Apple Will Lose This Patently Absurd Thermonuclear War in the End

Last week, a leading mobile manufacturer scored an important legal victory on its home turf. Actually, both of the litigants did. But the mobile war won't be won on patent claims and sales injunctions. Its ending can only be delayed in the courts, and then not by much. Instead of delving too much into the details, let's step back and look at the big picture. What really happened in Apple (Nasdaq: AAPL  ) v. Samsung last week, and what does it really mean to you as a consumer and an investor?

Refresher course
It's easy to get lost in the details of this complex case. Here are the big numbers on Apple's win in Northern California's District Court: just over $1 billion in damages, the result of Samsung's violation of three technical patents and three design patents in a total of 21 different devices.

Meanwhile, in Tokyo, three judges ruled against Apple's comparatively modest request for just over $1 million in damages from Samsung for infringing a rather technical streaming sync patent. A South Korean patent case broke down the middle for both parties just before Apple's American victory. Other international cases continue.

The details don't really explain the story. All Apple really won last week was a temporary victory over the shape of last year's phones by appealing to nine people too dumb to get out of jury duty.

What happens next
If any Apple v. Samsung jurors are reading this, I'm sorry I called you "too dumb to get out of jury duty," but it has to be said. You may be very nice people, but you don't seem to be trained in the intricacies of patent analysis, and significant mistakes made in the verdict lead me to think you were all in over your heads. Your jury foreman didn't challenge that impression during his post-verdict Bloomberg TV interview. Is the following garbled interpretation of "prior art" how the nine of you decided that Apple deserved $1 billion?

The software on the Apple side could not be placed into the processor on the prior art, and vice versa. That means they are not interchangeable. That changed everything right there.

Got that? Yeah, neither did I. Techdirt, a blog covering the legal side of technology, picked up on this interview and noted that the jury's instructions included a definition of prior art, which is supposed to show "that the invention has already been done or even explained somewhere else." If the Internet can poke holes in the jury foreman's explanatory gibberish, you can bet Samsung's lawyers will. After all, poking holes in gibberish is a big part of their job.

At any rate, many of Samsung's offending phones are already past their shelf life. Apple has a second California case against newer Samsung phones, including the recently released Galaxy S III, but it won't go to trial until 2014. As the "first smartphone designed by lawyers," the S III is a lot less likely to run afoul of Apple's infringement claims, but it already looks like a winner in the current infringement case. One analyst's post-verdict channel check of mobile retailers found many locations completely sold out of the S III.

Technology moves faster than the law. Remember that the next time you pin your hopes on patent claims.

Who really gets hurt?
Post-verdict, analysts picked out winners and losers as if they were drafting fantasy sports teams. Apple for quarterback! Trade Samsung's suppliers! Microsoft (Nasdaq: MSFT  ) and Nokia (NYSE: NOK  ) at wide receiver! Let's demote Google (Nasdaq: GOOG  ) to the bench. Apple and Samsung have by now combined to file 50 patent lawsuits around the globe, and one Stanford Law School professor estimates that the California case alone amounts to a $500 million stimulus package to the American legal industry. Maybe we should be drafting patent lawyers instead of smartphone manufacturers.

My fellow Fool Travis Hoium pointed out last week in the aptly titled "Apple Won! So What?" that "Apple's win over Samsung has more to do with Samsung's stupidity than Apple's great patent protection." Had Samsung been less brazen in its copycat efforts, the jury might have decided in its favor -- and even so, you can never underestimate the ability of juries to apply straightforward instructions in profoundly stupid ways.

If Apple was planning to do something "insanely great" with the upcoming iPhone 5, this might not matter. The first iPhone earned that label, but each successive release seems to set the bar a bit lower. Apple went from redefining the smartphone to defending beta-mode voice-activated personal-assistant software that some Apple insiders claim would have made Steve Jobs lose his mind, in a bad way. There's still time to make the iPhone 5 live up to Steve's standards, but the biggest change rumored so far is that it's a little longer:

Source: iColorOS.


Source: iColorOS.

