Apple-Samsung ITC deal - signs of a truce? June 16 2014

Rivals agree to drop cross-appeals against 2013 ITC ruling against Samsung, though no commercial impact

By Caroline Gabriel

There have been a few signs, in recent months, that Apple and Samsung might finally lay down their weapons in their long-running and increasingly futile patents war. The latest comes with an agreement to end one of their US battles, dropping all cross-appeals related to last year's ITC (International Trade Commission) ruling that Samsung had infringed on two Apple patents.

The deal only affects outdated handsets - when it comes to smartphone industry litigation, the courts move far more slowly than the device upgrade cycle - and it may prove to be merely housekeeping rather than a sign of greater truces to come. Or, as some fear, it may be a question of Apple and Samsung dropping irrelevant suits which will have little symbolic or commercial effect, and reloading their weapons for a new IPR battleground, in the internet of things - an area where both are amassing new patents.

The latest ceasefire relates to an ITC judgement that Samsung had infringed two Apple patents related, respectively, to the touchscreen interface and headset plug detection. The original ruling imposed an import ban against guilty products, but in reality, Samsung had already developed workarounds and updated its models. However, it appealed the injunction anyway, indicating how much of these expensive legal battles are about scoring points rather than protecting real revenues. Meanwhile, Apple appealed too, seeking to broaden the scope of the judgement and get even the devices with workarounds barred.

Both those motions have been dropped, and while the injunction is still technically in force, there are no models which are affected by it. It now remains to be seen whether the new climate of compromise extends to other US cases. Some of these are in federal court, including the highest profile cases, held in San Jose under the eye of Judge Lucy Koh. Both firms have consistently used the ITC as a second theatre, and last year

Samsung gained its own ITC import ban over Apple infringement of a standards-essential patent. However, the government vetoed the ruling, claiming concerns that Samsung was abusing its ownership of such patents.

The next hearing in San Jose will take place on July 10, and will address Apple's request for a sales ban on Samsung devices which were found, in the latest round of judgments, to have infringed its IPR. Koh has previously denied such petitions and is unlikely to change her mind this time, but Apple has also filed motions for an amended ruling, a new trial, and larger damages than the $11.6bn it won; while Samsung is challenging the ruling, the validity of the patents and the scale of the damages. The Korean firm is also still appealing rulings from the famous 2012 trial in the same court and last year's retrial over the damages awarded.

It is clear that the San Jose cases will be tougher to settle than the ITC ones, and there has been no progress in that direction despite court-mandated CEO-level talks and repeated pleas from Koh to come to a deal. However, there is rising pressure to make such a deal - partly from the companies' shareholders, concerned at the cost and distraction of lawsuits which deliver no knock-out victories; partly from the ecosystem, which has seen Apple and Google agree to drop all direct litigation against one another.

A Samsung official told Korea Times: "We are trimming down the number of dispute issues. We no longer want to spend time talking about secondary points. Both firms are trying to find common ground."

Another factor pushing Apple to come to a rapprochement will be its reliance on Samsung for key components such as displays. Despite efforts to broaden its supply chain, Apple still accounts for 9% of Samsung's display sales (up from a year earlier) and is said to be very interested in the Korean firm's innovations in AMOLED technology for wearables.

"As technology shifts toward wearable devices, Apple still wants to keep Samsung as its top-tier parts sourcing channel," another official said.

However, while wearables may provide a new area for the companies to work together - as well as compete fiercely on the actual devices - it may also be a new patents battleground. There is a broad feeling that a new IPR system will be required for the fragmented and immature world of the Internet of Things (IoT), but unless international and industry bodies move quickly to create a new framework, there is the risk that old habits will prevail, based around secretive bilateral licensing deals and litigation.

Apple and Samsung are both filing large numbers of patents related to the IoT, though according to Thomson Reuters Intellectual Property & Science, the Korean giant is in the lead in this respect. It surveyed US patent filings in the smart home market, and found that Samsung has filed almost 150 patents related to home automation since 2000, about double the number submitted by second-placed Sony, and it has a further 60 pending for this year. After Sony come LG and Flextronics, while Google comes in at sixteenth and Apple at thirtieth.

Bob Stembridge, senior researcher at Thomson Reuters, told the Wall Street Journal: "It's a clear area of focus for them. It's not just the volume of innovation, it's the quality of innovation." Samsung has become steadily more aggressive about filing patents, in the US and elsewhere, in areas which it regards as strategic. In 2013, it was the top filer in mobile telephony, semiconductors and smart media, and received more US patents than any other company apart from IBM, according to Fairview Research.