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Sat 25 Aug 2012 02:07 PM

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Apple awarded $1.05bn in Samsung patent row

US tech giant scores legal victory over Korean company after claiming it copied features

Apple awarded $1.05bn in Samsung patent row
(Getty Images)

Apple Inc has scored a sweeping legal victory over Samsung as a US jury
found the Korean company had copied critical features of the hugely popular
iPhone and iPad and
awarded the US company $1.05 billion in damages.

The verdict - which came after less than three days of jury deliberations -
could lead to an outright ban on sales of key Samsung products and will likely
solidify Apple's dominance of the exploding mobile computing market.

Apple's victory is a big blow to Google, whose Android software powers the
Samsung products that were found to infringe on Apple patents. Google and its
hardware partners, including the company's own Motorola unit, could now face
further legal hurdles in their effort to compete with the Apple
juggernaut.

Samsung lawyers were grimfaced in the quiet but crowded San Jose courtroom as
the verdict was read, and the company later put out a statement calling the
outcome "a loss for the American consumer."

The jury deliberated for less than three days before delivering the verdict
on seven Apple patent claims and five Samsung patent claims - suggesting that
the nine-person panel had little difficulty in concluding that Samsung had
copied the iPhone and the iPad.

Because the panel found "willful" infringement, Apple could seek triple
damages.

Apple upended the mobile phone business when it introduced the iPhone in
2007, and shook the industry again in 2010 when it rolled out the iPad.

It has been able to charge premium prices for the iPhone - with profit
margins of as much as 58 percent per phone - for a product consumers regarded
as a huge advance in design and usability.

The company's late founder, Steve Jobs, vowed to "go to thermonuclear war"
when Google launched Android, according to his biographer, and the company has
filed lawsuits around the world in an effort to block what it considers brazen
copying of its inventions.

The legal win on Friday came one year after CEO Tim Cook assumed the helm of
the company. Shares in Apple, which just this week became the biggest company by
market value in history, climbed almost 2 percent to a record high of $675 in
after-hours trade.

Brian Love, a Santa Clara law school professor, described the verdict as a
crushing victory for Apple: "This is the best-case scenario Apple could have
hoped for."

The verdict comes as competition in the mobile device industry intensifies,
with Google jumping into hardware for the first time with its Nexus 7 tablet,
and Microsoft's new touchscreen friendly Windows 8 coming in October, led by its
"Surface" tablet.

Apple's victory could present immediate issues for companies that sell
Android-based smartphones and tablets, including Google's own Motorola
subsidiary, which it acquired last year for $12.5bn, and HTC of
Taiwan.

Amazon - which has made major inroads into the tablet market with its
cheaper Kindle Fire - uses a modified version of Android for its Kindle
products but has not yet been subject to legal challenge by Apple.

Sterne Agee analyst Shaw Wu said the entire Android universe may now have to
consider "doing something different."

"It doesn't take a rocket scientist to look at it and figure it out," he
said. "Prior to the iPhone, none of the phones were like that. Android, if you
look at it, is very similar."

Some in the industry say Apple's legal offensive is bad for
consumers.

"Thx Apple it's now mandatory for tech companies to sue each other. Prices go
up, competition & innovation suffer," Mark Cuban, an Internet entrepreneur
and owner of the Dallas Mavericks basketball team, said in a Twitter
message.

But the legal battles are far from over. In a separate but related case,
Apple has won a pre-trial injunction against the Google Nexus tablet. Another
lawsuit, against Motorola, was thrown out recently by a federal judge in
Chicago, but litigation between the two at the International Trade Commission
continues.

Earlier on Friday, a South Korean court found that both companies shared
blame for patent infringement, ordering Samsung to stop selling 10 products
including its Galaxy S II phone and banning Apple from selling four different
products, including its iPhone 4.

Still, the trial on Apple's home turf - the world's largest and most
influential technology market - was considered the most important test of
whether Apple would be able to gain substantial patent protection for the iPhone
and the iPad.

The legal fight began last year when Apple sued Samsung in multiple
countries, and Samsung countersued. The US jury spent most of August in a
packed federal courtroom in San Jose - just miles from Apple's headquarters in
Cupertino - listening to testimony, examining evidence and watching lawyers
from both sides joust about patents and damage claims.

Jurors received over 100 pages of legal instructions from US District Judge
Lucy Koh on August 21, prior to hearing the closing arguments from
attorneys.

Lawyers from both tech giants used their 25 hours each of trial time to
present internal emails, draw testimony from designers and experts, and put on
product demonstrations and mockups to convince the jury.

At times, their questions drew testimony that offered glimpses behind the
corporate facade, such as the margins on the iPhone and Samsung's sales figures
in the United States.

From the beginning, Apple's tactic was to present what it thought was
chronological evidence of Samsung copying its phone.

Juxtaposing pictures of phones from both companies and internal Samsung
emails that specifically analyzed the features of the iPhone, Apple's attorneys
accused Samsung of taking shortcuts after realizing it could not keep
up.

Samsung's attorneys, on the other hand, maintained Apple had no sole right to
geometric designs such as rectangles with rounded corners. They called Apple's
damage claim "ridiculous" and urged the jury to consider that a verdict in favor
of Apple could stifle competition and reduce choices for consumers.

Samsung's trial team appeared to suffer from strategic difficulties
throughout the case. Judge Koh gave each side 25 hours to present evidence, but
Samsung had used more time than Apple before Samsung even began calling its own
witnesses.

By the end of the trial, Samsung attorneys had to forgo cross-examination of
some Apple witnesses due to time constraints. During closing arguments, Samsung
lead attorney Charles Verhoeven played mostly defense, spending relatively
little time discussing Samsung's patent claims against Apple.

The jury had not been expected to return a decision so rapidly. Even on
Friday, Samsung's lead lawyer was spotted casually clad in a polo T-shirt and
jeans.

But late Friday afternoon, a court officer announced a verdict had been
reached. After the verdict was read, Koh found some inconsistencies in the
complex jury form and asked the jury to revisit it, ultimately resulting in a
reduction of about $2m in the damages award.

The jury decided Samsung infringed six out of seven Apple patents in the
case, and that Apple had not infringed any of Samsung's patents. Apple's
protected technology includes the ability for a mobile device to distinguish one
finger on the screen or two, the design of screen icons, and the front surface
of the phone.

The jury also upheld the validity of Apple's patents, and said Samsung acted
willfully when it violated several of Apple's patents. That could form a basis
for Koh to triple the damages tab owed by Samsung.

"This is a vindication of Apple's effort to create significant airspace
around their design, and that's relevant not just for Samsung, but for firms
coming over the horizon," said Nick Rodelli, a lawyer and adviser to
institutional investors for CFRA Research in Maryland.

Apple's lawyers said they planned to file for an injunction against Samsung
products within seven days. Koh set a hearing for September 20.

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