“Samsung Was Just Defending Itself”

In the “Era of Apple,” the Samsung Group must be the biggest threat to Apple. Since smartphones and tablets have become new global trend-setters and focus of attention, virtually every player in the trade has their daggers-drawn. As economic competition becomes exponentially more intense in the global communication field, it is indisputable that those who own the most patents are able to strike its competitors directly to protect their market share and overall company interests. This cruel truth has been illuminated by the world's top eight communication enterprises (Apple, Samsung, HTC, Sony Mobile, Nokia, RIM, LG and Motorola). Among them, the battle between Apple and Samsung has attracted the most attention. These close competitors have been engaged in bitter disputes since April of last year and there is no end in sight.
 
The Battle is Far from Over

On April 19th, 2011, Apple filed a lawsuit against Samsung Electronics, accusing the latter’s Galaxy series smartphones and tablets infringed upon its patent rights. Apple submitted a complaint with the Northern District Court of California, claiming that its patent rights and trademark rights had been infringed, and unfair competition was identified. It asked the court to deliver an injunction against the defendant, to find the infringement to be intentional and order the defendant to pay Apple compensations on both actual loss and punitive damages. According to Apple, “Samsung’s latest products look very much like the iPhone and iPad from the hardware shape to the user interface, even the packagings are very similar, it is not a coincidence. The unabashed copying is blatant, and when other companies are stealing our intellectual property, we need to protect ourselves.”

On April 20th, Samsung delivered a “Disclaimer” on Apple’s lawsuit, saying: “Apple has filed a lawsuit against terminals of Samsung Electronics, such as the Galaxy series phones and tablet PCs, Nexus S and Epic 4G phones, etc. on IP infringements. Samsung will actively respond to this legal action, and take appropriate legal measures to protect our intellectual property rights.”

Only two days later, on April 22nd, 2011, Samsung announced that it had filed separate suits against Apple in Korea, Japan and Germany for various patent infringements, ranging up to 5 patents.
 
After it filed the lawsuit, Samsung also requested a court to require Apple to permit Samsung to examine the next generation of Apple’s products. However, at that time, the new generation of iPhone and iPad had not been launched and were kept confidential. Therefore, Samsung’s appeals were rejected. At the same time, a Korean court disclosed that Apple had sued Samsung Electronics for patent infringements in Korea, and therefore announced the resurgence of the battle of the two companies on smartphones and tablet PC equipment products.

On June 30th, 2011, Samsung launched another offensive by suing Apple in the U.S. Federal Court in Delaware, alleging the computer and handset manufacturer that produces iPhone and iPad patent had infringed its patent rights. Samsung’s attorney said that: “Apple copied many of Samsung’s innovative technologies when developing its iPhone, iPod and iPad products.” Samsung had also filed a complaint with the U.S. International Trade Commission (USITC) to ban imports containing the alleged infringing equipments.

After three months of volleying complaints, on July 1st, the Seoul Central District Court opened the first session on the Samsung v. Apple case over infringement of the former’s patent rights and merchandise rights. At trail, Samsung argued that the smartphones and tablet PCs of Apple infringed four of Samsung’s patents of standard and one of its technology patents without approval. It requested an order that the infringing activities should be ceased immediately and all the infringing products for sale should be retrieved and destroyed. Apple refuted Samsung’s claims, saying: “Samsung’s patents, which have been identified as standard patents, have not been confirmed as valid yet and even if they were standard patents, according to the principle of FRAND (Fair, Reasonable and Non-discriminatory use),’ the usage still did not constitute infringement.” Although the debate was dramatic, the first session failed to achieve substantial developments and the court decided to open the second session on August 18th.

On July 7th, Apple filed a complaint with the USITC, requesting an injunction against imports of all versions of Samsung’s electronic equipment. On August 5th, Samsung announced that it would delay the release of the Galaxy Tab 10.1 in Australia. “In view of the on-going legal processes, Samsung announce with regrets that the releasing conference of the GALAXY Tab 10.1 Tablet PC on August 11th will be delayed,” said Samsung.

On August 10th, Samsung received more bad news. Apple won in a German court, and achieved its goal of prohibiting the sales of Samsung’s Galaxy Tab 10.1 in any of the EU countries except the Netherlands. Samsung said it was “disappointed” that the German court supported Apple’s appeals. Samsung said in a statement that “The court did not deliver the prohibition notice to Samsung in advance before it was made, and even did not listen to any evidence statements from Samsung. We will take all necessary measures to ensure that consumers from Europe and the world can buy Samsung’s innovative mobile communication terminals.”

