Bloomberg News

Apple, Samsung Must Stop Some Korea Sales in Patent Fight

August 24, 2012

Apple, Samsung Infringed Each Other’s Patents, Seoul Court Says

An Apple Inc. iPhone 4S smartphone, left, and a Samsung Electronics Co. Galaxy S III smartphone are arranged for a photograph in Seoul. Photographer: SeongJoon Cho/Bloomberg

Apple Inc. (AAPL:US) and Samsung Electronics Co. (005930) must stop selling some smartphones and tablet computers in South Korea and pay damages after a Seoul court ruled they infringed on each other’s patents.

Apple, maker of the iPhone, violated two Samsung patents related to mobile-data transfer technologies, the Seoul Central District Court said today. Samsung, the world’s largest mobile- phone maker, infringed one Apple patent related to a “bounce- back” touchscreen feature, though the Suwon, South Korea-based company didn’t copy the design of the iPhone, the court said.

The sales bans don’t cover Apple’s iPhone 4S, its newest iPad, or Samsung’s latest products including the Galaxy S III phone, all of which were released after the lawsuits were filed. The companies have sued each other on four continents since April, accusing each other of copying products, design and technology as they battle for dominance of a smartphone market estimated by Bloomberg Industries to be worth $219 billion.

“The ruling is in line with what we had expected,” Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $29 billion, said by phone today. “What’s important is how the verdict that’s coming out soon in the U.S. will affect other pending cases in places like Europe and Australia.”

Damage Awards

Shares of Samsung fell 0.9 percent to 1.275 million won at the close of Seoul trading. Apple slipped 0.5 percent to the equivalent of $662.04 at 12:34 p.m. in Frankfurt. Nokia Oyj (NOK1V), which lost its position as the largest maker of mobile phones to Samsung this year, climbed 2.3 percent to 2.45 euros on the Helsinki exchange.

“We welcome today’s ruling, which affirms our position that Apple has been using our mobile telecommunications standards patents without having obtained the necessary licenses,” Samsung said in a statement. “Today’s ruling also affirmed our position that one single company cannot monopolize generic design features.”

Three phone calls to Steve Park, a Seoul-based spokesman for Apple, went unanswered.

Under the ruling, Apple must stop selling the iPhone 3GS, iPhone 4, iPad 1 and iPad 2 in South Korea, while Samsung must stop selling 12 products including the Galaxy S, Galaxy S II and Galaxy Tab. Cupertino, California-based Apple must pay Samsung 40 million won ($35,000), and the Korean company must pay its U.S. rival 25 million won.

The sales bans take effect immediately, though the companies can ask the court to rescind them.

Smartphone Market

“These products all came out a while ago, so the actual impact won’t be big,” Kim Hyung Sik, a Seoul-based analyst at Taurus Investment Securities Co., said by phone. “The U.S. case is the important one. Even a neutral verdict there would be a victory for Samsung.”

Samsung generated 39 percent of revenue in South Korea in the quarter ended June 30, according to data compiled by Bloomberg. Apple, the world’s most valuable company, got 23 percent of its sales (AAPL:US) in the Asia-Pacific region in the same period.

Samsung and Apple, the world’s two largest smartphone makers, are battling each other in courts even as they are bound by commercial deals involving components supply. In the last quarter, the South Korean company controlled about 35 percent of the global smartphone market, followed by Apple with about 18 percent, according to market researcher Strategy Analytics.

U.S. Trial

The two companies began a jury trial in U.S. federal court in San Jose, California, on July 30 to try Apple’s claims that Samsung copied its iPad and iPhone designs and Samsung’s counterclaims that it’s the victim of patent infringement by the U.S. competitor. The case is the first U.S. jury trial in the dispute.

Today’s ruling in Seoul “will have little impact on other cases, especially the U.S. case,” said Mark Newman, a senior research analyst at Sanford C. Bernstein in Hong Kong.

In the U.S. trial, Apple is seeking $2.5 billion to $2.75 billion in damages for its claims that Samsung infringed four design patents and three software patents in copying the iPhone and iPad. Apple also wants to make permanent a preliminary ban it won on U.S. sales of a Samsung tablet computer and extend the ban to the South Korean company’s smartphones.

Samsung is seeking as much as $421.8 million in royalties that the company claims it’s owed for Apple’s infringement of two patents covering mobile-technology standards and three utility patents.

Commercial Ties

“You need to see the result of the U.S. case before you decide who’s the winner or the loser,” Byun Han Joon, a Seoul- based analyst at KB Investment & Securities Co., said by phone.

Both sides have had legal victories. Apple won a U.S. court order on June 29 blocking sales of Samsung’s Galaxy Nexus smartphone, the first smartphone to use Google Inc.’s Android 4.0 operating system. The product has remained on the market as Samsung appeals the order to the Federal Circuit.

In November, Samsung won a battle in an Australian court that allowed customers to buy Samsung’s rival to the iPad.

The allegations over intellectual property contrast with the commercial ties that bind the two companies. Apple’s reliance on Samsung chips for its best-selling phones and tablets will be worth as much as $7.5 billion to Samsung this year, a 60 percent jump from 2011, according to estimates from Gartner Inc., an industry researcher based in Stamford, Connecticut.

Apple accounts for about 9 percent of Samsung’s revenue, making it the company’s largest customer, according to a Bloomberg supply-chain analysis.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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