Here are two more shots, this time with the iPhone 3 joining the family photos:

Source: iColorOS.

Source: iColorOS.

Source: iColorOS.

It's certainly possible that something big is coming, but -- as Siri's shown -- "something big" doesn't necessarily make for a game-changer. Siri's gotten the marketing push, but Google and Microsoft have their own speech-recognition engines, while Apple contracts with Nuance Communications (Nasdaq: NUAN  ) for Siri's recognition capabilities. Google and Microsoft haven't made speech recognition central to their ad campaigns, while Apple's battling a class action suit over Siri. Those star-studded Siri commercials may not have been the best idea. Promising sci-fi accuracy and delivering software that actually works only two-thirds of the time is a good way to disappoint a lot of excited customers.

Meanwhile, it's no longer quite so easy to call the iPhone the best smartphone in the industry. Reviewers have drooled over the Galaxy S3 and its "gorgeous screen," as Henry Blodget put it. The iPhone actually looks a little bland by comparison:

Source: In Entertainment.

Source: In Entertainment.

Even if you don't care for Nokia's Windows Phone-backed Lumia 900, it's tough to argue that the visually arresting hardware and software design combination won't draw at least some curiosity from consumers bored with the iOS/Android duopoly:

Source: TechnoBuffalo.

Source: TechnoBuffalo.

Yes, both Samsung and Nokia's designs do resemble the iPhone, but in the way that most pre-iPhone smartphones looked like BlackBerries. Overarching designs that work are always widely copied, and there's nothing Apple can really do about it now.

Smartphone manufacturers, Samsung included, have had more than enough warning time to alter any devices or OS features that might run afoul of Apple's legal team. Any company that continues to make deliberate choices to ape Apple now will be too slow to succeed in an industry where new smartphones seem to come out every week.

Apple isn't a scrappy upstart anymore, but this extended patent jousting reveals (at least to me) a mindset stuck in the combative Mac vs. PC, us vs. them era. Widespread news reports that involve having the world's largest company suing its competitors over rectangles and the color black make Apple look like a vindictive bully. Combine that with timid progression in Apple's iconic phones, and once-eager consumers may start to look elsewhere.

The last time Apple found itself Jobs-less, it fell into the habit of protecting its margins at the expense of real innovation. Steve Jobs isn't around to help Apple should it eventually stumble again. The company has to get over its defensiveness and be insanely great instead of just insanely litigious.

The Fool's analysts have vowed to stay on top of the mobile war with our new premium research service. With a full year's worth of coverage on either Apple or Microsoft, you can be sure to get the latest news and detailed analysis when you need it. Subscribe today:

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more news and insights.

The Motley Fool owns shares of Microsoft and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Google, and Nuance Communications, creating a bull call spread position in Apple, and creating a synthetic covered call position in Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (32) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 04, 2012, at 8:20 PM, bsimpsen wrote:

    "nine people too dumb to get out of jury duty"

    What is the purpose of such rhetoric, to denigrate your own intelligence? Why would you do that?

  • Report this Comment On September 04, 2012, at 8:42 PM, dmvcal wrote:

    AAPL either is the owner of the disputed IP, or, they are not. There is NO OTHER ISSUE.

  • Report this Comment On September 04, 2012, at 8:50 PM, macgregor54 wrote:

    Alex... George Mason Law School? If so, I'll accept some legal opinions on the jurors.

    That said, amigo, welcome to the law. Juries get to decide issues of fact. Fact is, they decided, based on what was presented and what they were instructed, that Samsung infringed.

    And that, my man, is that. There are avenues of appeal, of course, but please don't knock the jurors. I hated the OJ thing, too, but the system is the system.

    Samsung is out whining that Apple is trying to deprive consumers of choice. That is bull. If Sammy cared about consumer choice, they'd have designed something different enough that their lawyer could tell it from an iPad at 10 feet, which she couldn't. If they cared, they'd supply something OTHER THAN A BLATANT KNOCKOFF. All Samsung cares about is Samsung revenue and profit.

    We need no jury to tell us that, now do we?

