FRAND or foe? Apple beats Samsung for 24th time

Apple [AAPL] continues to endure its annus horribilis, but it appears Samsung's about to endure its own pig-Latin conundrum as the Korean firm sees yet another of its attempts to use FRAND licensing agreements in its litigations with Apple tossed out of a UK court.

Friend or FRAND? Apple beats Samsung for the 24th time.

Stand up for FRAND

Samsung has been attempting to prosecute Apple in various courts alleging unlicensed use of some 3G-related technologies in Apple products. These 3G patents form part of a parcel of patents licensed on a FRAND basis to all parties at reasonable fees. Apple has argued that Samsung has failed to keep to the spirit of these deals in its negotiations with the iPhone maker, and it seems the courts agree.

Bloomberg (Via Sydney Morning Herald):

"Apple Inc. won a UK lawsuit filed by Samsung Electronics Co. as part of the two companies' global patent battle over technology used on mobile devices.

Judge Christopher Floyd in London invalidated Samsung patents for technology that allows phones to send and receive information over third-generation mobile networks."

In an echo of what some Android fans believe when it comes to Apple patents when used against Android devices, the UK judge declared that while Apple had infringed two patents (related to data transmission) their use had already existed in "prior art" -- in other words, Samsung shouldn't have been granted these patents in the first place. He invalidated them.

This is the 24th such case Samsung has lost in actions relating to FRAND. The Japanese court this week also rejected Samsung's attempt to sue Apple for use of this parcel of patents within the 3G standard.

"With every win Apple scores, Samsung's demand for a 2.4 percent royalty on Apple's sales of 3G-capable products looks more ridiculous," Florian Mueller told ZDNet.


Under investigation

Samsung recently withdrew similar lawsuits in some European countries because EU regulators have begun an investigation into the company's anti-competitive use of these patents. EU chief economists and the FTC recently made joint proposals for the resolution of FRAND disputes.

This places limits on the use of injunctions or exclusion orders on the basis that those firms that agree to offer up patents to standards organizations do so on a voluntary basis, "rather than pursue a business model based on exclusion."

Not only has Samsung voluntarily chosen to make these patents available on a FRAND basis, but it has then acted in a fashion which undermines the fundamental nature of such agreements. Apple has frequently asserted that it has attempted to license these technologies, but that the terms offered have been partial and "onerous" (a 2.4 percent royalty is not paid or demanded elsewhere in the industry).

It's shameful that it takes regulators and judges to encourage Samsung to honor agreements it has voluntarily entered into. My personal opinion is that such behavior calls into question the company's integrity.

Samsung's integrity was of course put on trial in the landmark case in California. That case has seen Apple awarded half a billion dollars and Nokia file a friend of court brief alleging that it is appropriate that offending Samsung devices be withdrawn from sale.

With regulators taking increasing interest in the behavior of Apple's former friend and now FRAND-related foe, no surprise then that Samsung increased the amount of cash it spends on lobbying in the US by an astonishing 500 percent. It spent just under a million dollars lobbying in Washington last year. In contrast, Google spent $18.2 million while Apple coughed-up $2 million (down 13 percent on 2011).

Does Samsung control Android?

It seems the impact of the to-and-fro litigation between Apple and Samsung has served to benefit Samsung, which has pretty much become synonymous with Android phones.

ComScore smartphone marketshare figures confirm that Samsung and Apple continue to dominate this space. On strength of iPhone 5 sales, Apple rose 3.5 percent in the market in the January quarter while Android fell 1.3 percent. Meanwhile both Apple and Samsung gained share

"Samsung is growing at a rate that’s not dependent on Google’s Android," reports Slashgear.

This status may not last. Analyst Adnaan Ahmad at Berenberg Bank warns that Samsung's growth may be about to slow down. Why? Because the market for high-end smartphones is nearing saturation: "High-end market growth should slow to 10-15% in the next two years from the 50-100% we have witnessed in the past," he writes.

"Samsung’s high-end portfolio in effect subsidizes its mid and low-end portfolio. As the market trends to the mid and low end, this will have an impact on Samsung’s handset margins."

Samsung's next iPhone competitor is expected to offer little in the way of innovation, other than a larger screen size and a faster processor. This is likely to reduce interest in the company's flagship range, leaving the way clear for Apple's response with new devices later in the year.

Meanwhile Samsung and Apple face increasing competition from smaller manufacturers in the developing world markets.

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Copyright © 2013 IDG Communications, Inc.

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