In the last inning of the Apple-Samsung game of smartphone hardball, Samsung slid into home. Apple failed to make the tag. “Samsung is safe!” cried the umpires. The inning was umpired by the U.S. Court of Appeals for the Federal Circuit, which held Apple’s slide-to-unlock U.S. Patent 8,046,721 invalid. See Apple v. Samsung (Fed. Cir. Feb. 26, 2016).
Slide to unlock patent held invalid!
The Federal Circuit opinion also addresses other patents in suit, resulting in holdings including:
• Distinguishing an Apple patent on Quick Links (highlight and click on phone number) as not infringed by Samsung,
• Invalidating an Apple patent on Auto-Correct as obvious, and
• Upholding a Samsung patent (on compressing and organizing digital photos and videos) as infringed, not invalid, and amounting to relatively small damages.
In the end, in this case, instead of collecting about $120 million plus ongoing royalties (as awarded by the jury), Apple will pay Samsung about $150,000. In the high-stakes contest, that’s pocket change, but it adds insult to injury: Samsung has imitated the iPhone in most of its glory, yet at the end of the case, Samsung escapes untouched (no pun intended), while Apple has to pay Samsung for using an organizing feature.
Instead of collecting $120MM, Apple must pay $150K
In an earlier phase of the litigation, involving other Apple patents, notably the “rounded corners” design patents, Samsung has paid Apple over $500 million. The design portion, or $400 million of the half-billion, will be reviewed by the Supreme Court.
Apple’s rounded-corners design patent is still in the woods
See my recent article, How to Profit…While Apple…is at Supreme Court. Another $300 million is still in dispute.
Origins of the iPhone
In 2005, Steve Jobs had two brilliant ideas. His first idea was a multi-touch screen that could interact with a computer by typing directly onto the display, getting rid of physical keyboard and mouse, which ultimately led to the iPad. Second was his idea of incorporating the new technology into a mobile phone.
Jobs had two brilliant ideas
On December 23, 2005—Merry Christmas!—Apple filed the patent application which led to the issuance of the ‘721 slide-to-unlock patent referenced above.
Apple files for slide-to-unlock patent
In another spurt of genius, Jobs gave the smartphone top priority, and on June 29, 2007, he and Apple rocked the world with the release of the original iPhone, three years before the iPad. What did it take to create the iPhone? After the smart ideas were hatched, there came two and a half years of hard work, at a cost of $150 million, harnessing a crack team of engineers working in collaboration with AT&T.
Collaboration with AT&T
There was a time when AT&T dwarfed Apple. Not any more: Today, Apple has the largest market capitalization of any company traded on a major U.S. stock exchange.
But the point here is that Apple, then a computer maker, needed AT&T’s telephone technology, and it was smart enough to collaborate, and to do so wisely, in the creation and launch of the iPhone.
People could hardly wait. Thousands of people lined lined up outside AT&T and Apple stores. Some stores ran out of stock in one hour. One million original iPhones were sold in 74 days. The price of the premium model was lowered from $599 to $399. Six million units were sold in one year, at which time the iPhone 3G was introduced.
Yet the iPhone was not the first smartphone. Nor was it the first multi-touch device.
The iPhone was, however, the first phone with a multi-touch interface. It permitted natural, intuitive scrolling through lots of information on a small screen. It was the first phone to ship with an advanced operating system. As Steve Jobs said in his famous announcement, the new iPhone would combine three devices: A “widescreen iPod with touch controls,” a “revolutionary mobile phone,” and a “breakthrough Internet communicator.”
One of the most innovative features in the iPhone is the slide-to-unlock feature:
Simple, right? Slide to unlock. No one had ever seen anything quite like it. It was an instant success. Intuitive. It worked!
Three things to know about simple but elegant inventions
Here are three things everyone should know about simple-but-elegant solutions:
- They sell!
- They will be copied (that’s where one hopes a patent will help); and
- They tend to look obvious, in hindsight, especially to patent examiners and courts.