Although Apple had won the first battle, this did not mean it would show any mercy on its enemy. On September 9th, Apple attacked Samsung again by filing complains with a Tokyo district court, accusing Samsung infringed upon two of its patent rights related to iPhone and iPad, and asked the court to ban Samsung from selling the alleged infringing products in Japan. According to the statistics of Strategy Analytics, a market research company, the sales of Samsung Galaxy S once surpassed iPhone in Japan.
 
 
 
On September 13th, Samsung appealed to a higher court on the Germany court’s decision of banning the sales of Galaxy Tab 10.1.

On September 16th, Samsung upgraded its counterattack. It launched litigation against Apple in Australia over patent infringements. Apple was accused of infringing on seven patents held by Samsung which were related to communication and the quality of mobile network service.

There is no need to elaborate the delicate relationship between Samsung and Apple. However, when encountered with the strongest competitor in the industry, Samsung’s moves showed that it refused to admit being inferior, and would fight Apple till the end. On October 17th, Samsung announced that since Apple’s new phone iPhone 4S was alleged to have infringed on several patents owned by Samsung Electronics, Samsung had submitted applications to a Tokyo Court in Japan and the New South Wales Court of Justice of Australia to prohibit the sale of iPhone4S. Meanwhile, Samsung Electronics also appealed against the Australian court decision on October 13th of prohibiting the sale of Galaxy Tab 10.1 in Australia.

According to the survey result of a market analysts company Asymco, among the total operating profit of the world’s top eight mobile phone manufacturers in the first quarter of 2012—Apple, Samsung, HTC, RIM, LG, Nokia, Sony Ericsson and Motorola, Apple and Samsung together had accounted for 99%, while of this 99%, Apple alone had accounted for 73%. Samsung, as Apple’s partner, had also become Apple’s most competitive rival in getting more market shares. Therefore, the war of 2011 did not end, instead become more intense in 2012.
 
Although it attracted a lot of attention, reconciliation talks under the request of a U.S. court failed to end the battle of the two top rivals. Choi Gee-sung, Vice President of Samsung Electronics and Apple CEO Cook conducted “up to 16 hours of negotiations” over the course of within two days, the public thought that the two giants were hoping to settle the war, but the expectation ultimately came to naught. According to reports, Samsung and Apple’s high-level decision makers only re-affirmed their positions of continuing to go to court.
 
As both the supplier and main competitor of Apple, Samsung’s rise in recent years has already put Apple on guard, and patent litigation has undoubtedly become the important means of attack. Moreover, the manufacturers in the field of communications have long been good at using the patent litigations to strike competitors so as to gain more profits and restrict their rivals’ development. The rising Samsung is bound to become the thorn in Apple’s side.

Interview with Kim Ki, Chief IP Counsel of Samsung Mobile Display

China IP: We understand that the Samsung Group has a lot of business, but its investment in the mobile industry is the most prominent. Does Samsung have any tendency in allocating its investments in specific areas?

Kim Ki: That indeed is one of the reasons for the success of Samsung. Semiconductor, display panel and other related technology fields require large investments. Having accumulated knowledge over the years, Samsung is now able to make the right choice at the right time. Samsung Electronics needs massive funds into new areas of technology every year. The LED technology is quite different from LCD. There are other companies trying to enter this area, such as LG and Sony, but for now, the market share of the Samsung Mobile Display has reached 98%. This means that we can almost be said to be the only company capable of producing the product. I think it is in large part due to the staggering capital investment of Samsung Group. I do not know the specific figures, but Samsung’s annual inputs on the R&D of the display panel can reach millions of dollars, and this investment has been going on for about a decade. Since it is a new technology, equipment and materials required are often developed independently by Samsung. After years of effort, Samsung has established an ecosystem around the technology so that the companies following our footsteps into the field can benefit from the ecosystem.

China IP: What is Samsung’s plan in the patent litigation battle in the mobile Internet era, in particular what is Samsung going to do to handle the disputes with Apple?

Kim Ki: My position may not make it suitable for me to talk about specific cases like disputes between Apple and Samsung. Samsung may be the company involved in the most disputes in today’s business world, but Samsung is not litigious itself. The number of lawsuits filed against Samsung in the last year was up to 50, and basically Samsung was just defending itself. Most of these claims were filed by non-practicing entities (NPE), which have formed a class of litigation faced by Samsung. The others are litigations are between competitors. Samsung’s intellectual property works began in the early 1980s. Over all these years Samsung has accumulated experience and learned about how to create and maintain its own intellectual property rights. Therefore, Samsung has taken a defensive posture in litigations against its competitors because Samsung is able to handle these proceedings.

