Bloomberg News

Samsung Barred From U.S. Nexus Phone Sales

June 30, 2012

Samsung Nexus Smartphone

A Samsung Electronics Nexus smartphone sits on display at the Mobile World Congress in Barcelona, Spain, in March 2012. Photographer: Chris Ratcliffe/Bloomberg

Samsung Electronics Co. (005930), the world’s biggest maker of mobile phones, was barred from selling its Galaxy Nexus smartphone in the U.S. by a second court ruling this week in its global patent dispute with Apple Inc. (AAPL:US)

The ruling by U.S. District Judge Lucy Koh in San Jose, California, follows her June 26 order blocking U.S. sales of Samsung’s Galaxy Tab 10.1 computer in the patent and trademark- infringement lawsuit over smartphones and tablets. On June 7, Koh expedited evidence sharing for Apple’s bid to block sales of Samsung’s newest Galaxy smartphone, the Galaxy S III.

“Although Samsung will necessarily be harmed by being forced to withdraw its product from the market before the merits can be determined after a full trial, the harm faced by Apple absent an injunction is greater,” Koh said in her ruling yesterday. “Apple’s interest in enforcing its patent rights is particularly strong because it has presented a strong case on the merits.”

The world’s two biggest makers of high-end phones have accused each other of copying designs and technology for mobile devices and are fighting patent battles on four continents to retain their dominance in the $219 billion global smartphone market. After rejecting Apple’s repeated requests for injunctions blocking sales of Samsung products, Koh, following an appeals court ruling in Apple’s favor, has granted Apple two important injunctions this week.

‘Big Deal’

“It’s a big deal,” said Carl Howe, an analyst with Yankee Group, a Boston-based technology research firm. “Samsung is perhaps the best and most successful challenge to Apple in the smartphone business, so to win an injunction against your biggest competitor is pretty profound.”

Taken with the earlier ruling on the Galaxy Tab, he said, “It does imply that there will be problems for Samsung.”

Samsung accounts for 29.1 percent of global shipments of smartphones, according to market research firm IDC. Cupertino, California-based Apple is second with 24.2 percent, IDC said.

Apple has sought to bar as many as 25 Samsung smartphones in addition to the Nexus model covered by yesterday’s ruling, including the latest, the Galaxy S III. The Nexus phone was the first smartphone to run Google’s Android version 4.0.

“Samsung is disappointed, as the court’s decision will restrict U.S. consumer choice in the smartphone market,” Adam Yates, a Samsung spokesman, said in an e-mailed statement. “We will take all available measures, including legal action, to ensure the Galaxy Nexus remains available to consumers.”

The South Korean electronics maker is working closely with Google to resolve the sales ban as the disputed patent involves the U.S. company’s search function, Samsung said in a separate statement today.

Biggest Suppliers

Outside courtroom battles, Samsung and Apple also have a close business relationship. Samsung is one of Apple’s biggest suppliers, making parts including semiconductors and screens. About 7.6 percent of Samsung’s revenue comes from Apple, according to data compiled by Bloomberg.

Earlier this week, Kim Young Chan, a Seoul-based analyst at Shinhan Investment Corp., said Samsung’s “fundamentals will stay intact” so long as smartphone sales aren’t blocked. Samsung, which doesn’t disclose shipment figures for smartphones and tablets, sold 44.5 million smartphones globally in the first quarter, according to market researcher Strategy Analytics. Apple is the biggest buyer of Samsung chips and displays.

Delay Request

Kevin Johnson, a lawyer for Samsung, said the Suwon, South Korea-based company will request by tomorrow afternoon to delay the order from taking effect.

In her order, Koh said Apple had shown that four of its patents are likely valid and infringed by the Samsung phone. Earlier yesterday, Koh said in court that she would rule by tomorrow on Samsung’s request to delay the ban on U.S. sales of the Galaxy 10.1 tablet.

Samsung argued in a court filing that Koh’s order on the tablet is “improper” and should be lifted while the company appeals the ruling. The court relied on old evidence and has refused to consider newer evidence demonstrating that a patent at issue in the case is invalid, according to the filing.

Apple has previously said it isn’t a coincidence that Samsung’s latest products look like the iPhone and iPad. It has said the “blatant copying” is wrong and that it needs to protect its intellectual property.

Kristin Huguet, a spokeswoman for Apple, declined to comment yesterday beyond the company’s earlier statement.

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 12- cv-00630, U.S. District Court, Northern District of California (San Jose). The tablet case is Apple Inc. v. Samsung Electronics Co. Ltd., 11-cv-1846, U.S. District Court, Northern District of California (San Jose).

To contact the reporters on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net;

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


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