Samsung enters the smartphone market
In response to the iPhone, and acting even more quickly, Android, backed by Google, in an “Open Handset Alliance” with Samsung, Intel, HTC, Motorola and others, imitated the iPhone design and many of the features, especially the full-touch interface and advanced operating system.
In October 2008, the first Android smartphone appeared, namely, the HTC Dream, also known as the T-Mobile G-1. A couple of months later, the Motorola Droid jumped into the lead.
In June 2009, Samsung entered the market. It came late to the party with the i7500, which would become known as Galaxy.
As we now know, the Samsung Galaxy has come to dominate the world market for smartphones, bombarding every niche, every price point, every carrier, and every country. See History of Samsung Galaxy (Digital Trends Mar. 14, 2013).
One and a half billion smartphones shipped last year.
1.5 billion smartphones shipped in 2015
There are two camps. In one camp is the pioneer, Apple, with a mere 15% of the market share, yet a whopping 90% of the profits. Why so profitable? The iPhone 6, at the “top of the market,” has sold for premium prices of $649 to $949. See iPhone vs. Android (Information Week July 23, 2015). The 6s followed. The smaller SE is offered at a bargain price—for the meager 16GB model—and the 7 and other models are close behind.
The other camp is Android, brought to you by Google, with over 80% market share. (Google is a close No. 2 to Apple in U.S. market cap). Samsung is the Philistine of that camp, rivaling Apple for number of units sold, but lagging far behind in price and profit margins. Samsung is the leader among the generics. It is the role of the generic leader to compete on price, which is to sacrifice margins.
See Here’s why the iPhone isn’t going to catch up to Android (Business Insider Aug. 26, 2015).
The Apple-Samsung patent wars are a part of popular culture, an item of modern history—the subject of their own Wikipedia entry.
Dozens of patents have been asserted and counter-asserted in twenty countries around the globe.
Samsung has paid Apple half a billion dollars of real money, under protest and with threats of demands for repayment if the Supreme Court ultimately sides with Samsung, see Verge (Dec. 4, 2015), and its “coalition of Silicon Valley giants.” See Silicon Valley sides with Samsung (Register July 21, 2015).
Between them, Apple and Samsung were estimated to have spent a combined $400 million in legal fees as of four years ago, see Phone Arena (Mar. 30, 2012) (citing Bloomberg). By now, maybe they’ve paid their lawyers a billion dollars in the feud.
In the U.S., much of the patent litigation has been conducted in the U.S. District Court for the Northern District of California, Judge Lucy Koh, presiding.
Appeals have been taken to the U.S. Court of Appeals for the Federal Circuit and a petition for writ of certiorari has been granted by the U.S. Supreme Court. See my article, Profit from patents while Apple, Samsung weigh in at Supreme Court.
The Apple slide to unlock patent
It’s ubiquitous now, the slide-to-unlock feature. As you know, it looks like this:
The jury found the asserted slide-to-unlock claims of the ‘721 patent to be novel and non-obvious.
But the Federal Circuit panel, based on the briefs, the record, and a short oral argument, held the claims invalid as a matter of law on the basis of obviousness in view of two references, namely, Neonode and Plaisant.
Neonode had a no-icon sweep to unlock feature
Neonode looks like this:
Not bad. But hardly intuitive. Neonode does seem to have been “real”—it was the subject of a YouTube video demonstration on June 29, 2007, the very day the Apple iPhone was released.
As you can see, Neonode has a sweep-to-unlock feature, but it lacks an icon to show the user where to place a finger, let alone an icon that moves along with the finger.
The deficiency in Neonode was found by the Federal Circuit to be supplied by Plaisant.
Plaisant looks like this:
Unlike the other prior art reference, Plaisant never seemed to make any real imprint on the world. But in patent law, a publication is a publication, and even a little noticed publication qualifies as prior art.
Plaisant was an old, obscure paper disclosing a toggle switch
According to the Federal Circuit, one of ordinary skill in the art would have found it obvious to combine Nenode’s keylock and Plaisant’s on-off switch to obtain Apple’s slide-to-unlock feature.
Secondary considerations or “objective indicia,” such as long-felt need, adoption by others, and commercial success, were found to be of no help to Apple.