But when faced with companies who do not sell products, Samsung cannot adopt such a strategy and must react according to the different circumstances of each on a case by case basis. Generally, the purpose of NPE litigation is to settle, this will normally lead to a sum lower than the cost of litigation and compensation. From the business point of view, Samsung may choose to settle, because the spending is relatively low, but from a strategic perspective and patent strategy perspective, this is not a good choice. So Samsung, even when it knows perfectly well that the proceedings will increase costs, will still choose to defend its own interests. Samsung will not settle for the sake of settlement. Samsung respects the legitimate IP rights of other companies, so if the counterparty is indeed seeking for IP protection we will try to settle on appropriate terms for the use of the disputed technology. But if we think that the other party is suing just to receive settlement money, then even if the proceedings will not impact Samsung’s development in short terms, Samsung will still insist on fighting to the end.

From past to present, Samsung have been cooperating with its competitors: it has signed license agreements with many well-known companies. This year, all the litigations involving Samsung have not been initiated by our competitors but by NPEs. At present, the patent map has changed and most proceedings going on are between NPEs and patent practicing companies, which has become an emerging trend. If Samsung finds that its competitors hold the patent it need, Samsung will make appropriate arrangements.

China IP: We all know that Samsung and Apple enjoy a cooperative relationship. So will Samsung treat Apple differently in the proceedings?

Kim Ki: Apple is one of Samsung’s most important customers, we have a long-term relationship. However, litigation is litigation. We believe that business is business, while patents are patents. We are only seeking approaches to resolve the dispute through litigations. From the business relationship point of view, Apple cannot be separated from Samsung, and vice versa. If the mutual needs could be both satisfied, these disputes will be eliminated somehow. It is impossible for a company to strike down another company, and finally to monopolize the market. To hurt the other party is not the purpose of patent litigations.
 
 
 
China IP: Some say that the lawsuits between Samsung and Apple are actually warfare between Android and iOS. Do you have any comment?

Kim Ki: I don’t know what Apple’s true intentions are. I don’t think this is the problem of the two camps. The aim of litigation lies not in causing loss to each other, but to achieve the company’s goal through it. There’s no intention to weaken or to cause loss to the counterparty. I will not speculate the potential purpose of the two sides.

China IP: How does Samsung evaluate the Chinese market? And how do you view the counterfeit problems existing in the Chinese market?

Kim Ki: Samsung Electronics, our parent company, has been planning to develop the high-end market in China. In the past, Samsung used to follow the steps of others in R&D. At that time, since Samsung products are fast in entering the market, we mainly applied the lowcost strategy. For example, 15 years ago, if you look at the U.S. market, you will find that Samsung belonged to the commodities lowest in prices. Meanwhile, we were also the contract manufacturer of some higher priced products. But those days are gone forever. Today, Samsung’s LED products are the industry’s highest-priced products and we can say that Samsung has added high value into its brand. Samsung has many factories in China. China is an important territory in patent acquisition and protection, and there is not too much litigation in China so far. From Samsung’s perspective, we hope that this trend could be sustained. Patent litigation is also rare in Korea. The high-profile litigation which we are familiar with happens primarily in the United States.

Samsung also cooperates closely with the Chinese government. Counterfeiting exists in many countries and China is only one of them. Samsung, as a company, can only cooperate with the local government to defend our rights. The Chinese government is also very cooperative, Samsung is not frustrated by counterfeits in China.
 
China IP: What is the overall intellectual property strategy of Samsung?

Kim Ki: In the 1980s, Samsung attached the most importance to quickly enriching our patent portfolio. We now hold many patents. In the past five years we have consistently been ranking among the top five patent applicants in the U.S. Patent and Trademark Office, and the patent volume of Samsung is very impressive now. Therefore, the company’s strategy changed: we are now paying more attention to quality rather than volume. Samsung is no longer a follower but an industry leader and this fact has laid the foundation for the shift of Samsung’s IP strategy.
 
Although Samsung is currently deeply involved in many kinds of litigation, Samsung generally does not initiate lawsuits against others but only seeks to defend its legitimate rights. In most cases, Samsung can reach licensing agreements with competitors who respect our IP. In the future, Samsung will continue dialogue with our competitors in order to make a better arrangement for our patents.