Analysis

Apple uses courts to buy time to secure iPad's market share

SINGAPORE — Reuters

President and CEO Samsung South West Asia J.S. Shin (L), Bollywood actress Lara Dutta (C), and Samsung Electronics Senior Vice President Global marketing Y.H. Lee (R) pose with Samsung's thinnest mobile tablets, the Galaxy Tab 750 and Galaxy Tab 730, during a product launch in New Delhi on August 10, 2011. (PRAKASH SINGH/AFP/Getty Images)

Apple Inc.’s latest victory in its intellectual property battle with Samsung Electronics’ is a step forward in its broader strategy of using the courts to help cement the unassailable lead its iPad has in the tablet market.

The U.S. technology giant has just won an injunction in a German court that temporarily bans Samsung from selling its flagship Galaxy tablet in most of the European Union, having won a similar ruling in Australia last week.

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These injunctions are only preliminary measures and Apple will have to provide more substantial evidence in subsequent court cases that the design of the Galaxy infringed its patents or copied their designs in order to make any bans permanent.

Such cases can take months if not years to come to court – assuming there’s no settlement first – and if Apple loses it will be liable for the business lost by Samsung in the meantime.

“Apple has a strategy of filing patents, getting some protection and trying to prevent other people from entering the market in the short-term,” said Nathan Mattock, an intellectual property lawyer at Marque Lawyers in Sydney.

“If Apple’s wrong it will have to pay Samsung a considerable amount of damages, so it’s potentially quite risky.”

TIME IS PRECIOUS

But while risky, technology experts say pursuing this kind of strategy is worth it for Apple in terms of the time it buys their iPad to try and win an even greater market share.

“It’s a market that’s developing very fast which Apple have the lead in, so regardless of the damages they have to pay if they lose, the longer they can hold off competition the better for their business,” said Andrew Milroy, vice president of information and communication technology research at consultancy Frost & Sullivan in Singapore.

In Australia, Samsung has agreed to show Apple an Australian version of the Galaxy Tab 10.1 one week before its launch there, a Samsung spokesman said.

In the first quarter of 2011, Apple’s iPad accounted for 66 per cent of the global tablet market according to market researcher IDC. However the growth of new products coming on to the market means that’s expected to drop to around 58 per cent by the end of the year.

Technology experts say Apple is using the courts in order to try and stop that slide.

“Using the courts is increasingly becoming part of commercial strategy in high growth markets where the opportunities are great – it’s a tactic to try and slow the competition down by whatever means you can,” said Frost & Sullivan’s Milroy.

Going down this route in German courts is particularly effective as it’s easier to win a preliminary injunction forcing a company to remove its products from the market straight away than it is in the United States.

Florian Mueller, who writes the software intellectual property blog FOSS Patents, said that these injunctions require evidence the products in question are causing harm to the right holder’s business but “not the more complex kind of hardship and public interest analysis that is performed in the United States.”

SAMSUNG TO STRIKE BACK

The competition, however, is likely to strike back. Legal experts say Samsung will be preparing a multi-pronged case which will likely force Apple in to some kind of settlement allowing them back in to the market.

“Samsung’s case will be a combination of ‘your patent’s not valid, even if it is valid its scope is very narrow and we’re not infringing it anyway, plus by the way you’re infringing our patent as well’,” said Kimberlee Weatherall, associate director of the Intellectual Property Research Institute of Australia.

“It’s posturing with a view to reaching some sort of settlement – the stronger the position Samsung can put itself in with those multiple levels of argument the more favourable the settlement is likely to be,” she added.

It’s not just Samsung that Apple’s big name IP lawyers, including Freehills in Australia and Morrison & Foerster in the United States, have in their sights.

The company is also involved in legal action with Taiwan’s HTC and Motorola Inc. , alleging patent infringements by their smartphones.

GOOGLE BATTLE

All of these rivals to Apple use Google Inc.’s Android platform, and the legal action prompted a stinging attack from Google’s legal chief last week.

“They (Apple) want to make it harder for manufacturers to sell Android devices,” Google’s David Drummond wrote in a blog entry.

“Instead of competing by building new features or devises, they are fighting through litigation.”

For now though Apple, whose strong sales mean it has built up billions of dollars in cash reserves, has enough money on its hands to finance both innovation and litigation.

“Apple has got quite a war chest so it can operate in this way, and that in the short-term at least is going to lead to their market dominance and everyone is one notice of that,” said Mattock at Marque Lawyers.

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