  • Report this Comment On September 04, 2012, at 8:54 PM, techy46 wrote:

    Apple's already lost in the open minds of global consumers not brainwashed by US generational issues. Competition is usually the great equalizer unless truely innovative forces are present. Androids in phones and Windows in PCs have already shown that open trumpts Apple's proprietary model. You can't patent innovation.

  • Report this Comment On September 04, 2012, at 8:58 PM, 1brayden wrote:

    Another reason not to subscribe to anything associated with the Motley Fool

  • Report this Comment On September 04, 2012, at 9:02 PM, ramkap wrote:

    This article is foolish, but in the literal sense. The Motley Fool use to be a class organization/publication but the caliber of this "article" is more befitting of current Forbes contributors. Leaving aside the authors opinions, which he is entitled to, his understanding of the litigation runs between lacking to non-existant. The litigation coveres protecting innovators from copiers.

  • Report this Comment On September 04, 2012, at 9:11 PM, itsy1958 wrote:

    The only "foolish" juries I've seen are OJ's and Casey Anthony's. Sorry, I have to agree that this one got it right. Too bad the judge wouldn't allow more evidence in & seemed to be in such a hurry to get the whole thing over with. (Yet, she later put off a hearing that was supposed to happen this month until December...scratching my head.)

  • Report this Comment On September 04, 2012, at 9:33 PM, macgregor54 wrote:

    @techy46....

    can you patent profits? the 'innovators' you mention seem to have left out that rather critical ingredient.

    market share is meaningless.

  • Report this Comment On September 04, 2012, at 10:01 PM, Emperor2 wrote:

    I wish I hadn't wasted my time reading this

    "Patently Absurd" and incredibly stupid article.

  • Report this Comment On September 04, 2012, at 10:01 PM, eltoro2827 wrote:

    @Alex Planes

    You señor are an idiot. Do your homework before you write a rubbish.

    I am either an apple, MS or a sumsung/google fan but the truth is the truth. Had Samsung thought about the consumers they would have designed something different rather than produce knock offs and claim to theirs.

  • Report this Comment On September 04, 2012, at 10:51 PM, lrd555 wrote:

    Apple's not going to lose. Unlike Samsung & others, Apple actually owns a great deal of multi-touch patents. No need to use FRAND patents when you have 200 of the real thing.

    Let's see Samsung, HTC & others avoid 200 patent bombs. It ain't going to happen. Not in the USA. Maybe in socialist England or FRAND friendly Germany regions. But that's where it stops.

  • Report this Comment On September 04, 2012, at 11:41 PM, Minow wrote:

    @Alex Planes & The Motely Fool

    To educate, amuse & enrich? Investors deserve

    better!

  • Report this Comment On September 04, 2012, at 11:55 PM, Mike2000balloons wrote:

    Do we really have to read garbage like this? Good luck Alex. Your motivation isn't apparent but I suspect that deep down you harbor recessed feelings of anger towards Apple. You obviously feel "cheated" by the verdict. You're only "hoping" that this scenario will play itself out. Belittling a jury for doing what was perfectly obvious seems rather childish. Apple won this verdict based on FACTS. Not until a licensing agreement is in hand will Apple continue to allow Samesung to blantantly run afoul of this verdict. I think looking back now that you were to dumb to get out of work today so you "mailed it in" on your article today.

  • Report this Comment On September 05, 2012, at 12:11 AM, Risky88 wrote:

    Of please

    if you were select to be on that jury

    you would be all

    GIDDY

    at the chance to see that case.

    Don't even lie you

    FOOL!

  • Report this Comment On September 05, 2012, at 12:12 AM, Risky88 wrote:

    Americans can barely drive their cars

    you really expect them to be able to handle something as complex as a technology court case?

    really?

  • Report this Comment On September 05, 2012, at 1:25 AM, somethingnew wrote:

    "...but this extended patent jousting reveals (at least to me) a mindset stuck in the combative Mac vs. PC, us vs. them era."

