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Apple win unlikely to undo Samsung’s smartphone gains

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While Apple’s influence is significant in the smartphone space – as witnessed by last week’s jury verdict awarding Apple $1.05 billion in damages from Samsung for patent infringement – Samsung has been on a roll as of late, a trend that the verdict is likely to do little to stop.

Apple is likely to seek a ban on the infringing products in the United States while Samsung will probably seek an appeal. The verdict, which upheld the infringement claims against Samsung smartphones but not the Galaxy Tab 10.1 tablet, is likely to be appealed by Samsung.

“This is still not that significant damage as it represents just five percent of the total handset division profits Samsung generated globally since its first Galaxy S launch,” said Neil Shah, senior analyst for the global wireless practice at Strategy Analytics, Newton, MA.

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“From Apple’s point of view the damage is already done from Samsung as the Korean vendor has already taken a huge lead in terms of smartphone market share and mindshare which won’t vanish away easily in near-to mid-term,” he said.

Workarounds
Last week’s jury verdict awarding Apple $1.05 billion in damages against Samsung for patent infringement is clearly a significant win for the company.

The original case dates back to 2010, when Apple accused Samsung of infringing a handful of patents in its smartphone and tablet design and use, followed by counter claims from Samsung against Apple.

In a slight blow to Apple, the company had sought $2.5 billion in damages. A formal hearing on Sept. 20 is expected to determine if the court will issue permanent injunctions banning the sale of the infringing Samsung products in the U.S.

Samsung’s counterclaims were not upheld by the jury.

The verdict points to just how influential Apple’s iPhone has been on the smartphone market.

For example, one of the unique design features that Samsung was found to have infringed is a rectangular shaped device with rounded corners.

Other patents involved in the case include bounce-back scrolling and pinch to zoom, which are commonly used  on many Android devices. As a result, Android manufacturers are likely to start looking for workarounds. 

However, the writing has been on the wall for a couple of years now and smart manufacturers such as Samsung have started to come out with devices featuring more unique design elements and functionality.

“Samsung is already walking away from these devices,” said Philip Solis, research director for mobile devices at ABI Research, New York. “There are newer devices that are being designed differently.

“There is a slight possibility that this slows Android overall and gives Nokia an opportunity to focus on Windows Phone,” he said. “Overall, I don’t think it is going to affect that much.”

A win for consumers?
The injunctions, if approved, could cause Samsung to lose some revenues and profits in the U.S.

However, the company has a strong customer base worldwide.

Samsung is also seeing strong results from more recent models that were not a part of the case.

“According to our estimates Samsung’s US smartphone revenues contribute to just roughly 13 percent of its total global handset revenues and most of the new high value models such as Galaxy SIII and Galaxy Note are not affected by this verdict,” Mr. Shah said.

“The ban would warrant Samsung to tweak its user experience in the infringing and upcoming models, which should not be a big issue if it extends the Galaxy S3 design language,” he said. “Thus, the newer Samsung models will be now based on more innovative and unique design that will propel Samsung only forward.

“So actually apart from the damages which can be challenged it’s a win-win for Samsung, Android and consumers in long-term,” he said.

The competition
As the largest Android manufacturer, Samsung’s loss here could be seen as a loss for Android. Apple has long contended that Android closely copies its iOS software.

The loss could open a door for some OEMs making mid-tier smartphones as this is where the verdict will most impact Samsung.

It could also open a door for RIM or Windows Phone.

“Increasingly, licensing Android has become akin to licensing patent liability,” said Carl Howe, vice president of research and data sciences at Yankee Group, Boston, in a report on the verdict. “However, companies such as RIM that own all their intellectual property run fewer risks of these types of adversarial judgments and are less likely to infringe because they offer integrated hardware-software solutions.

“This judgment may give RIM’s new BlackBerry 10 devices new market power as they try to reinvigorate the BlackBerry brand in smartphones, simply because they are less likely to incur legal costs,” he said.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York

Associate Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at chantal@mobilemarketer.com.

 
Related content: Legal/privacy, Apple, iPhone, Samsung, Galaxy, Android, Yankee Group, Carl Howe, Strategy Analytics, Neil Shah, ABI Research, Philip Solis, mobile marketing, mobile

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