Apple Inc (NASDAQ: AAPL) And Samsung Electronics Co Ltd (KRX: 005930) Drop Patent Lawsuits Overseas

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By Mark Michaels on August 7, 2014 Company, Consumer Staples, Technology & Software

Yesterday August 6^th, both Apple Inc (NASDAQ: AAPL) and Samsung Electronics Co Ltd. (KRX: 005930) both released a statement that said that they would be abandoning all lawsuits against each other in countries overseas. These countries include Japan, Australia, Germany, South Korea, Italy, the United Kingdom, Netherlands, and France.

In the agreement, both Apple and Samsung seem to be realizing that what has been a tediously long, drawn out, and brutal fight all over the world over each company’s patents. The vicious fights over patents stemmed from the flourishing market for touch screen smartphones.

Apple has claimed that Samsung copied its iPhone designs for its smartphones. Samsung has countered by claiming that Apple has been using parts of its wireless transmission technology without the company’s consent.

In this collection of lawsuits, neither company has gained an overwhelming decision that affected the other company’s sales. Judges have suggested time after time that the two companies settle their disputes on their own rather than take the dispute to court.

Even before yesterday’s announcement about dropping the lawsuits, there have already been signs of cutbacks in each company’s aggression. In June, both Apple and Samsung agreed to drop their appeals for a case regarding patent infringement at the United States International Trade Commission. This case lead to a ban on the importation of some of the older Samsung phone models.

Apple and Google Inc (NASDAQ: GOOG) announced its decision in May to drop suits against one another involving Motorola Mobility. Google Inc produces the Android mobile operating system that Samsung utilizes in many of its mobile phones.

However, Samsung stated that they are not ending all of their lawsuits completely. They also have not achieved any agreement regarding cross licensing. The company’s share price dropped in Seoul, South Korea.

Cases In The United States

The two companies have stated that they have both agreed to drop all trials against one another in countries outside the United States. This agreement does not speak of any licensing agreements, and both companies plan to continue to go after the existing cases in the United States courts.

It is clear that both companies now see that the mixed results of these lawsuits around the world are not worth the effort. However, since they have not reached a cross licensing agreement, the two companies may be just taking a break before they begin their next battle.

Additionally, it is important to note that the United States continues to be a legal battleground for Apple and Samsung. The market shares for smartphone is changing – Apple and Samsung are losing ground to newcomers like Chinese Huawei Technologies Co and Taiwanese Lenovo Group Ltd, who are gaining market share in countries all over the world by offering their innovative phones at very competitive prices.

Increasing Sales

The dispute over patents is rooted in the flourishing sales for smartphones. When Apple released the iPhone in 2007, the transformed the smartphone market and popularized the use of phones with touch screens and access to the Web. Samsung followed Apple’s lead, and released a wave of touch screen smartphone models that boasts different styles and prices.

The rivalry between the Californian company and the South Korean company lead to two patent infringement cases in a federal court in San Jose, California. Apple won the two suits in the California courts, receiving $930 million in the result in 2012 and $120 million in the verdict earlier in 2014 this year.

In these court cases, many internal emails from both companies were unveiled. One of these emails unveiled Samsung’s desire to release a smartphone onto the market as quickly as possible to compete against Apple’s iPhone. Emails from Apple executives showed complaints about the effect of Samsung’s advertising campaigns on the iPhone’s sales.

Tim Cook, the CEO of Apple, and Shin Jong Kyun, the mobile chief of Samsung, as well as other executives from both companies, were present at a sessions with a mediator in early February. Representatives from both companies have followed up with phone calls with the mediator. Other sessions with the mediator in 2012 and 2011 also did not result in a deal being made.

Partners vs. Rivals

Samsung is currently struggling with lessening demand for their smartphones and lower earnings. It global market share also dropped 7.4 percent last quarter from the same quarter one year ago. Samsung also slipped from its top spots in the China and India markets.

In its quarterly earnings report last week, Samsung posted its lowest quarterly profit in two years. This slump is most likely due to a 15 percent drop in its shipments to China.

It is clear that the entire smartphone industry is changing, and Apple and Samsung have no time or funds to waste on frivolous lawsuits. It is necessary for them to get back to work to find out how to come out on top in the increasingly competitive smartphone market.