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Samsung: Life after Apple patent loss

As Samsung deals with the aftermath of its billion-dollar loss to Apple in a California court earlier this month, the company now faces a number of questions as it ponders its next moves. While it's a given that future mobile devices from the Korean conglomerate won't look or work like the iPhone and iPad, it's the short-term impact that has consumers and investors alike feeling jittery.

IDC analyst Kevin Restivo says there isn't much cause for concern. "In the short term, this won't affect Samsung's market share," he says. "If the company was to lose any kind of market share in the U.S., it would not be the result of this court battle. It would be a result of the iPhone 5."

Restivo says for now, market dynamics will affect Samsung's fortunes more than courtroom outcomes. He says as Samsung now faces three potential scenarios on the legal front:

Injunction
Judge Lucy Koh has scheduled an injunction hearing for December to determine whether Samsung can continue to sell its Nexus S and Galaxy S II phones and Galaxy Tab, and Galaxy Tab 10.1 tablets in the U.S. Apple has subsequently filed suit to expand this list by 17 devices, including the Galaxy S III, Galaxy Note and Galaxy Note 10.1.

Workaround
Samsung could update its software to eliminate its use of Apple's patented pinch-to-zoom and scrolling technologies. The over-the-air download would be free to customers, but it might also force users to re-learn basic touchscreen functions.

Settle with Apple
Restivo calls a settlement the least likely and least favoured option for the company. "That would be like conceding defeat to its arch rival," he says.

Before any of these becomes reality, however, the company will kickstart the appeals process. Following the Aug. 24th jury verdict, Samsung announced it would appeal, claiming the allegations against it were false. It also accused Apple of leveraging the patent process to gain a monopoly in the smartphone market.

Restivo says heading back to court is the best thing Samsung can do. Even though Apple expanded the injunction list to include more recent devices like the flagship S III, a protracted appeal process stops the clock, essentially. By the time the extended case fully plays out, even the newer devices in question will be largely obsolete.

"By getting the appeals process started, Samsung makes the patent infringement ruling less harmful to its business, because the models in question are actually quite old," he says. "Clearly the model S II is no longer its flagship model, so the longer this case drags on, the better for Samsung."

Looking beyond Samsung

Longer term, Restivo sees this case changing the very face of the smartphone market. While he says it's a big victory for Apple, there's more to the story, namely the psychological impact it could have across the industry.

"It's as much a moral victory as anything," he says. "Apple doesn't need the billion dollars in damages. What it says to its competitors is the software design is uniquely Apple's, and competitors will need to differentiate on the software front, otherwise there's established legal recourse in the U.S.

"So even though it's a win for Apple, it's more tangential, and it won't affect Samsung's short-term performance," adds Restivo. "You'll see it more ingrained in future phone designs from competitive phone makers. Moving forward, not only Samsung, but all Apple competitors will think long and hard about software design because this is such a legal precedent."

That broader impact also includes Google, whose Android operating system powers all of the Samsung devices covered in the trial. Samsung is the largest vendor of Android-based smartphones, and this case — and over a dozen like it in jurisdictions around the world — are largely seen as proxy battles between Apple and Google as the two push their respective mobile visions. Apple's victory over Samsung in the U.S. could be seen as a precedent-setting case that opens the door to similar litigation against other Android vendors such as HTC, LG and Google-owned Motorola.

As if to illustrate how widespread and nasty this battle is already becoming, Motorola filed suit against Apple last month with the International Trade Commission, alleging the company infringed Motorola-owned patents in its Siri voice-control product. Motorola is seeking a ban on U.S. imports of all affected devices, including the iPhone and iPad. This is the third time in less than two years that Motorola has gone after Apple in court.

While the legal battles over Android continue to expand, Samsung seems to be covering its bets. Its just-introduced Ativ line of smartphones is notable for using Microsoft's upcoming Windows Phone 8 operating system. While it's still too early to determine whether Microsoft's operating system offers much salvation, it's clear Samsung has ample options, and lots of time to leverage them.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca

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