Apple Scores a Pyrrhic Victory

Apple Inc. (Nasdaq: AAPL) has scored a victory it may eventually regret. A California jury has awarded the company a tad above $1 billion in a lawsuit against Samsung Electronics Co. Ltd. (Korea: SEC), which was found liable of "willful infringement" of Apple's wireless patents.

Rick Merritt has been covering the court proceedings extensively at a sister publication, EE Times. "The Android community should be very afraid in the wake of Apple's clear win Friday in its case against Samsung," Merritt warned in his latest report. "Apple is now armed with a handful of proven weapons it can wield against Android competitors in and out of court on the industrial design of its iPhone and the user interface of both the iPhone and iPad."

Apple may indeed use this legal club to bludgeon other Google Android device makers into withdrawing their smartphones and tablets from the market or agreeing to pay hefty royalties to the Cupertino, Calif., company. These companies could also adopt the Windows mobile operating system from Microsoft Corp. (Nasdaq: MSFT), as Bill Cox, a marketing executive at the Redmond, Wash., company, gleefully tweeted after the verdict was announced. It's more likely that Google will rework its Android operating system to avoid any of the patents involved in the Apple-Samsung tussle.

But Apple should hold off on uncorking the champagne. It might have won this skirmish, but there are many more battles ahead. It is locked in other patent disputes. For example, Google has accused Apple of violating some patents owned by Motorola Mobility, now a wireless hardware division of the search engine provider. That case will take months or years to play out.

The wireless patent battles will also play out in other countries. Last week, for example, a court in Seoul, South Korea, found that Apple and Samsung infringed on each other's patents. The companies were ordered to stop selling certain smartphones and tablets and to pay each other some amount of money as compensation. Apple's bill was slightly higher than Samsung's.

The verdicts in the US and Korea (along with previous ones in Europe) mean the two companies must eventually sit down and hash out a compromise. This won't happen soon, but eventually cooler heads will prevail at the two companies, and I predict a cross-licensing agreement will follow.

In the meantime, Apple isn't winning that much applause in the blogosphere. In fact, the majority of the comments I have seen seem to be against the verdict. That's the bigger danger the company faces as consumers digest its verdict. The victory over Samsung has reinforced the impression Apple acts as a bully, as some observers have said in online comments. Many of the comments on a BBC article on the subject were not applauding the verdict. Even though the writers were not praising Samsung, they focused their ire on Apple, which they said won a verdict for things that should never have been patented. Here are some examples.

• "Apple need to get over themselves -- Samsung have produced a thin rectangular phone with curved edges. Hardly groundbreaking."
• "Anyone who wants a clear perspective on Apple's behaviour need only look at the short TED video on remixing. Apple did not invent GUI's, mice or touchscreens. They consciously 'lifted' most of the ideas and are behaving like complete hypocrites. The upshot is less for the consumer and more for Apple."
• "There were phones that looked very similar to the iPhone way before the iPhone was thought of."
• "I think Apple have ridiculously overplayed their hand here, and will upset a lot of formerly neutral consumers."

Though some analysts say Apple can use its US court victory to whittle down Samsung's dominance of the smartphone market, I don't see this happening. Android OS devices won't fall off the map, either (its 68 percent marketshare may dip a bit), and Microsoft's Windows OS won't move to a double-digit marketshare from its current 5.4 percent. The Samsung devices Apple may ask the California court to ban will be quickly replaced. Samsung rolls out devices frequently, unlike its rival, which has moved more or less to a six-to-10-month iPhone replacement cycle. Soon the effects of the California verdict will be wiped clean from the market's memory and even from Samsung's balance sheet.

What will remain is a vast pool of irritated consumers, an equally disappointed supply base, and a royally ticked off rival-partner. Samsung -- Apple's archrival in all of the American firm's markets -- happens to be a supplier of critical components to the company. It won't, of course, shoot itself in the foot by endangering the profitable partnership, but didn't somebody say there are many ways to skin a cat?

An interesting comment posted on EE Times aptly sums up the situation: "I hope the next headline isn't 'Enraged Samsung employee starts fire at 32nm fab.'" The Samsung fab referenced here makes what? Components for iPhones. Nuff said.