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Samsung vs Apple
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Apple Vs Samsung: The Battle of the Wrong Contenders

On August 24, 2012, a jury in San Jose, California drew curtains (for the time being at least) on the long-drawn saga between Apple and Samsung. The court delivered a verdict largely favorable to Apple, validating most of Apple’s claims and ordering Samsung to pay Apple $1.05 billion in damages.

The verdict followed months of bitter battle between the two companies, which together sell more than half of the world’s smartphones and tablets. Although Apple’s charges against Samsung are more about design and features, it is actually an attack on Google and its Android software, which drives Samsung’s devices and has become the most widely used mobile software.

Since Apple, Google and Microsoft belong to the operating platform universe, their patent strategies differ vividly from the old mobile telecommunications world of essential patents. The mobile telecommunications industry is not new to IP litigations. However, current litigations concern the operating software used in smartphones, whereas earlier litigations were targeted at mobile telecommunications standards. This situation has arisen as Google did not have ex ante licenses from Apple and Microsoft.

There are two IP regimes, ‘essential patents’ (radio, transmission and telephony) and ‘platform patents’ (operating system software). In the Apple vs. Samsung case, the charges filed against Samsung relate both to essential patents (related to design of Samsung phones and tablets) and to platform patents (related to certain features allegedly copied by Android from iOS). However, when it comes to mobile internet, there is no overlap between the two patent regimes. The current IP litigation game (between Apple, Google and Microsoft) is only about platform patents (operating system software) and not about ‘essential patents’ (radio, transmission and telephony).

The mobile telecommunications market is currently undergoing upheaval as mobile internet is becoming the dominant application and phones are practically turning into mobile internet devices. For mobile telecommunication incumbents (such as Ericsson, Motorola, Nokia, Sony and Samsung), competition remains heated with direct threat from the likes of Apple and indirect competition from Google and Microsoft.

Apple and Microsoft are expected to be the winners in the current IP litigation scenario, since their IP is considered to have value in smartphones, while as Google’s IP, in comparison, is considerably lower, the Android operating system and its alliance network seem to be losing. The role of mobile telecommunication incumbents, with respect to patent portfolios is still important but limited to essential patents.

The unique position of Google as merely the provider of Android has also protected it from any direct IP litigation. However, to fight with Google, both Apple and Microsoft have filed IP litigation against the adopters of Google’s platform ecosystem, which includes original equipment manufacturers (e.g., HTC, Motorola Mobility, and Samsung) and application developers (Lodsys sues Rovio).

These attacks are global and are spread across four continents; specifically, Apple has sued the largest producer of Android-based devices, Samsung, in the USA and the rest of the world, except for China. It will be interesting to see the outcome of these litigations, as it might change the way the global mobile sector currently functions – if Samsung were to lose, it will shake-up Google’s ambitions of becoming the global leader in mobile telephony software; if the outcome comes out in favor of Samsung, both Samsung and Google will lead the market, and perhaps give rise to smaller hardware manufacturers which could use the Android platform to enter the market.

Whatever the outcome of these lawsuits, it sure is expected to spur innovation among relevant industry participants. Android (Google) has been found to be vulnerable/susceptible to litigation and unless they significantly strengthen their patent portfolio, hardware manufacturers would be wary of adopting android and will look for alternatives (such as MS Windows Mobile or develop their own operating systems). And if Apple wins, then OEMs will still have to look for alternative operating platforms. So the path is not as rosy for the Android system as it seems at the outset.

Thus, two key observations from the Apple vs. Samsung patent disputes can be noted:

  1. Apple’s patents are only valid and enforceable in the USA and the company will have difficulty in leveraging these outside the USA, for example in Europe and Asia.

  2. Apple’s patent portfolio outside the USA is minimal and the company will therefore struggle to protect its products in Europe and Asia. Moreover, the company would be forced to sign cross-licensing agreements with old mobile phone incumbents (Apple and Google Subsidiary – Motorola Mobility Consider Arbitration).

The current IP litigation scenario in mobile telecommunications shows how the industry is transitioning from an industry dominated by standards and essential patents in the late 1990s to an industry increasingly dominated by platform patents.

What’s next in this battle? Where might this lead the industry to?

Courts in different jurisdictions, such as in the UK, Korea, Japan, Australia and Germany have all given varied verdicts and the litigation battles are expected to continue (Samsung has already challenged the San Jose verdict). However, if Apple is able to enforce its patents outside the USA as well, mobile phone incumbents would feel hesitant to use Android and may opt for competing operating systems such as the Windows Phone.

Even then, it is unlikely to represent the demise of Android. Some of the features in contention have already been removed, while other features are given significantly lesser protection outside the USA.

The story, clearly, is far from over.

Will Retailers’ Cash Registers Ring This Holiday Season
by EOS Intelligence EOS Intelligence No Comments

Will Retailers’ Cash Registers Ring This Holiday Season?

