It is no secret that Apple (AAPL) is litigious. Some would say it all started with Steve Jobs' announced intention to launch a "thermonuclear war" against Android. Yet the hostilities have extended far beyond Google's Android platform. Recent targets have included Samsung, HTC, Google (GOOG) and Amazon (AMZN).
To be sure, Apple has won some major victories, sustained some major losses, and stalemated as well. Yet the biggest headlines of late have concerned the global litigation between Apple and Samsung (SSNLF.PK). On August 24, Apple won a $1.05 billion victory against Samsung in U.S. Federal Court, though that court will hear motions to have the verdict set aside on December 6th, 2012. That said, the court will also hear Apple's motion for an injunction that would effectively prevent the sale of eight Samsung mobile phones in the U.S., as well as modifications to the jury award that have the potential to triple the amount Apple can receive from Samsung.
Typically, it's not so easy to overturn jury verdicts unless there has been a clear error of law. Juries are fact-finders, and courts of appeal will defer to fact-finders whenever possible. Yet Apple's victory against Samsung has certainly been called into question on a number of fronts, and it appears that even the most epic legal victory in the history of patent litigation will fall short of making material gains in Apple's share price.
For starters, on October 23th the United States Patent and Trademark Office (USPTO) issued a non-final office action declaring all 20 claims, including the crucial claim 19, of Apple's rubber-banding patent (the '381 patent) invalid. Though Apple had successfully asserted that claim against Samsung, the USPTO response now provides a clear basis for Judge Lucy Koh to grant a judgment as a matter of law in favor of Samsung, thereby overturning that portion of the jury verdict.
Samsung has also mounted challenges to the jury deliberations themselves, arguing that the jury foreman incorrectly advised the jury as to when prior art will invalidate utility patents. Additionally, Samsung has made the case that the verdict should be overturned on the basis of the jury foreman's failure to truthfully answer questions during voir dire (juror selection) relating to his involvement in past lawsuits. As it turns out, one lawsuit that Samsung alleges the juror failed to disclose implicates Seagate (STX), which sued the foreman on a promissory note. Samsung owns a majority stake in Seagate, and the attorney that brought suit against the foreman on Seagate's behalf is the spouse of an attorney at Quinn Emmanuel, the law firm representing Samsung in the present case.
Whether Samsung's efforts to overturn the verdict in the U.S. remain to be seen, but in the meantime Samsung continues its global pushback against Apple. Just one week after Apple's victory, Samsung secured a win in a Japanese court, which found that Samsung did not infringe on patents dealing with synchronization of certain music and video data with servers. The technology that was the subject of this dispute was unrelated to Apple's victory against Samsung in the U.S., but Samsung's victory in Japan has been received positively, driving Samsung's stock price higher, and has led some to conclude that the overall mood of the global litigation between these two tech giants has turned in Samsung's favor.
The South Korea case tells yet another story, though the stakes in that case pale in comparison to the U.S. case, amounting to just about $90,000 in damages at most and potential injunctions in what is fundamentally a relatively small smartphone market. Samsung was found to violate an Apple design patent, and Apple was found to violate two of Samsung's utility patents, and resulting in the banning of early model Samsung Galaxy smartphones, as well as the iPhone 3GS and iPhone 4, also dated versions of the phones. Of course, given that many have expected Samsung to prevail in South Korea, where Samsung would presumably have home court advantage, the split decision giving a slap on the wrist to both companies may even be viewed as a victory for Apple.
In Germany, a judge will decide on December 7th whether Apple has infringed Samsung patented process involving the insertion of smileys - communicative representations of facial expressions - when sending text messages on a smartphone. Of course, Apple's track record in Germany is not so good, and if German courts remain in step with prior decisions, the outcome doesn't bode well for Apple. The last patent case between Apple and Samsung filed in Germany concluded with a determination that Samsung did not infringe an Apple patent relating to touchscreen technology. Prior to that, a German court found that Samsung did not infringe an Apple patent on a list-scrolling feature, and even earlier, that Samsung's 10.1 inch Galaxy Tab tablet does not infringe Apple's asserted Community design (the equivalent of a U.S. design patent). Of course, it is important to note the difference between a failure to find infringement of Apple's intellectual property - which was the outcome of the previous German patent cases - and finding that Apple has infringed upon another's intellectual property, in this case Samsung. It is certainly possible that the German court is attempting to steer clear of finding in favor of infringement generally, given the negative attitude toward the slew of patent litigation that has flooded courts around the world.
The Apple versus Samsung story is far from over, and though Apple has certainly won a major battle in that fight with its $1.05 billion verdict, it is ultimately unclear who will win the war, if anyone. What investors should take from these drawn out patent disputes is that regardless of the merits of these cases, the headlines will drive stock prices of both companies on a short-term basis, but more than likely provide little direction for the stocks on a long-term basis. As we've seen in the Korean case, but also in the U.S. case, by the time injunctions are granted the products on which they are granted are obsolete, and as far as damages go, we have yet to see Apple collect its billion dollar judgment, and once it does, both Apple and Samsung may have a new catalyst.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.