry, an intellectual property lawyer at Wolf, Greenfield & Sacks in Boston who isn’t involved in the litigation. “I don’t think we’re there yet, not in a war this big. It’s a global war.”

10 Countries

Since the San Jose case was filed in April 2011, Apple and Samsung have filed more than 30 such lawsuits against each other in 10 countries. In response to Cupertino, California-based Apple’s bids to block sales of Samsung devices and win billions of dollars in damages, Suwon, South Korea-based Samsung has asserted that Apple’s patents are invalid and claimed that it’s the real victim of infringement.

The settlement negotiations are being handled by U.S. Magistrate Judge Joseph C. Spero, who is based in San Francisco.

“The judge will try to get them to realize that it’s better to come to some kind of business understanding than to just roll the dice and let judge and jury do their job,” Henry said. “I think they’re out to do more damage to each other before they get to the point of resolution.”

Adam Yates, a spokesman for Samsung, declined to comment on today’s settlement talks.

‘Blatant Copying’

Kristin Huguet, a spokeswoman for Apple, offered the same statement the company has issued for months about developments in the case, saying that Samsung’s “blatant copying is wrong, and we need to protect Apple’s intellectual property when companies steal our ideas.”

Apple on May 18 renewed its bid for a court order immediately blocking Samsung’s sales of its Galaxy Tab 10.1 tablet in the U.S. While Koh previously rejected Apple’s request for an injunction, the company said its new motion is based on an appeals court’s May 14 opinion that Apple will probably prevail on its patent infringement claim, according to Apple’s May 18 court filing.

Apple and Samsung met in September, December and on May 4 to discuss settling their dispute before the U.S. International Trade Commission, Apple said in a May 10 filing. The meetings failed to produce a resolution, and Apple’s case against Samsung is scheduled to begin trial at the Washington-based trade agency on May 31, while Samsung’s patent-infringement claims against Apple are set to go to trial at the agency June 4.

Block Imports

The ITC, which has the power to block imports of products found to infringe U.S. patents, requires parties to meet in hopes of a settlement before trials are held.

Koh’s order that the leaders of the companies meet in person is meant to add pressure on them to reach a resolution before a trial, said Mark Lemley, a Stanford Law School professor who specializes in intellectual property.

“It’s pretty common for judges to do this when the court is serious about trying to push a settlement, though rarely are the companies this big,” he said in an e-mail.

U.S. Magistrate Judge Paul S. Grewal in San Jose, who has assisted Koh in the Apple case, last year ordered Google Inc. (GOOG:US) and Oracle Corp. (ORCL:US) chiefs Larry Page and Larry Ellison to hash out their differences in person over the search engine company’s use of the Java programming language to develop the Android operating system for mobile devices. Page and Ellison met for two consecutive days in sessions that lasted more than 10 hours each day.

Oracle-Google Trial

“That didn’t work out so well,” Lemley said. Oracle’s lawsuit against Google is now entering the sixth week of a three-part trial in San Francisco eight months after the settlement talks ordered by Grewal.

Samsung has profited from its ability to offer devices running Android software at a wide range of prices. The company sold more than 40 percent of all Android mobile phones in the first quarter this year as the South Korean manufacturer became the world’s largest handset maker, Stamford, Connecticut-based research company Gartner Inc. (IT:US) said. Android is currently installed on 56 percent of new smartphones, more than twice Apple’s share.

That gives Samsung leverage in its litigation against Apple, along with Samsung’s position as Apple’s second-largest supplier, Henry said.

Steve Jobs

Equally important is believing in your fight, Henry said. To that end, Apple may be drawing inspiration not to back down from the claim by Steve Jobs, the company’s late co-founder, that the iPhone and iPad are being “ripped off.”

Jobs, who mocked Samsung as a copycat in March 2011 when he unveiled the iPad 2, gave the go-ahead for Apple to sue Samsung in San Jose a month later and went after the company in five other nations. He died in October.

Apple may feel “it will just lose too much face to settle,” Henry said. “It would take a very good sales job to come up smelling well from the settlement on Apple’s side. That doesn’t mean it won’t happen, but the appearance is going to have to be that they were victorious.”

As its market share of competing products is squeezed, Apple is losing billions of dollars and is eager to get the San Jose case to trial, the company’s lawyer, Harold McElhinny of Morrison & Foerster LLP, said in court this month.

Koh told the companies at a May 2 hearing that they failed to follow her orders to narrow the number of patents, trademarks and devices at issue. She said that if the case isn’t sufficiently narrowed in coming weeks she may move the trial date to sometime next year or tell Apple that it’s “free to sue in another venue, and get five or six trials and get all the devices and patents you want, but it’s not happening here.”

‘Most Important’

McElhinny responded that “keeping the trial date is our most important thing.” He offered to narrow the case further, telling the judge that Apple “will meet whatever your honor has in mind -- we have to do that.”

While the settlement may not happen today or tomorrow, Henry and Lemley said they both believe the case won’t get to trial.

“The parties will need to settle at some point in the future; they can each do far too much damage to the other to allow this to continue forever,” Lemley said.

“Each one has enough intellectual property to shut down the other’s products,” he said. “I don’t think either one can let that happen. So I think they will have to settle for money eventually. Which way it flows, and how much, I don’t know.”

The case is Apple Inc. v. Samsung Electronics Co., 11-01846, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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