It’s a big moment for retailers as we enter the holiday season, which traditionally has been known to generate sales higher than in any other quarter during the year. But this year again, retailers cannot afford to sit back to enjoy the sweet sound of their cash registers ring. Despite the rebounding US economy and some European economies showing first signs of recovery, the ‘economic crisis’ phrase is still being heard in dozens of languages.

At the outset, the US retail holiday season outlook seems relatively optimistic, with National Retail Federation’s projections indicating a 4.1% increase in 2012 holiday retail sales over the 2011 season, to reach a healthy $586 billion this year. Though moderate, there is a visible increase in optimism compared with 2011, resulting in higher consumer confidence in economic recovery, employment stability, as well as individual and household finances, all of which should bring American retailers a sense of relief and may result in a brighter fiscal year-end.

Online shopping and mobile apps are expected to play an important role during this season in the American market. This, paradoxically, might mean a mixed bag of good and bad news for retailers. Well-informed consumers, empowered by easy access to online tools allowing for quick, on-the-spot price and offer comparisons, are bound to make retailers’ and marketers’ job harder. But, by now, any sane retailer should have realized the world of opportunities lying here, and only these retailers will be able to bite a bigger share of consumer’s holiday budget. Increased penetration of smartphones, in tandem with mobile apps, online shopping and social media, have opened several platforms for retailers to interact with consumers, leading to an increase in conversion rate of consumers from ‘online researchers’ to ‘actual buyers’. According to Deloitte’s research, shoppers using mobile apps are expected to spend 72% more than non-users this year, with the conversion rate for shoppers using dedicated mobile applications being 21% higher than shoppers not using such tools.

Although this data pertains to the American market, it offers a good learning for European retailers too, as for them, the 2012 holiday season outlook appears gloomier than for their American counterparts. They seem to be very much aware of what is at stake, especially remembering 2011, which was hoped to be the turning year for the European economy, but actually witnessed worsening of the retail sector across several European countries. Poor consumer confidence was reinforced with recurring news: “Italy Xmas sales seen down”, “Greece sales plunge”, “Retailers slash prices to clear stocks, hurting margins”. There were some instances of retail sales growth, mainly in Russia, Poland, Romania, and to some extent in the UK, which witnessed faster clearance of holiday stock, but, apart from Russia and Poland, it was far from the good old days of record sales.

Christmas shoppers brought little relief to Europe’s retailers last year, with online sales increasingly cannibalizing in-store purchases. Till date, 2012 has not been much better than 2011 in terms of hinting at better consumer confidence, with most Europeans constrained by lower disposable incomes, higher-than-average inflation, wage cuts, high unemployment and dwindling social benefits, all of which do not promise a very fruitful 2012 holiday season for retailers across Europe. Several European retailers, just like their American fellows, are also turning their eyes to online and mobile-app shopping, especially as 2012 has shown that online retail and mail order are relatively immune to economic volatility and falling consumer confidence (though online sales penetration varies considerably across EU states).

So can European retailers do anything or should they simply wait and watch the holiday season fare badly? While there are no magical solutions, some obvious aspects might help improve retail sales numbers a bit this year:

  • Christmas is the best time to play on emotions, but this alone will not charm consumers into opening their wallets during these difficult times. Retailers must offer great sale prices and monetary incentives to buy. As the gloomy outlook prolongs, consumers tend to be more perceptive to price cuts than Santa’s friendly image.

  • Price cuts, discounts and special holidays offers are a decent but rather ancient invention. Any retailer thinking of this being the sole instrument of gaining consumers will have to compete with the sea of price cuts available everywhere. Creating a sense of urgency and exclusivity allows one to stand out and force consumers to decide quickly, such as by offering sharp discounts but for a very short period.

  • It has never been more important for retailers to stay on their ones toes with excellent customer service. With a battle for consumer’s every euro and dollar, retailers just cannot afford unhappy customers, who are very likely to spread the news about their bad experience.

  • Offering a delayed payment option might not make the retailer excited, but it might be the best option to secure sales from those consumers who are worried about their liquidity and spending too much now. There might be a willingness to buy gifts, so a delayed payment option might help consumers make some purchase rather than nothing at all.

  • Retailers, even those who do not offer online shopping options, must make themselves visible online – this is not the right time to neglect social media (but is it ever?).

While the economic situation is slowly improving, consumers will undoubtedly remain cautious, and the 2012 holiday season is unlikely to break any sales record. With this rather mixed outlook, the good old basket of retailer tricks including Christmas special offers, jolly atmosphere and in-store decorations will turn out to be too weak to counterbalance the pressure on the consumer’s wallet and weak confidence. But perhaps the only thing that the European retailers CAN do is to pick from the old tricks basket as smartly as they can, wait out the worst times and just hope for the best.

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