    Best line of the article

  • Report this Comment On September 05, 2012, at 7:01 AM, H3D wrote:

    "It's certainly possible that something big is coming, but -- as Siri's shown -- "something big" doesn't necessarily make for a game-changer. Siri's gotten the marketing push, but Google and Microsoft have their own speech-recognition engines, while Apple contracts with Nuance Communications (Nasdaq: NUAN ) for Siri's recognition capabilities."

    All true.

    But Speach recognition is a SMALL PART of Siri.

    The rest of Siri, which is the AI system that makes it useful, belongs to Apple and Google does not have an equivalent.

    All Google has is Speach recognition as a front end to Siri. The equivalent of saying to Siri "look up xxxx on Google". But Siri can do so much more than that.

  • Report this Comment On September 05, 2012, at 7:03 AM, H3D wrote:

    Typo correction. Google has voice recognition as a front and to search. Not as a front end to Siri. Obviously.

  • Report this Comment On September 05, 2012, at 7:43 AM, jdmeck wrote:

    How do you define lose? Is Korea Apple's home turf? Apple 2 Samsung 1.

    Outright theft or just copying of form and function because you are lazy, Apple going after Samsung was the right thing to do. It's better for all if all companies are forced to think and innovate on their own. The consumer will win, always.

  • Report this Comment On September 05, 2012, at 11:43 AM, CluckChicken wrote:

    "Apple actually owns a great deal of multi-touch patents. No need to use FRAND patents when you have 200 of the real thing."

    Most of those should get tossed once they would get to the courts specializing in patents. Why? Simply because many those patents are for technologies already found on other devices some are even found on devices from the 70s. Like the pinch to make smaller on a touch screen was being used on devices in the 80s so moving that to a smaller mobile touch screen is not an innovation but a natural evolution.

    This whole thing is really a failure of the patent office and the low standards it now takes to get a patent.

  • Report this Comment On September 05, 2012, at 11:46 AM, jdmeck wrote:

    Theft and lazy irresponsibility comes in many forms. Apple is a company built on taking an idea and creating something new and different. Built on seeing the value in what others see as junk (Mouse - Gorilla Glass).

    Samsung has always been a company that copied. They have copied (along with others) every appliance the citizens and companies of this country have created. When the iPhone came out they decided to copy and steal. They copied the look and feel of Apple’s hard work because they were too lazy to make something better. They stole the workings of the iPhone because they were too lazy, arrogant and stupid to make something better. This country has given enough to South Korea. The thought of their companies stealing from us after all we have given is sickening.

  • Report this Comment On September 05, 2012, at 11:49 AM, chopchop0 wrote:

    Great article.... the US-based media and audience are pro-Apple and this verdict shows. The jury did a horrible job of determining the verdict and infringements.

    The Galaxy S3 is a true game-changer and it's amusing that Apple is going after a phone that has essentially brought brand new features to the smartphone table. I won't be surprised if you see some of IPhone 5 ripping off the S3 with novel features like face unlock, smart screen that stays awake while you look at it, and smart dialing that dials a number when a contact is pulled up and bring the phone to your ear.

  • Report this Comment On September 05, 2012, at 11:53 AM, chopchop0 wrote:

    Also, I find it amusing that over the years, Apple has turned to Samsung to produce it screens and supply its chips. When they tried to go with LG or sharp, they realized they just weren't up to snuff....

  • Report this Comment On September 05, 2012, at 12:19 PM, Minow wrote:

    I think people are missing the 'Big picture here' South Korea was once a third world country that rose in prominence after The Korean War/Cold War Era! Samsung, LG and other companies were born out of Capitalism on The Korean Peninsula largely because of The USA and the international communities, but the black market played a huge part in the copying/piracy and knocking-off of American & international companies intellectual property....I witnessed it first hand on several occasions, it was deeply rooted in their economy as they were a developing economy! The point I'm making here is Samsung's and others have been at this for a while (copying/piracy) its well known and documented. I remember when some of their electronics first came to market---they weren't great, but thanks to FRAND and a little copying, and competitiveness, demand for cheaper products abound, I harbor no ill will or feelings towards Korea...well maybe a little towards The North Korean Leadership! I deeply respect The Koreans, because they sprang from a heap of rubble after The Korean War/Cold War Era and they're no stranger to hardship!but for Pete's sake where's the innovators in the field of electronics? Bloomberg reported it...

