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Patent Wars on the Pacific Rim, starring Apple and Samsung

Samsung and Apple’s lawyers are primed and, as always, battle-ready. Jayel Aheram

Patent Wars on the Pacific Rim, starring Apple and Samsung

By now, we’re surely all aware of the ongoing tussle between Apple and Samsung over patents, given it makes global headlines on a regular basis. So what are we to make of it?

The current flashpoint comes hot on the heels of a decision earlier this month by US president Obama to overturn a court decision from earlier this year that would have prevented Apple selling older versions of its mobile products in the US.

Now, the US International Trade Commission (ITC), who handed down the ban, and President Obama are at loggerheads over bans on imports of Samsung mobile devices, following claims by Apple that its patents have been infringed. Will the president intervene – as he did for Apple – on behalf of Samsung? Will he choose not to? Are suggestions of protectionism on the part of the US justified?

We’ve seen similar claims in Australia over several years, with our courts being asked to block imports.

The Samsung Galaxy S II features in the current dispute. khengsiong

If you believe the hype when it comes to patents, we’re living through a war that resembles high-tech monster movies such as Guillermo del Toro’s new blockbuster Pacific Rim. Lots of noise. Lots of movement. Lots of fireworks. Lots of high technology in a heroic fight to protect civilisation (or merely national pride and particular investors).

But strip out some of the breathless reporting and you’ll see it’s business as usual in the business of innovation. Success in global markets for products such as mobile devices involves lawyers. It’s no longer just a matter of creative designers, armies of software coders in black T-shirts and docile (or suicidal) factory workers in the Pearl River Delta.

Apple and Samsung have come to dominate the market for mobile devices, eclipsing competitors such as Nokia, Siemens and BlackBerry. Both have a basket of patents regarding the “user interface” on those devices – the touchscreen and touch-&-drag features that make mobile phones, tablets and other devices so user-friendly.

And friendliness means dollars, big dollars. It’s ultimately more important than the shape, texture or colour of the devices. It’s also more important than who makes the hardware – the screens, batteries and chips – within those devices.

If you control the dominant patents you can rely on contractors to manufacture and assemble your components. You can exclude competitors or force them to pay for use of your innovation. That power reflects the skill of your lawyers in drawing up and defending the patents that embody the innovation.

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Behind the battlelines

Unlike in Pacific Rim, we don’t see giant machines going down in flames or cities being levelled in explosions. Instead the battles involve lawyers arguing abstruse points of law before Australian and overseas judges. They also involve lobbyists, with policymakers and the media being briefed about “national interest” or alleged misbehaviour by people on the other side of the ocean.

There are calls for intervention by trade officials as a way of side-stepping the need to go to court, make a persuasive argument and then wait while the judges consider the evidence

As mentioned already, recent weeks have seen decisions by the ITC in favour of both Apple and Samsung. And, as you might know, the ITC is a US government agency, not an arm of the United Nations.

Apple’s iPad 2: part of the current patent dispute. N0fX

Given the importance of trade for the US economy, the ITC tends to raise barriers to “unfair” imports of overseas products, including electronics. “Unfair” can mean abusive labour conditions.

More often it involves disregard of intellectual property law – those pesky patents - or practices such as dumping - selling products for less than the cost of production in order to weaken a US competitor or simply keep a factory running. (The latter is a temptation for state-owned enterprises or state-supported enterprises in Asia.)

Action to raise or lower trade barriers is a key form of soft power, just as important as sending an aircraft carrier to “show the flag”.

The ITC cooperates with the US Trade Representative in encouraging other nations to lower their barriers, thereby encouraging access by US exporters and investors.

At the moment Australia is dealing with substantial pressure regarding negotiation of the “secret” and far-reaching TransPacific Partnership Agreement, which threatens to fundamentally erode our Pharmaceutical Benefit Scheme in favour of overseas drug companies.

To put it succinctly: trade disputes matter.

In Australia

The latest patent disputes between Apple and Samsung are – inevitably, it seems – heading to court in the US. They involve rights to control the chips and software for the user interface on mobile devices – important as consumers switch from desktop machines to phones, pads and other devices.

The court hearings won’t be finalised before 2014. We will presumably see an echo of that litigation in Australia, given our market is sufficiently large to justify going to court and that other countries cite our court decisions in considering patent disputes.

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So what do the latest squabbles mean for Australian consumers, marketers and policymakers?

Samsung has claimed it’s using new software and therefore doesn’t breach the patents that are held by Apple or need to pay the US$2.5 billion being sought by Apple for damages. Ultimately, a court rather than a marketer is going to decide whether there has or hasn’t been a breach. Meanwhile, Samsung is busy selling its products.

Apple is similarly continuing to sell products it says are fully protected by its patents and that don’t infringe Samsung’s patents. We can expect to see claims and counterclaims in the media. Lawyers and academics will be looking forward to decisions by courts.

It’s no Hollywood blockbuster, but still … Get your popcorn and sit back to watch the show.

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