Apple Vs Samsung Legal Suit
One of the largest global technology companies, Apple Inc., has instituted several legal claims and suits since its inception. As a registered limited company, Apple Inc. has the rights to sue and be sued in front of the courts as a recognized legal body. A majority of the company’s litigation has been in its quest to safeguard its ownership of intellectual property developed by its employees. However, the company also has been a party to civil actions involving consumer actions, defamation claims, antitrust claims, practice suits, and corporate espionage. Since the late 20th century to present, the company has sued and been sued in various civil actions. It is essential to note that some of these cases have set a judicial precedent in the area of information technology and intellectual property. One of these civil actions by Apple Inc. has been against Samsung. This legal suit has been noted as a landmark case regarding intellectual property in the information technology field.
Background
In the 20th century, Apple Inc. bought memory chips manufactured by Samsung. Back then the relationship between these two companies was cordial. The rocky relationship between the two companies began when Apple Inc. started dominating the Smartphone market. In response to the iPhone’s remarkable reception by the market, other competitors, including Samsung, started developing competing products. This is what led to the inception of the Android operating system. It is essential to note that though Samsung was selling Smartphone components to Apple Inc., it was also developing its own Smartphones. Statistics show that Samsung supplied an approximate 26% of the component cost for making the iPhone 4 (Elias, 2012). It was this practice by Samsung that is argued to have led to the litigation case against it by Apple Inc.
In April 2011, Apple Inc. initiated a legal suit against Samsung for allegedly developing similar products to the iPhone 4 (Elias, 2012). The two products that Apple Inc. cited were the Galaxy tablet and the Smartphone labeled Galaxy S. It is interesting to note that even after this legal suit was initiated, Samsung continued supplying components for making the iPhone 4 to Apple Inc. Apple’s success with the iPhone had given them a majority market share in the Smartphone sector. This is because the design of their phones was more consumer-friendly than the current BlackBerry smartphones. After the launch of the iPhone, the Smartphone market became a competition field for application development. Since, Apple had developed the iOS platform used on the iPhones, they had a competitive advantage in app development.
However, Apple Inc.’s competitive edge was significantly reduced when the Android platform was launched by Google. Consequently, Android became the preferred platform due to its low licensing charges and ease of app development. As a strategic competitor, Samsung quickly adapted the Android platform and considered it as an opportunity to rival Apple Inc.’s market share from the iPhone. According to one of Samsung’s internal memo, the company recognized that the iPhone was the industry standard for smartphones, hence was the product to beat. Apple Inc. did not consider Samsung’s adaption of the Android platform as part of healthy competition; rather, Apple Inc. accused several manufacturers of trying to copy its designs and intellectual property. However, Apple Inc. has also been accused of not paying Samsung licensing fees of an approximate value of USD 14 for each iPhone sold (Ramanathan, 2012).
The US courts ruled that Samsung had copied some of Apple Inc.’s designs in developing their Galaxy smartphones and also their tablets. The courts pointed out that there was a striking similarity between initial products in the market developed by Apple Inc. and new products being developed by Samsung (Ramanathan, 2012). In their ruling, the judges instructed that Samsung should pay Apple Inc. USD 1.5 billion as a fine for copying the iPhone and iPad’s design and user interface (Elias, 2012). Inspired by the success of the case in the United States, Apple Inc. has decided to sue Samsung for the same charges in other countries such as the United Kingdom.
How the Legal Suit could have been prevented
The Apple Inc. Vs Samsung case could have been avoided through several ways. One is if Samsung had concentrated on either being a manufacturer of its own products or a seller of components it developed. The conflict of interest that existed between Samsung developing their smartphones and also components for the iPhone, created an avenue for suspicion. If Samsung had decided to start developing its products midway during their supply contract with Apple Inc., they would have sought to terminate the contract to avoid such future litigations.
The case could also have been avoided if the Samsung management team had not directed their employees to create products using the iPhone as the market standard. This directive in one of their memos increased the possibility of products similar to the iPhone and iPad been developed by Samsung’s technicians. It would have been advisable if Samsung had been intent on creating a whole new concept and design in the smartphone industry. The company should have sought to achieve what Apple Inc. did when it developed the iPhone in a market dominated by BlackBerry phones which had a different design and interface. However, by creating the notion that all future innovations in the smartphone sector were to revolve around the iPhone, Samsung not only created products similar to those of Apple Inc., but also impeded on innovation of new designs and interfaces.
Ethical Considerations
The key ethical issue in this case is on the conflict of interest that Samsung had by developing smartphones and at the same time selling components to other competitors to develop similar products. A company’s management team should understand that where there is a conflict of interest, the possibility of unethical decisions and operations increase. In this case, Samsung was one side directing its employees to make quality smartphone components to sell to Apple Inc. while at the same time challenging them to develop better Samsung smartphones. In such a situation, employees are at a higher probability of ensuring that their company’s products are better than the components for their competitors. Unethical practices may be done in order to achieve this objective.
Sources of Law relevant to this Case
The key source of law that was relevant to this case was the US Patent Law. This law governs ownership of intellectual property in disputes such as the one between Samsung and Apple Inc (Feldman, 2012). Contract law was also applied in this case as the two parties had a contractual relationship (Harrigan, 2010). Both parties attempted to show how the other violated their work contracts and hence claiming ownership of the intellectual property involved in the civil action.
Alternative Resolutions
Apple Inc.’s management could have opted to pursue alternative resolutions to solve their grievances against Samsung. It is necessary to point out that Apple Inc. decided to take the litigation before a court of law because the company wanted to set an example of actions it would take against other violators of its intellectual property rights.
A viable resolution available to Apple Inc. was to initiate dialogue between its legal team and the one for Samsung. The lawyers would have discussed the arguments from both sides and arrived at an amicable solution based on legal precedents and the US constitution. This method would have reduced the negative publicity both companies received during the trial period. Also, this option would have significantly reduced the costs incurred in settling the dispute. This is because the key costs would have been legal fees for the both company’s lawyers, which are significantly lower as settling such disputes falls under the lawyers’ job description (Cheeseman, 2009).
The company could also have sought the help of an arbitrator such as the World Intellectual Property Organization (Cheeseman, 2009). Both parties involved in the legal suit could have agreed on a recognized regulatory body in the field of intellectual property to help solve the issues raised by Apple Inc. The mediator would base their decision on precedents, arguments from the two sides, facts and accepted standards in the area of intellectual property ownership. This alternative would have also helped reduce the costs both parties incurred in the legal litigation that took place.
In future, Apple Inc.’s management should consider the alternatives above before initiating legal proceedings against other parties. It is also essential to note that the management of Apple Inc. should be open to changing their position regarding an issue as this is what led to the collapse of the mediation talks between the two companies.
References
Ramanathan, V. (2012). Apple Vs Samsung Lawsuit: Samsung Infringed Four Apple Patents, Rules ITC. International Business Times. Retrieved from http://www.ibtimes.com/apple-vs-samsung-lawsuit-samsung-infringed-four-apple-patents-rules-itc-853640
Elias, P. (2012). Apple-Samsung Patent Lawsuit: Samsung Ordered To Pay Apple $1.05 Billion. Huffington Post. Retrieved from http://www.huffingtonpost.com/2012/08/24/apple-samsung-patent-lawsuit-ruling_n_1829472.html
Cheeseman, H. (2009). Business Law. 7th edition. New Jersey: Prentice Hall
Feldman, R. (2012). Rethinking Patent Law. New York: Harvard University Press.
Harrigan, R. (2010). Vertical integration, outsourcing and corporate strategy. New York: McGraw-Hill.
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