In an unexpected announcement last week, rival smartphone makers Apple and Samsung agreed to a ceasefire in the ongoing patent litigation battles in all countries except for the U.S. “Apple and Samsung have agreed to drop all litigation between the two companies outside the United States,” said the companies in a joint statement obtained by The Wall Street Journal. “This agreement does not involve any licensing arrangements, and the companies are continuing to pursue the existing cases in U.S. courts.”
The exclusion of any U.S.-based litigation is an important exception for Apple, since the Cupertino-based company has had the most success against Samsung in U.S. courts. Samsung was ordered to pay Apple about $930 million in total damages after several patent-infringement trials over the past two years. However, even though Apple won the most recent trial in May of this year, the verdict was widely viewed as a symbolic victory for Samsung since the Korea-based company was ordered to pay only $119 million instead of the $2.2 billion that Apple was seeking. Apple was also found to be infringing on Samsung’s patent that covers a method for retrieving and classifying digital data and was ordered to pay $158,400 in damages. With damages awards that likely didn’t even cover the cost of litigation, both companies appeared to emerge as losers in the last major patent-infringement battle in the U.S.
Although the exclusion of any U.S.-based lawsuits from the deal still leaves room for plenty of litigation between these two companies, the truce appears to reveal a growing realization from Apple that its long-running smartphone patent battle against Samsung and other rivals has largely been an exercise in futility. Despite the multi-million dollar damages awards, Apple’s patent-infringement lawsuits have failed to put a dent in Samsung’s finances or its majority share of the worldwide smartphone market.
According to IDC data, Samsung held a 25.2 percent share of the global smartphone market in the second-quarter of this year, while Apple held an 11.9 percent share. Additionally, since the lawsuits can take months or even years to work through the court system, infringing products are usually obsolete by the time the trials are concluded, so sales bans are irrelevant even if they are granted. Similarly, even individual Samsung smartphone features that are found to be infringing on Apple’s patents can usually be effectively duplicated with technical workarounds.
Besides the financial cost of litigation, Apple’s lawsuits against Samsung have also sometimes exposed embarrassing information about the notoriously secretive company. Internal Apple communications revealed in the last patent-infringement trial between the two companies showed that the iPhone maker was worried about the success of Samsung’s ad campaigns that painted Apple’s users as older and out of touch with the latest technologies. As noted by The Wall Street Journal, the last trial also revealed a slide from an internal Apple presentation titled “Consumers Want What We Don’t Have,” that highlighted desirable Android-based smartphone features that were lacking in Apple’s iPhones.
Apple first signaled a change in its approach to its smartphone patent litigation when it agreed to drop multiple patent-infringement lawsuits against Google in May of this year. “Apple and Google have agreed to dismiss all the current lawsuits that exist directly between the two companies,” said the companies in a joint statement acquired by the Financial Times. “Apple and Google have also agreed to work together in some areas of patent reform. The agreement does not include a cross license.”
Like the recently announced deal it reached with Samsung, Apple’s agreement with Google also contained a major exemption. Since the deal only covered “direct” litigation, Apple is still free to pursue its patent-infringement lawsuits against Motorola Mobility, the smartphone business that Google is currently in the process of selling to Chinese PC maker Lenovo.
While the option to pursue patent litigation against Samsung in U.S. courts remains, it appears that the recent truce agreement between Apple and Samsung is yet another sign that the long-running smartphone patent war is beginning to wind down. Although Apple may have chalked up the most victories in the courtroom, the ultimate winners of the smartphone patent war may have been the attorneys hired by the various companies.
However, if both Apple and Samsung use the money that is saved by ending the patent-infringement litigation to reduce the overall cost of smartphones or to invest in new technologies, the eventual winners could be consumers around the world.
Follow Nathanael on Twitter (@ArnoldEtan_WSCS)