Apple Loses Another Patent Battle

| About: Apple Inc. (AAPL)
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By Louis Bedigian

This isn't the way the Mac maker had hoped to kick off the year.

Following a media blitz of hype for the iPhone 4S launch in China, it looks as though Apple (NASDAQ:AAPL) might conclude the week on a, well, weaker note.

During the iPhone maker's ongoing and never-ending patent dispute with some of the world's largest smart phone manufacturers – including Samsung (OTC:SSNLF) and HTC (OTC:HTCXF) – Apple got into a scuffle with Elan Microelectronics Corp. (NYSE:ELN), a touch design company that's based in Taiwan. According to Reuters, Elan announced this morning that Apple will pay $5 million to settle a patent infringement case.

This might sound like an insignificant victory (and a worriless payout for Apple, which has billions of dollars in cash reserves), but Elan's success is a painful reminder that the iPod creator isn't guaranteed to win these courtroom battles. Actually, Reuters reports that Apple did win this battle – the U.S. International Trade Commission apparently ruled in favor of Apple because it had not violated U.S. trade law. And yet Apple is still forking over a bucket of cash.

While this particular war was started by Elan (the company sued Apple in America regarding two patent infringements, prompting Apple to counter with a lawsuit of its own), the Tim Cook-led enterprise is well known for launching the first strike. If it weren't for Apple going after its competitors – who, like all competitors, saw the success of the iPhone and have attempted to copy it – the company might not be in this mess right now. Most importantly, it might not have had to pay Nokia (NYSE:NOK) an undisclosed sum of money and agree to become a Nokia licensee.

Apple had hoped that its initial lawsuits would ward off the competition, prevent copycats from entering the market, and elevate the iPhone's status as a one-of-a-kind product. However, Apple has been unsuccessful in this regard. Many consumers still view the iPhone as a one-of-a-kind product, but the company has been unable to prevent additional copycats from hitting store shelves. Worse yet, by becoming a sue-happy tech giant, Apple has put itself in the spotlight as the company to go after. Whereas Apple's competitors may have been content to keep the fight at retail (where it belongs), they are now out for blood. And they won't stop until they've sucked Apple dry.

Lucky for Apple, Samsung isn't a vampire. The Galaxy S II maker has had an equally difficult time in court. But anyone who has followed the patent battle has likely noticed that Samsung's assault came in response to the actions of Apple, which made the first strike. Samsung has not attacked its other competitors in the same way.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.