Apple Drags Google Into the Courtroom With Samsung

As Apple's legal battle with Samsung shifts to software, Google gets drawn into the mix.

Mar 31, 2014 at 10:15AM
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The S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) were up 0.84% and 0.87%, respectively, as of 10:15 a.m. EDT. Despite some volatility, stocks have not strayed far from where they began the year -- Friday's closing price for the S&P 500 was good for only a half-percent gain year to date.

In this morning's headlines, the world's most valuable company, Apple (NASDAQ:AAPL), is dragging Google (NASDAQ:GOOGL) into the courtroom as part of its long-running legal battle against rival mobile device manufacturer Samsung.

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The allegation at hand is patent infringement. Samsung and Apple are the dominant smartphone manufacturers: According to one estimate by Asymco, the companies devoured nearly nine-tenths of smartphone industry profits over the past six years; another estimate from broker Raymond James has them taking home all of the profit in the fourth quarter of 2013. Meanwhile, Google's Android was installed on roughly four of five smartphones last year -- making it the world's most popular operating system by a wide margin.

While the first trial pitting Apple against Samsung in 2012 focused on hardware design, Apple is now accusing its rival of infringing on five of its software patents. Samsung counters that it licensed four of five of these patents as part of its licensing agreement with Google for Android and that Google was already developing the technology before Apple applied for its patents. The functionality covered by the five patents are: detecting data in a message and converting it to a link, background syncing of data, universal search as used in Apple's Siri digital assistant, spelling autocorrect, and "slide to unlock." Samsung claims that all but the last one are native Android features.

In the first trial, a jury ruled for Apple and Samsung was ordered to pay $929 million (naturally, it's appealing that verdict). In this case, Apple is asking for damages in the amount of $33 to $40 per phone that infringed on the five patents since 2011, a pool of devices it says numbers in the tens of millions.

This case makes for good headlines, but I think it's mainly a distraction for investors. Courtroom battles move at a glacial pace compared to the battles that really matter -- those taking place every day in the marketplace. For example, the smartphones at issue in Apple's latest suit are Samsung's Galaxy S3 and Nexus; Samsung's Galaxy S5 will be available globally from next month.

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Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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