Apple 2.0

Covering the business that Steve Jobs built

Why Samsung must negotiate. Why Apple won't settle.

May 21, 2012: 7:09 AM ET

In the court-ordered talks that begin Monday, the two sides are playing by different rules

Choi and Cook. Photos: AP and Reuters

FORTUNE -- The federal judge overseeing the Northern California front of the global smartphone patent war has the power to bring the CEOs of Apple (AAPL) and Samsung -- Tim Cook and Choi Gee-sung -- to a mediation session, but even he can't force a settlement.

The differences between the kinds of patents the two companies are bringing to the table may simply be too great.

Steve Jobs set the terms of the dispute in 2007 when he unveiled the touchscreen smartphone that is now Apple's No. 1 source of revenue.

"We've been innovating like crazy for the last few years on this," he said. "We filed for over 200 patents for all the inventions in iPhone, and we intend to protect them."

According to Walter Isaacson, Jobs was as angry as his biographer had ever seen him about the way Google (GOOG) and the Android phone manufacturers had "slavishly" copied the iPhone's design, threatening to go "thermonuclear" on them -- a term with special resonance in the Far East.

Samsung may have an equally powerful arsenal of patents at its disposal -- including many covering the fundamental technologies of cellular telephony that Apple relies upon -- but those patents are not so easily deployed in a court of law.

Many of Samsung's telecommunications patents were submitted to the technical committees in charge of setting international standards under so-called FRAND terms, whereby a company is permitted to collect royalties for use of its proprietary technology, but must negotiate those royalties for rates that are "fair, reasonable and non-discriminatory."

Samsung has tried to use those standards-essential patents against Apple, accusing the company in countersuits of exploiting them without permission, something Apple may well be doing.

But as a legal strategy this carries risks, because as long as Apple is willing to pay for the use of Samsung's patents, Samsung is required to negotiate terms that are fair and reasonable and don't try to unduly punish Apple.

Apple is under no such obligation with regard to its patents. If it doesn't want a competitor to use its proprietary technologies, it doesn't have to license them under any terms.

It's in this context that we must consider the remarks Steve Jobs' successor made during the most recent earning call:

"I've always hated litigation and I continue to hate it," Cook told analysts in April. "We just want people to invent their own stuff. So if we could get to some arrangement where we could be assured that's the case and a fair settlement on the stuff that's occurred, I would highly prefer to settle than to battle. But it -- the key thing is that it's very important that Apple not become the developer for the world. We need people to invent their own stuff." (transcript)

Many commentators interpreted that statement as an olive branch extended in advance of this week's Samsung talks.

But it's just as likely that Cook was signaling something quite different. Apple is willing to settle those things that Samsung is required to negotiate. But when it comes to protecting Apple's inventions, the Cook's heels seem to be as deeply dug in as his predecessor's were.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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