The tables seem to have turned on Apple (
) in its ongoing patent war with Samsung Electronics (
). The iDevice maker received an import ban order on some of
the older models of the iPhone and the iPad after the U.S.
International Trade Commission (
) found the devices in violation of a 3G wireless patent held by
The import ban is limited to only those models that work on
) and T-Mobile's airwaves, but Samsung holds the right to allege
infringement against the other CDMA-based models as well. Since
Apple gets these mobile devices made in the Far East, the ruling
basically makes it impossible for Apple to sell them in the U.S.
once the order takes effect.
See our full analysis for Apple
| Samsung Electronics
The ruling has come as a surprise to many because the patent in
question is a 'standards-essential' one, meaning that the patent
holder is obligated to license it out at reasonable terms. A patent
win for Samsung should therefore have resulted only in monetary
charges for Apple and not on outright import ban. However, the ITC
doesn't adhere to these rules, which are otherwise generally
followed by the U.S. courts. The White House has previously
recommended to Congress that the ITC be asked to abide by the same
principles and that its ability to impose import bans in cases
pertaining to these patents be limited. However, it remains to be
seen if the Obama administration's stance leads to an overturning
of the ITC's decision during the 60-day period that the President
has to review the case.
Minimal Impact on Sales
Considering that iDevice sales will not be affected during the
review period and that the iPhone 4 and the iPad 2 are nearing the
end of their life cycle anyway, the impact on Apple may be limited
to only a few months. The extent of the impact will depend on when
Apple decides to launch the next-generation iPhone and iPad this
year, which is when both the iPhone 4 and iPad 2 are likely to be
taken off the shelves. In the specific case of the iPad 2, whose
Wi-Fi and non-AT&T cellular versions haven't been banned, the
impact is likely to be even more muted. The ruling may however
cause Apple to speed up its development process so that the
iDevices are launched sooner than earlier expected.
Apple will however do well to avoid taking undue risks while
accelerating the product build. With its profits declining as gross
margins take a hit amid intensifying competition, it will be
foolhardy to launch a new product without taking the requisite
steps to get the supply chain ready or making the new OS bug-free,
just for the sake of offsetting the short-term sales loss of a
three-year old product.
As for Samsung, the patent win could help it shed its 'copycat'
image in the U.S. after its brand took a beating last year when
Apple had won a $1 billion patent infringement case against it. The
South Korean smartphone maker is ramping up its efforts to win
market share in the U.S. with the Galaxy S4, and this patent win
could help it market its high-end mobile devices better. (see
Samsung Has Its Sights Firmly On Apple With Galaxy
) A stronger foothold at the high-end of the smartphone market is
what Samsung is gunning for, since that is where most of the
profits in the mobile market lie.
How a Company's Products Impact its Stock Price at Trefis