Apple, Samsung Both Infringed Patents, Korean Court Rules - Businessweek

Apple Inc. (AAPL) and Samsung Electronics Co. (005930) must stop selling some smartphones and tablet computers in South Korea and pay damages after a Seoul court ruled they infringed on each other's patents.

Apple, maker of the iPhone, violated two Samsung patents related to mobile-data transfer technologies, the Seoul Central District Court said today. Samsung, the world's largest mobile- phone maker, infringed one Apple patent related to a "bounce- back" touchscreen feature, though the Suwon, South Korea-based company didn't copy the design of the iPhone, the court said.

Cupertino, California-based Apple must stop selling the iPhone 3GS, iPhone 4, iPad 1 and iPad 2, while Samsung must stop selling 12 products including the Galaxy S, Galaxy S II and Galaxy Tab, the court said in a statement. Apple must pay Samsung 40 million won ($35,000), and the Korean company must pay its U.S. rival 25 million won, the court said.

"The ruling is in line with what we had expected," Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $29 billion, said by phone today. "What's important is how the verdict that's coming out soon in the U.S. will affect other pending cases in places like Europe and Australia."

Four Continents

Samsung didn't have an immediate comment on the ruling, Nam Ki Yung, a Seoul-based spokesman for the company, said by phone. Two phone calls to Steve Park, a Seoul-based spokesman for Apple, went answered.

Shares of Samsung fell 1.1 percent to 1.273 million won at 2:07 p.m. in Seoul trading.

The sales bans take effect immediately, and the companies can ask the court to rescind them. Samsung generated 39 percent of revenue in South Korea in the quarter ended June 30, according to data compiled by Bloomberg. Apple, the world's most-valuable company, garnered 23 percent of its sales (AAPL) in Asia- Pacific during the same period.

"These products all came out a while ago, so the actual impact won't be big," Kim Hyung Sik, a Seoul-based analyst at Taurus Investment Securities Co., said by phone. "The U.S. case is the important one. Even a neutral verdict there would be a victory for Samsung."

California Trial

Apple and Samsung (AAPL) have sued each other on four continents since April, accusing each other of copying products, design and technology, even as they are bound by commercial deals involving components supply. At stake is the dominance of the smartphone market, estimated by Bloomberg Industries to be worth $219 billion last year, where Samsung and Apple are the world's two biggest manufacturers.

Samsung sued Apple in April 2011 in Seoul, Tokyo and Mannheim, Germany, alleging the iPhone maker infringed the South Korean company's patents. Apple countered with a suit in June. Samsung filed a separate suit in Seoul in March this year, as the dispute expanded to countries including the U.S., U.K. and Australia.

The two companies began a jury trial in U.S. federal court in San Jose, California, on July 30 to try Apple's claims that Samsung copied its iPad and iPhone designs and Samsung's counterclaims that it's the victim of patent infringement by the U.S. competitor. The case is the first U.S. jury trial in the dispute.

In the last quarter, the South Korean company controlled 34.6 percent of the global smartphone market, followed by Apple with 17.8 percent, according to market researcher Strategy Analytics.

Competitors and Customers

In the U.S. trial, Apple is seeking $2.5 billion to $2.75 billion in damages for its claims that Samsung infringed four design patents and three software patents in copying the iPhone and iPad. Apple also wants to make permanent a preliminary ban it won on U.S. sales of a Samsung tablet computer and extend the ban to the South Korean company's smartphones.

Samsung is seeking as much as $421.8 million in royalties that the company claims it's owed for Apple's infringement of two patents covering mobile-technology standards and three utility patents.

Lawyers for both companies made closing arguments on Aug. 21 ahead of jury deliberations.

Both sides have had legal victories. Apple won a U.S. court order on June 29 blocking sales of Samsung's Galaxy Nexus smartphone, the first smartphone to use Google Inc.'s Android 4.0 operating system. The product has remained on the market as Samsung appeals the order to the Federal Circuit.

In November, Samsung won a battle in an Australian court that allowed customers to buy Samsung's rival to the iPad.

The allegations over intellectual property contrast with the commercial ties that bind the two companies. Apple's reliance on Samsung chips for its best-selling phones and tablets will be worth as much as $7.5 billion to Samsung this year, a 60 percent jump from 2011, according to estimates from Gartner Inc., an industry researcher based in Stamford, Connecticut.

Apple accounts for about 9 percent of Samsung's revenue, making it the company's largest customer, according to a Bloomberg supply-chain analysis.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net