One might argue, as Apple presumably did, that an appellate court should hesitate to substitute its judgment for that of the jury that spent weeks studying the evidence and hearing live witnesses examined and cross-examined at trial. But the fact is that the Federal Circuit did substitute its judgment for that of the jury.
Apparently, every tribunal in the world that has reached a decision on the slide-to-unlock ‘721 patent has held it invalid, yet there remains widespread interest in the dispute.
Trying the iPhone case in iStanbul
Even today, I depart for Istanbul, Turkey, for the 4th Annual AIPPI-Turkey IP Law Seminar, where I will participate in a mock trial of a thinly disguised version of the Apple-Samsung slide-to-unlock patent infringement case. We will try all issues, including validity of the patent claims over Neonode and Plaisant. My co-counsel and I have been assigned the responsibility of defending the mock infringer. “He is no lawyer who cannot take two sides.”—Charles Lamb, letter to Samuel Rogers (Dec. 21, 1833).
Where Apple’s wheels came off
Late in the game, Apple is falling short in its efforts to maintain and enjoy exclusivity on its remarkable invention of the iPhone. The patent system should have given Apple exclusive rights for slide-to-unlock and other features claimed in the patent application filed December 23, 2005. That exclusivity should run for a 20-years-from-filing term, i.e., until December 23, 2025, plus additional term adjustment
Instead, Apple seems to have enjoyed only a year and a half, from the iPhone launch in late June 2007 to Samsung’s late entry in January 2009.
Apple did a lot of things right. It rapidly invented, designed, engineered, made, and launched the smartphone that changed the world. It did all of that in secrecy even while working closely with AT&T. It maintained ownership of the intellectual property, even while AT&T also was positioned to (and did actually) reap large rewards.
Apple did a lot of things right
There’s an important lesson here for executives. Collaboration, such as between Apple and AT&T, can accomplish wonders, bringing together disparate industries and technologies. What is remarkable here is that Apple and AT&T seem to remain joined at the hip without any apparent disputes or fallings-out between them. This is a tribute to smart business people and their lawyers. They must have thought through their arrangement from the outset, putting their agreement in writing, providing for ownership of IP and other key terms. Few collaborators exhibit such foresight.
Apple filed several patent applications, but they have withered and fallen under vigorous attack. Mainly the design patents, widely criticized in hindsight for obviousness of round corners and flat screen, have survived. And now the amount of money awarded for design patent infringement is at risk in the Supreme Court.
Apple has lost much of its competitive advantage. It has lost most of the market. Its prices and profits are not what they would be if Samsung had been excluded. The patent system, though far better than nothing, has largely failed Apple.
The patent system has failed Apple
A few powerful companies—not all of Silicon Valley as popularly portrayed—have sided with Samsung. Some big tech companies want to be able to do whatever they want without having to pay pesky patent owners for the privilege.
The public, the media, and the courts are buying cheap smartphones and condemning the patent rights that would stand in the way of price wars.
Things could have gone better for Apple. But it has made, and it continues to make, a lot of money. If it hadn’t been smart about the way it filed for patents and developed and launched the iPhone, it would not have done and would not be doing nearly as well. It might have been buried—or at least faster and deeper—under the competition that has muscled its way into the fray.
Five (5) steps to patent success
- If you and your company desire to succeed in your product line, invent something, whether it’s entirely new or “merely” an improvement.
- Before you collaborate with anyone (perhaps a vendor, as AT&T was to Apple), think through the arrangement from the beginning and write up the key terms, such as IP ownership, and ink an agreement.
- Patent your invention—try to do a better job, to be more thorough, more strategic than Apple—to obtain issuance of patents that will stand up in litigation.
- Launch your new, improved product, which is to say: Sell! (for timing, see my article on when to patent, when to launch);
- Fasten your seat belt: You’re in for a wild ride!
Apple hit the big time with the iPhone even though its slide-to-unlock patent bit the dust. You and your company can improve your product line—and your bottom line, too—if you’re smart, fast and diligent.