JULY 2014

Mathys & Squire

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these patent portfolios have tended to be cross-licensed between companies in negotiated settlements. However, the smartphone wars have now involved more than ten large companies and have cost many millions of dollars to pursue, and far eclipse any action brought by the disdained “patent trolls” in recent years.

At first, Apple had some success in its litigation, especially in the US, where it was awarded more than $1billion in damages in the first verdict of August 2012. However, Samsung had more success outside the US, particularly in Korea and Japan and, ultimately, in Europe. There was also some relief for the South Korean company in the US where the damages award was revised down to $290million.

The litigation has encompassed both technical patents and designs (utility and design patents) and has taken place in numerous countries and with varying results. With hindsight, and perhaps also with better foresight, it’s evident that some battles might have been picked or fought more wisely.

However, two clear conclusions should be drawn from this highly-charged global contest – that the litigation is by no means certain and the outcomes may not be as desired, even when, or possibly even because, the company involved has large resources to throw behind the legal challenge. Moreover, the variation in outcomes from country to country underlines the need to think carefully and strategically.

Litigation considerations For those wondering why litigation in this sphere is burgeoning and to try to give some insight into why this dispute is so protracted, it’s worth stepping aside from the Apple and Samsung specifics, to consider some of the generalities of litigation.

For a start, litigation can be used tactically, particularly in the US where costs do not generally follow outcomes. It is possible to do a lot of damage and put a competitor to significant cost and trouble, even with

a case which is known to be weak. Also, as mentioned earlier, litigation is inherently uncertain, which means a defendant with a good defence cannot guarantee they will prevail even after spending money.

So where there is something commercial to be gained, there may be reasons for “having a go” even with a questionable case. A lot of so-called “troll” litigation relies on this. This is a good reason, as far as it can be called that. Now let’s look at the bad ones. Many US-based entities fail to recognise that European jurisdictions - and different jurisdictions in Europe - may reach different conclusions from a US jury. In addition, due to the way that litigation is generally managed in large organisations, there is a significant risk of adverse outcomes.

Consider the position of an executive team in a company selecting between two law firms in a “beauty parade”. Firm A says: “In our view this is a marginal case and, on balance, you may well lose, but we’re happy to take this on and expect to spend five million dollars”. Firm B, who has a reputation for being aggressive, says: “Nothing is certain but we think if things go well we can win this, we’re the best, and our fees will probably be ten million dollars.”

Executives are likely to go with the more bullish and more expensive option rather than risk being criticised if they go with Firm A and lose. The litigation proceeds, it starts to goes badly. The smart defendant knows the company using Firm B is paying handsomely for every action so is encouraged to try tactics to put the plaintiff to costs. More money is thrown in than the company anticipated, and eventually an unfavourable outcome is reached for fifteen million dollars. The executive says: “Well we picked the best firm and we gave it our best shot and we had bad luck but that was always a risk.” He is less open to criticism than if he had taken the option of simply not spending five million dollars!

The beginning of the end? Turning back to Apple and Samsung, it could

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be that litigation weariness is setting in, possibly signalling a more sober cost-benefit analysis. After the initial exuberance, recent decisions have become more nuanced and careful and damage awards have become lower. It’s expected that it will be much more difficult for either company to obtain headline-grabbing damages in future, and this may drive a more measured approach towards settlement.

There are signs that all of the companies involved are starting to tire of these patent battles. Few new litigation cases have been brought by any of the companies previously involved in the smartphone wars since the end of 2012 and negotiated settlements are beginning to emerge.

Perhaps most notably, Apple has negotiated a settlement with Google over patent actions it had originally brought against Motorola. This may pave the way for further settlements with Google and those who implement the Android system - including, eventually, Samsung. LM

Ilya Kazi is a Chartered Patent Attorney and partner at Mathys & Squire’s London office. He is one of the world’s leading

intellectual property strategists.

Contact:

Mathys & Squire London office: Tel: 0207 830 0000

Email: london@mathys-squire.com