The San Jose Verdict: Implications For Apple

Aug.25.12 | About: Apple Inc. (AAPL)

After 3 weeks of heated testimony, the jury found Samsung (OTC:SSNLF) willfully infringed on Apple's (NASDAQ:AAPL) patents. Not just on one patent. Not two. The jury's verdict: Samsung swiped numerous Apple design, utility, and trade dress patents. Apple was exonerated of copying any of Samsung's patents. Samsung's penalty: $1.05 billion.

It was a big Apple victory. While under the $2.5 billion Apple was seeking, the judgment costs Samsung all the profits made selling those smartphones/tablets identified as knock-offs and then some. Samsung sold 21 million smartphones from Q2 2010 through Q2 2012 in the U.S. for $7.5 billion in revenue. In five minutes, all those earnings went poof.

What's a billion between frenemies? After all, Apple earned $40 billion TTM. Samsung cornered $10 billion TTM. Definitely a major sting for Samsung.

Yet, the verdict means so much more than money for Apple. It safeguards Apple's innovation. It took four years for Apple to develop the iPhone, only 3 months for Samsung to mimic the phone's icon design. The verdict discourages stealing Apple's technology. Competitors will think more carefully before so closely mimicking Apple's new products.

Microsoft (NASDAQ:MSFT) has already signed a cross-licensing agreement with Apple gaining access to the patents involved in the Apple-Samsung dispute. This arrangement provides a template for future licensing deals. The deal specifies "no cloned" products.

Appeals aside, the San Jose jury erected a major disincentive for would-be intellectual property theft. As for slavishly copying Apple's next-gen iPhone, that's so 2010.

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