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Apple's Courtroom Win Powers Up Patents

By Rachelle Dragani MacNewsWorld ECT News Network
Aug 28, 2012 5:00 AM PT

Apple's stock hit record highs Monday, the first day of trading after a jury in California awarded the company more than $1 billion for damages inflicted by Samsung.

Apple's Courtroom Win Powers Up Patents

But Apple isn't the only company having a good day on the market following the verdict. Smartphone competitors like Research In Motion, Nokia and Microsoft all rallied on the day as the trial highlighted the importance of a strong patent portfolio. Despite coming in behind Apple in smartphone market share, the longtime mobile market players have relatively deep patent rosters from their years in the business.

Meanwhile, Google, which makes the Android operating system that runs on many of Samsung's smartphones, dropped 1.4 percent to close at US$669.22. Samsung, which trades in the South Korean market, was down about 7.5 percent.

Since a lengthy appeals process is likely to follow the California verdict, and there have been no decisions made regarding a permanent ban on certain Samsung devices, it's impossible to say what kind of impact this decision will have on Google's Android ecosystem going forward, said Ramon Llamas, senior research analyst with IDC Mobile Devices Technology and Trends. But that doesn't mean it won't weigh a little heavier on other manufacturers' minds now, he said.

"Obviously Apple went after Samsung because it was the clear and immediate competitor, and we know how much Android has meant to them," he told MacNewsWorld. "But they're not the only vendor to have rectangular-shaped phones with a wall of applications. The HTCs, Motorolas and LGs of the world do as well, and whether or not Apple wants to take these guys to court, no one knows, but it is definitely something for them to consider."

Changing Design

This particular case brought to light how important design patents can be, said Roman Tsibulevskiy, patent attorney at Goldstein Law Offices. Whereas in the past, IP battles tended to focus on more technical or utility patents, in this case attorneys used simple visual evidence to show the similarities between iPhones, iPads and Samsung device designs. That emphasis on design from two high-profile companies with extremely recognizable products could force competitors to exaggerate differences from Apple in the future, he said.

"What's interesting about this case is that a lot of the patents deal with design," he told MacNewsWorld. "Those haven't been as litigated in the industry, and that could force other companies to really try to make their products distinguishable going forward. One Apple attorney pointed out in the trial how different Microsoft phones are, and said that could be a direction Samsung could have taken.

"This is definitely reason for someone like Nokia to say, 'OK, we're scared of your patent portfolio' and design something much different," he added. "In terms of value, that's really something. It's really the best kind of PR for Apple."

Among intellectual property experts and telecom leaders, that's not a new concept, said Tsibulevskiy, as evidenced by recent acquisitions in the tech world. Google's purchase of Motorola cleared earlier this year, giving the search giant a much stronger supply of patents from the longstanding mobile device maker. But the verdict is serving as a wake-up call to mainstream investors, making them realize the importance of a deep portfolio.

"In terms of patent value, this is not the only case to demonstrate it," he said. "There have been other legal patent battles, but this is just one more thing that bolsters the claim about the value of patents."

Still Need the Whole Package

That power does come with limitations, though, said Llamas. Secondary players in Apple and Samsung's battle, such as RIM and Microsoft, are having a good day on the market. But a company like RIM, which is struggling with an outdated smartphone model and corporate restructuring, can't expect an overnight turnaround simply because of its deep portfolio, said Llamas.

"You can't overlook the fact that the consumer doesn't really care about patents," he said. "They just want a really good device and a good experience. When is the last time a consumer looked at a smartphone in a store and said, 'I'm going to buy this because this company's patent portfolio is awesome?' For guys like RIM and Nokia, their patents are going to help them develop and grow in the years to come, and that's what matters."

But even as customers generally remain ambivalent toward a given company's portfolio, Llamas acknowledged it's just another important consideration when investors consider the overall value of a telecom company.

"There's a lot to consider here once you look at the amount of money that has exchanged hands, and some of the recent acquisitions for greater patent portfolios," he said. "From that kind of perspective, it's something you want to make sure you cover. Patents lead to licensing, and licensing fees mean more cash, which means money in your pocket as an investor."

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