Apple 2.0

Covering the business that Steve Jobs built

Why would Apple settle?

August 16, 2012: 7:57 AM ET

Samsung has much to gain by cutting a deal, as the judge requested. Apple not so much.

Court drawing: Vicki Behringer for Reuters

FORTUNE -- "It's time for peace," Judge Lucy Koh declared in federal court Wednesday, the ninth day of the jury trial in Apple's (AAPL) high-stakes patent infringement suit against Samsung. "I see risk here for both sides if we go to a verdict."

Christopher Carani, a partner at Chicago-based McAndrews, Held & Malloy and an authority on design law, respectfully disagrees.

The risks for Samsung are well known, he says: Injunctions, delays, the need to design around Apple's patents, and the stigma of being known as a copyist -- not to mention billions of dollars in damages.

Apple, on the other hand, has little to lose by waiting for the jury's verdict. It's already spent the lion's share of the monstrous legal fees, and those who view the company as over-litigious are not likely to change their mind.

Besides, based on his reading of the transcripts, Carani believes the case is going Apple's way.

On the iPad:

Judge Koh already tipped her hand on the iPad design infringement charge when she granted Apple a preliminary injunction against the Galaxy Tab. And the parade of "prior art" Samsung's legal team trotted out Monday and Tuesday, according to Carani, is not likely to persuade a jury that Apple's tablet design patent is invalid:

"Either (1) the prior art has already been submitted and rejected, as a matter of law, by the Federal Circuit during the earlier appeal, or (2) its previous prior art submissions were closer in visual appearance than its new submissions; the new prior art submissions will suffer the same fate."

On the iPhone:

Samsung is not likely to fare much better in its defense against Apple's three iPhone design patents, according to Carani. The Federal Circuit court has already ruled on what he says was Samsung's best bet -- the so-called JP'638 patent -- declaring it insufficient to invalidate Apple's patents. And the infamous F700 (and its related patent KR'895) have both been excluded because Samsung waited until after the court's deadline had passed to introduce them into evidence.

Besides, Carani says, Apple hasn't even begun to exhaust its smartphone patent arsenal:

"Keep in mind that while it has asserted two smart phone design patents and one GUI design patent, Apple has dozens of others that they have not asserted that are directed at the same products, but having varying scope (some narrower, some broader).  Thus, the main risk to a patentee in a patent case -- having one's patent invalidated -- is largely eliminated in this case. In other words, even if these design patents are wiped out, there are more in the cupboard.

"Further, and perhaps most significant, Apple has other continuation applications pending at the [Patent Office] that Apple can amend and modify pending on the outcome of the case. In sum, as a direct result of its sophisticated design patent acquisition program (which was a central part of Steve Jobs' edict to jumpstart Apple's IP acquisition), Apple now has a high degree of flexibility to maneuver depending which way the case comes out; it can largely mitigate any casualties of litigation. In other words, Apple can add more to the cupboard."

Judge Koh, meanwhile, has plenty of reasons to ask the two company's CEOs to talk one last time. For one thing, the instructions she's been asked to give the jury are more than 100 pages long and will take an hour and a half to read. According to Koh, they're going to "put everyone into a coma."
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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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