Standards-essential patents

Samsung-Apple patent war: The Journal misses the point

May 8, 2013: 7:45 AM ET

Note to editor: Not all patents are the same.

Judge Koh presiding over the original Apple v. Samsung trial. Illustration: Vicki Behringer

Judge Koh with the Apple v. Samsung jury. Illustration: Vicki Behringer

FORTUNE -- Under the headline Samsung-Apple Patent Fight: Is It Worth It?, Wednesday's Wall Street Journal takes a long look at three years of smartphone litigation and concludes that the answer is no.

"A string of rulings in big cases has left litigants with little to show for all the trouble," writes the Journal's Ashby Jones in the "nut" paragraph that states the thesis of his piece. "The courts have proven as likely to deliver plaintiffs a rebuke as a win, and the slow grinding of the justice system has sapped the impact of the occasional big victories."

The problem with pairing this thesis with that headline is that it conflates two kinds of patents:

  • Standards-essential patents (SEPs), that must be used to comply with a technical standard, such as a communications protocol or a widely used plug, like the USB. Owners of these patents, in return for the benefit of being able to collect royalties on every device that adopts the standard, are required to license them under so-called FRAND (fair, reasonable and non-discrimanatory) terms.
  • Non-SEPs, sometimes called "innovation" or "differentiation" patents. These patents have not been adopted by a standards-setting body. They can represent many years of proprietary development work, and they don't have to be shared with competitors.

Jones is correct that a string of rulings in SEP cases have left litigants with little to show for their efforts. Indeed, such lawsuits often backfire. Just last week a preliminary European Union ruling found Google's (GOOG) Motorola division guilty of abusing of its standards-essential patents when it sued Microsoft (MSFT) over the use of a popular video compression standard.

But the $1.05 billion Samsung-Apple verdict is the exception that proves the rule.

Apple (AAPL) sued Samsung for adopting its innovations -- its non-SEP patents -- without permission. Samsung counter-sued solely on the basis of its SEPs.

In this case -- as in almost every other case involving SEPs -- the jury threw out Samsung's claims. On the question of whether Samsung had infringed Apple's innovation patents, the jury found Samsung liable on nearly every charge.

See the difference?

With one minor quibble, I can't argue with the rest of Jones' piece. Patent litigation is too slow. By the time Apple won its case against one generation of Samsung devices, a new generation was already on store shelves. And it could well be that some of the patents Apple tried to enforce in court should not have been granted in the first place.

But Jones repeats a common error when he writes that the Apple v. Samsung judge "slash[ed] the damages award by about $450.5 million." Judge Lucy Koh "vacated" part of the ruling, but did not throw it out. Instead, she ordered a new trial to determine whether that portion of the original $1.05 billion award should be reduced or -- less likely, but still possible -- increased.

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