Apple 2.0

Covering the business that Steve Jobs built

Steve Jobs offered Samsung Apple's crown jewels for $250M

August 11, 2012: 7:34 AM ET

Willing to license iPhone and iPad patents for $30/phone, $40/tablet. Samsung declined.

From Apple's Oct. 2010 presentation. Click to enlarge.

FORTUNE -- In October 2010, seven months after Steve Jobs told his biographer that he was going "thermonuclear" on Google's (GOOG) Android for ripping off the iPhone, he and Tim Cook offered Samsung a secret licensing deal -- a fact that Apple (AAPL) saved for last Friday in its multibillion dollar patent trial against the Korean electronics giant that is both a key Apple supplier and the largest manufacturer of Android phones.

According to the late-afternoon testimony of Borks Teksler, Apple's director of patent licensing strategy, the company's top executives had been "shocked" in March 2010 when Samsung introduced the first of its line of Galaxy S touchscreen phones. "We didn't understand how a trusted partner would build a copycat product like that," he told the jury. Jobs and Cook contacted Samsung and demanded a meeting.

In August 2010, Apple prepared a document that identified dozens of instances where it believed Samsung was using or encouraging others to use Apple's patented technology, Teksler testified.

Then the jury was shown Defendant's Exhibit No. 586: A Keynote presentation Teksler created in early October that spelled out exactly what Apple wanted in return. "Because Samsung is a strategic suppler to Apple," the preamble reads, "we are prepared to offer a royalty-bearing license for this category of device."

The terms:

  • $30 per Android, Symbian and Bada smartphone (Windows phones to be discussed)
  • $40 per touchscreen tablet
  • Various discounts, e.g 20% in exchange for a license to use Samsung's patent portfolio

At $600 per unsubsidized phone, that works out to a royalty rate of 5%. Samsung, according to earlier press accounts, had demanded 2.4% per device for its patents.

By Apple's calculation, payments for calendar year 2010 would have worked out to $250 million with the discounts and $288 million without.

Now Samsung is being hit with Apple's demand for more than $2.5 billion in sales, lost profits and damages -- damages that could be tripled if the jury finds not only that Samsung infringed, but that the infringement was willful.

We learned Friday for the first time that Apple had offered to license its core interface technology -- something Jobs had fiercely resisted in the past.

We may find out next week, when the trial resumes, why Samsung declined.

You can download a copy of Teksler's pdf here.

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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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