A patent can be the life blood of a company because it gives the company the sole right to use or market the process, product, or machine that is covered by the patent for a few years. This essentially gives the company a temporary monopoly over the patented subject matter. Patents are particularly of great value for technology companies like Apple and Samsung. The technology industry is extremely competitive and securing a patent on the design of a product can give a company an advantage over its competitors. Once a patent is received, companies go to great lengths to protect their patents and will often initiate litigation when necessary, as evidenced by the extensive patent litigation between Apple and Samsung that began in April.
In April, Apple sued Samsung in the United States, alleging that Samsung’s line of Galaxy tablets were a mere copy of the iPhone and iPad. Litigation between the companies has since spread to other countries throughout the world (including Italy, France, Germany, the Netherlands, and Australia among others) as each company has attempted to have the other’s alleged infringing product banned from that market. Apple has had much success in its litigation, having its claims upheld in the United States, Germany, and the Netherlands, as well as receiving a temporary ban of the Samsung Galaxy Tab 10.1 in Australia.
In this ensuing global patent battle, the most recent attack came from Samsung as it sought to have France and Italy bar the sale of the Apple iPhone 4s. These two suits are based on two alleged patent infringements related to the 3G technology of cell phones, otherwise known as the Wideband Code Division Multiple Access standards. Samsung claims that these patents are “essential” patents, meaning that they are part of an “industry standard-setting process.” Such patents are required to be licensed to all who desire them, but licensing must be done in accordance with competition laws and in a fair, reasonable, and non-discriminatory manner. The consequence of this classification is that Apple will have to pay Samsung to use its technology. A failure to reach an agreement, however, on the amount of payment, would not result in Samsung having the ability to block any products from being shipped and sold.
Given the potential consequences of such a characterization of the alleged infringed patents, it may seem odd that Samsung chose this strategy. Understanding the complex relationship between the two parties makes the classification more comprehensible. Apple and Samsung are major competitors in the cell phone market. In the second quarter of 2011, Apple had the most global sales of smartphones and Samsung was ranked second. In the third quarter of 2011, however, Samsung outsold Apple and gained the top spot. Despite this intense competition, Samsung, the world’s largest memory chip manufacturer, serves as an important supplier for Apple. This relationship explains why Samsung would take the approach it has.
The Italian court presiding over the lawsuit in Italy denied Samsung’s ban request in late October, allowing for the scheduled release of the iPhone 4s on October 28, 2011. There will, however, be another hearing on December 16, 2011, during which the parties will submit additional information for further consideration. Though the French court has yet to make a ruling, the Italian decision is yet another victory for Apple in its ongoing patent war with Samsung. When the fight will cease, and what effect this litigation will have on the business relationship of the parties, has yet to be determined.
* Chris Hewitt is a second-year law student at Wake Forest University School of Law and a member of the Journal of Business and Intellectual Property Law. He holds a Bachelor of Business Administration in Trust and Wealth Management from Campbell University. Upon graduation in 2013, Mr. Hewitt plans to practice business and estate planning law.