    Google asked Samsung to change the design of some of its product so it wouldn't look so obvious that it was copied! So stop getting stuck on stupid people! Samsung's and (others) are being sued for more than a frickin shape...there's more at play here...

  • Report this Comment On September 05, 2012, at 1:29 PM, jdmeck wrote:

    Chopchop0 - And how do you explain the verdict in Korea where a panel of three judges awarded Apple two judgements against 1 for Samsung?

  • Report this Comment On September 05, 2012, at 3:22 PM, TheRealRacc wrote:

    If anyone of the readers were capable of seeing through the author's "rhetoric," whether you appreciate it or not, this article is actually trying to apply a commentary on the patent hearings to stock performance. It is not a dissertation on Apple products.

    Apple supporters are constantly ignoring the details here, and that is a patent lawsuit on geometric shapes and sizes. To me, ALL cell phones look a like at 10 feet. That is why this article was written, to show ridiculous the entire circus is. And the commenters prove him right.

  • Report this Comment On September 06, 2012, at 12:52 PM, zgriner wrote:

    I'm no lawyer and neither do I fake one. But, I've been a software engineer for quite awhile. I am not pro or con any company. I am for ideas.

    The state of software patents in the US is awful. Many are nothing more than saying that the computer does it or directs it. The same tired, pirated ideas are patented over and over. Very few are original and qualify as something new.

    The only winners are those entities with the deepest pockets. The consumer loses.

  • Report this Comment On September 06, 2012, at 1:35 PM, BruceHBi wrote:

    I am not a patent lawyer, but I have tried enough cases to know that the only words from the jury that the appellate courts will hear were written on the verdict sheet. That is the beauty (or folly) of our jury system. Just about anything said to the press after the verdict is irrelevant in any appeal.

  • Report this Comment On September 07, 2012, at 12:22 PM, whyaduck1128 wrote:

    Someone was short AAPL or at least not long.

  • Report this Comment On September 08, 2012, at 2:19 AM, rjonesthree wrote:

    Anyone who believes that American companies have no right to defend genuine innovations from Asian copy artists has no business being published on an investor website.

    Samsung's phones and "tablets" have been such blatant copies of Apple's products that prominent computer trade publications long ago were publishing side-by-side comparisons and predicting that Apple would take legal action. Samsung's products have been the consumer electronics equivalents of fake Rolex watches and Gucci handbags. Ripoffs, pure and simple, right down to the multi-pin power connectors.

    America leads the world in intellectual property and the ability to defend it is vital to the survival of our companies and our national economy. China and Korea by contrast place no value on intellectual property and are infested with counterfeiters.

    I am more than tired of Android fanboys who pretend that Apple has invented nothing and has no right to pursue copy artists in the courts. It's unseemly, to say the least. There was NOTHING like current smartphones on the market before the iPhone. Its introduction was breathtaking, and it fundamentally changed the cell phone market. Android in its current form absolutely would not exist without it, and for Android fans to denigrate it now is just, well, words fail me.

    I say we defend American innovation NOW or we may as well kiss our economy goodbye.

  • Report this Comment On September 08, 2012, at 2:26 AM, rjonesthree wrote:

    Ps to therealracc, all cellphones nowadays look alike to you at 10 feet because they all copy iPhone. Try looking at any modern cellphone next to a 1990's cellphone.

    Or compare with a Nokia/Microsoft phone. I give Microsoft a lot of credit for doing something genuinely different and innovative.

    And no, the suits have not been about simply "rectangles and rounded corners." Quit parroting fanboy arguments and educate yourself about the facts.

  • Report this Comment On September 09, 2012, at 10:47 AM, column wrote:

    I happen to feel that it is a duty to attend to jury duty on the few occasions that it happens. I don't believe I am stupid because I don't try and get out of jury duty.

    I haven't bothered to read the rest of your article because I believe your initial position, "the jury is too stupid ..." is flawed, therefore your follow-on position is likely flawed as well.

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