Apple's Korean War Goes Into Overtime

Apple (Nasdaq: AAPL  ) won a massive victory in a Californian court a month ago. The jury found Samsung guilty of infringing Apple's iPhone and iPad patents to the tune of $1 billion in damages -- an amount that could be tripled if judge Lucy Koh finds the infringement "willful." Moreover, a Samsung tablet that was not seen trampling on Cupertino's design patents had already been blocked from sale in America. Since Samsung had already appealed that injunction and thus moved that sub-case to a higher court, Koh found it impossible to give the Koreans any relief.

That was then, and this is now.

This week, the Court of Appeals remanded the Galaxy tablet block back to Judge Koh, who immediately granted Sammy's motion to dissolve the case. Moreover, Apple may have to pay up to $2.6 million to compensate Samsung for lost sales while the non-infringing device was off the market. It's but a drop in Apple's overflowing money buckets, but it's a symbolic victory for Samsung nonetheless.

And the Koreans could use some courtroom confidence right now, because the company is mounting a counter-attack.

Another Korean war?
For one, Samsung argues that the $1 billion verdict should be overturned and a whole new trial launched. The jury foreman may have lied about his background in the jury selection process, the company says, and then misled other jurors to further his own personal agenda. In post-trial media interviews, foreman Velvin Hogan certainly comes across as a guy with an axe to grind: "[E]xcept for my family, [the jury service] was the high point of my career... you might even say my life," he recently told The Verge.

Moreover, it turns out that Hogan was fired and then sued by hard-drive maker Seagate Technology (Nasdaq: STX  ) nearly 20 years ago. Samsung is now a major shareholder in Seagate, a stake acquired last year as Seagate bought Sammy's hard-drive operations. If it doesn't sound like a soap opera yet, the lawyer who sued Hogan back then is now married to a partner at Quinn Emanuel -- the law firm that represented Samsung at this trial.

So Samsung owns part of a firm that Hogan has reason to hate, and the guy knew enough about patents to twist deliberations the way he wanted. It's a strange and far-fetched connection, but personal vendettas have been launched over even lesser slights.

Now, Judge Koh may or may not buy what Samsung is selling here. But if she doesn't start a fresh trial with presumably less-tainted jurors, you can rest assured that Samsung will appeal. Stay tuned for more legal fireworks.

Higher and higher
Oh, and the stakes are only rising higher. Apple has asked Judge Koh to increase the damages by another $700 million and stop sales of every infringing Samsung device. In return, Samsung waited for Apple to release the iPhone 5, so the Korean company could examine the phone and add it to a different lawsuit under the same judge. If things start going Samsung's way, in other words, Apple might find itself unable to sell its latest and greatest handset. So that sword is cutting both ways now. However, that suit isn't scheduled for trial until 2014. By then, the iPhone 5 will be old hat.

In other news, Google (Nasdaq: GOOG  ) division Motorola Mobility shocked just about everybody by simply withdrawing an Apple complaint with the International Trade Commission. There's no settlement, no agreement to smoke a peace pipe in Cupertino, no nothing -- just a dropped complaint that could have removed iPhones, iPads, iPods, and even Mac computers from American store shelves.

Many observers thought the complaint was kinda-sorta evil and out of step with Google's image to begin with. Maybe this is damage control, or maybe Motorola simply launched that assault without Google's say-so, in which case the wayward son has been corrected. We may never know the real backstory. But the lattice of criss-crossing legal actions over smartphones and tablets just got a tiny bit less complicated.

What does it all mean?
If nothing else, this comedy of errors reminds us all that the patent system is in dire need of an overhaul. The current laws were made in a different era, for a different era, and they don't work very well in the fast-moving world of modern technology. Besides, it's a "one size fits all" solution for a diverse landscape of innovation and creativity, where different industries really should work under different standards. Patents were always meant to give inventors more reason to invent, but they've devolved into ammunition in legal battles that reduce the pace of real progress.

I don't have all the answers, or I'd be running for Congress with a patent reform agenda. Could we talk Judge Richard Posner into running for a Senate seat in 2014, perhaps?

A new premium report on Apple details the opportunities and challenges in store for its shareholders, including a deep dive into the legal arena. The report also includes a full year of updates to keep you up to speed. Click here for your comprehensive report on Apple.

 

Fool contributor Anders Bylund owns shares of Google but holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.

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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 October 03, 2012, at 8:05 PM, H3D wrote:

    "Moreover, Apple may have to pay up to $2.6 million to compensate"

    Wow, gosh. That's 0.2% of the damages, 0.06% if tripled.

    And the judge may well override the jury and impose a new ban in a few weeks. The removal of the ban for now was a procedural timing artefact, not a verdict.

  • Report this Comment On October 03, 2012, at 8:08 PM, H3D wrote:

    " Samsung is now a major shareholder in Seagate,"

    So what? If Seagate was a major shareholder in Samsung, it might matter. But not this way around. Damaging Samsung has no impact on Seagate.

  • Report this Comment On October 03, 2012, at 8:12 PM, H3D wrote:

    "Many observers thought the complaint was kinda-sorta evil and out of step with Google's image to begin with. "

    Come on, Googorola is getting warmed by regulators around the world about abusing Standards Essential Patents. Google is way down the evil path.

  • Report this Comment On October 04, 2012, at 9:09 PM, chopchop0 wrote:

    Google is nowhere near as Evil as Apple is now. Apple has become what MSFT was in the 90s

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