August 26, 2012 in Nation/World

Apple verdict may realign the market

Samsung scrambles for new technology
Paul Elias Associated Press
 
Associated Press photo

Samsung Electronics’ Galaxy S III, right, and Apple’s iPhone 4S are displayed at a mobile phone shop.
(Full-size photo)

SAN JOSE, Calif. – It was the $1 billion question Saturday: What does Apple Inc.’s victory in an epic patent dispute over its fiercest rival mean for the U.S. smartphone industry?

Analysts from Wall Street to Hong Kong debated whether a jury’s decision that Samsung Electronics Co. ripped off Apple technology would help Apple corner the U.S. smartphone market over Android rivals, or amount to one more step in a protracted legal battle over smartphone technology.

Many analysts said the decision could spell danger for competitors who, like Samsung, use Google Inc.’s Android operating system to power their cellphones.

“I am sure this is going to put a damper on Android’s growth,” New York-based Isi Group analyst Brian Marshall said. “It hurts the franchise.”

The Silicon Valley jury found that some of Samsung’s products illegally copied features and designs exclusive to Apple’s iPhone and iPad. The verdict was narrowly tailored to only Samsung, which sold more than 22 million smartphones and tablets that Apple claimed used its technology, including the “bounce-back” feature when a user scrolls to an end image, and the ability to zoom text with a tap of a finger.

But most other Apple competitors have used the Android system to produce similar technology, which could limit the features offered on all non-Apple phones, analysts said.

“The other makers are now scrambling” to find alternatives, said Rob Enderle, a leading technology analyst based in San Jose.

Seo Won-seok, a Seoul-based analyst at Korea Investment, said the popular zooming and bounce-back functions the jury said Samsung stole from Apple will be hard to replicate.

The companies could opt to pay Apple licensing fees for access to the technology or develop smarter technology to create similar features that don’t violate the patent – at a cost likely to be passed on to consumers.

Apple lawyers are planning to ask that the two dozen Samsung devices found to have infringed its patents be barred from the U.S. market. Most of those devices are “legacy” products with almost nonexistent new sales in the United States.

A loss to the Android-based market would represent a big hit for Google as well. Google relies on Android devices to drive mobile traffic to its search engine, which in turn generates increased advertising revenue. Android is becoming increasingly more important to Google’s bottom line because Apple is phasing out reliance on Google services such as YouTube and mapping as built-in features on the iPhone and iPad.

Some experts cautioned that the decision might not be final, noting the California lawsuit is one of nine similar legal actions around the globe between the two leading smartphone makers.

Samsung has vowed to appeal the verdict all the way to the U.S. Supreme Court.

The $1 billion represents about 1.5 percent of Samsung’s annual revenue. Jerome Schaufield, a technology professor at the Worcester Polytechnic Institute, said the verdict wouldn’t upend a multibillion-dollar global industry.

“Samsung is powerful,” Schaufield said. “The company will regroup and go on.”

Samsung engineers have already been designing around the disputed patent since last year.

“We should never count out Samsung’s flexibility and nimbleness,” said Mark Newman, a Hong Kong-based analyst with Sanford C. Bernstein. “This is merely an embarrassment and annoyance to the company that they will have to find ways around.”

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