Cupertino, Calif.-based Apple and South Korea-based Samsung announced today (Wednesday) that they would drop lawsuits against each other in all countries except the United States. The partial peace is one less risk factor for investors in both companies to worry about.
Countries where the patent war is over include Australia, Japan, South Korea, Germany, the Netherlands, the UK, France, and Italy.
"They now see little need to wage a war around the world, which will only fatten the bills of lawyers," Young Park, a Hyundai Securities technology analyst in Hong Kong told Reuters.
Money Morning, way back in May of 2012, pointed out the futility of this patent war- something the executives of both companies should have taken into account.
While the suits in the United States will continue, the truce elsewhere raises the chances that the two tech rivals will eventually reach some sort of settlement there as well.
In the United States, Apple has won two jury verdicts in the U.S. District Court in San Jose. In one, Samsung was to pay AAPL damages of more than $1 billion for copying parts of the iPhone design. In the second suit, Apple was to receive damages of just $119 million, far less than the $2.2 billion it asked for.
Samsung is appealing both cases, so it will be a long time before Apple sees any of the money.
But let's be honest. The money was never what this patent war was about. Apple was using Samsung as a proxy to attack Google Inc.'s (Nasdaq: GOOG, GOOGL) Android operating system, which Apple felt ripped off several key features of the iPhone.
The goal of the patent war from Apple's perspective was to stop sales of Android devices, and on that score it failed miserably. By the second quarter of this year, Android market share had reached 84.6% compared to 11.9% for Apple's iOS devices, the iPhone and the iPad.
And Apple had good reason to worry; disappointing iPhone sales have dinged Apple stock several times over the past two years.
But the bigger question is why, after three years of bitter fighting, would these companies suddenly back down?
Why AAPL and Samsung Have Tired of the Patent Wars
Neither Apple nor Samsung has derived much benefit from the patent wars, and some recent developments have made the fight a distraction neither can afford…
A week ago Samsung reported ugly earnings, with revenue dropping for the third straight quarter and profits falling 25% year over year. That ugliness was driven by slowing smartphone sales, which are getting hit on both ends of the pricing spectrum.
On the low end, Samsung is losing out to cheaper alternatives from companies like China's Xiaomi. And on the high end, Apple's iPhone 5 has shown surprising strength against the Galaxy S5.
Samsung's smartphone shipments actually declined in the second quarter, and its market share slipped from 32.5% in the second quarter of 2013 to 25.2%.
AAPL, meanwhile, has found that trying to use the world's court systems to stop the copycats is like trying to nail Jell-O to a wall and a lot more expensive.
Instead, Apple seems to have concluded that just trying to stay ahead of rivals with better hardware and software is a much better strategy – one that we will see realized on Sept. 9 when it unveils the iPhone 6 and (hopefully) releases iOS 8.
The litigation process frequently proved embarrassing to the secretive company, which was forced to reveal a trove of internal documents.
And the truth is, the fight turned out to be not as critical as Apple may have thought. Even with global market share now in the low teens, the iPhone sucks up 87.4% of all smartphone profits, according to research firm IDC.
That's one big reason why anticipation of the iPhone 6 has helped AAPL stock rise about 12% over the past three months.
Apple also has many other initiatives going on, and figures to branch out soon into wearable tech, the Internet of Things, and possibly mobile payments.
The patent war with Samsung just doesn't matter that much anymore.
To keep up with all the latest news on APPL stock, follow me on Twitter @DavidGZeiler.
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