Apple Inc.'s (Nasdaq: AAPL) huge patent-trial victory over Samsung Electronics Co. (PINK: SSNLF) has radically shifted the balance of power among the world's mobile computing combatants.
The implications of Apple's victory extend well beyond the two tech giants. As another black mark against Google Inc.'s (Nasdaq: GOOG) Android, the decision could spark a move away from the free operating system toward alternatives.
A nine-member jury found that all 21Samsung products in the suit had infringed on Apple patents and awarded the Cupertino, CA, company $1.05 billion in damages.
The jury dismissed Samsung's counterclaims, awarding it zero in damages.
"This is the best-case scenario Apple could have hoped for," Brian Love, a Santa Clara law school professor, told Reuters.
The markets agreed, sending Samsung stock down as much as 8% on the South Korean stock exchange. AAPL, meanwhile, was up nearly 3% in early trading to a new high of $682.07, though it slipped back later in the day.
Samsung said it would appeal the ruling, but few analysts give the company much of a chance at overturning the verdict.
In fact, it's more likely things will get worse for Samsung. U.S. District Judge Lucy Koh could double or even triple the damages based on the jury's finding that Samsung "willfully" infringed on Apple's patents.
And Apple said it planned to file for an injunction to halt the sales of Samsung's infringing products in the United States, which would be a far bigger blow than the unusually large monetary damages. A hearing on that is expected Sept. 20.
While Apple and Samsung have filed dozens of lawsuits against each other around the world, the case decided Friday was considered the most important because it concerned the U.S. market.
That the Apple-Samsung patent case decision heavily favored Apple surprised many analysts, most of whom expected a more balanced outcome.
Let's take a closer look at what the Apple-Samsung verdict means to the major players in the $219 billion mobile computing market.
The Apple-Samsung Patent Case: Winners and Losers Rundown
Apple: Clearly, Apple is the biggest winner. But the $1 billion in damages is pocket change to a company that earned nearly $44 billion in profits over the past year and has $117 billion in cash. What matters to Apple is the chill the decision puts into its rivals, most of whom also use the Android operating system and have copied at least some of the signature features of the iPhone. It also represents a degree of vindication for late CEO Steve Jobs, who had vowed to go "thermonuclear" on all Android-based iPhone and iPad imitators. Going forward, other companies will have to work harder to differentiate themselves from Apple's products or face the company's wrath in the courtroom.
Samsung: Surprisingly, it's not as bad as it looks for Samsung. While not as flush as Apple, Samsung does have a cash pile of about $21 billion to deal with the damages. And while injunctions could hurt the company in the short run, it's been working on design changes to its products should the worst happen (as it just did). Getting those non-infringing designs out the door quickly will help Samsung minimize the harm done by any injunctions, and give it a leg up on other Android device makers that could soon find themselves in Apple's litigious crosshairs. If those other Android manufacturers are also forced to pay the same $10 per device royalty to Apple, Samsung benefits again, as its larger margins make it better able to absorb the extra cost.
Google and Android: Here are the case's biggest losers. Google gives Android away for free, hoping to make money from search and other software services. So far, Google has built a large and healthy ecosystem. But if manufacturers have to pay Apple hefty licensing fees on top of those many already pay Microsoft Corp. (Nasdaq: MSFT) for other patents, Android may start to lose its appeal. At best, Google will be forced to develop workarounds to Apple's patents; at worst, several key manufacturers will choose to abandon Android.
Microsoft and Nokia Corp (NYSE ADR: NOK): Patience and persistence have often paid off for Microsoft, and it may again if the Apple court victory sours manufacturers on Android. Coincidentally, the mobile-optimized Windows 8 operating system is set for release in October. It may not be free, but at least it won't suck you into a legal quagmire. While the iPhone and Android devices have squeezed Microsoft's smartphone share into the low single digits, this could be the opening that puts Windows back in the mobile game. And it could make Nokia CEO Stephen Elop look like a genius for jumping on the Windows bandwagon early. The first Windows 8-powered Lumia phone is less than two weeks from launch. Nokia stock was up on the news as much as 12% on the Helsinki exchange Monday.
Research in Motion Ltd. (Nasdaq: RIMM): While pressure on Android in theory should boost all competing operating systems, it will take more than an Android stumble to reverse RIMM's tailspin. But more critically, Microsoft's Windows 8 phones will hit the market months before the new BlackBerry 10 models.
The Consumer: Samsung called the verdict "a loss for the American consumer" that would "lead to fewer choices, less innovation, and potentially higher prices." Other than higher prices that might result from the Apple licensing fees, the jury's decision should have the reverse effect. Restricted from lazily copying Apple's designs, mobile computing manufacturers now will be forced to trulyinnovate. Who knows, somebody might even come up ideas better than Apple's. That would be great for consumers.
Indeed, it could even backfire on Apple, according to one analyst.
"The real threat is not a competitor beating Apple at its own game, but instead changing the game," tweeted Michael Gartenberg, industry analyst while Swiss financiers UBS. "The likelihood of Apple being leapfrogged or a rival creating a new category [of device] is greater if they have to think out of the box. If they just copy Apple, like Coke, Apple can claim to be 'the real thing'."
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.