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Could The Tide Be Turning On Apple?

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As reported in TMV a week ago, an Australian appeals court kicked out Apples appeal to prevent the Galaxy 10.1 tablet from being sold in Australia. A couple of days later an American court kicked out Apple’s application to prevent the same tablet from being sold in the United States before the real court case begins next year. The judge in this case actually stated that she did not see much merit in Apple’s case.

Now a German court a week ago actually banned the sale of both the iPad and iPhone 4S in Germany – this was due to a Motorola patent infringement suit against Apple. The ruling stated that Apple’s cellular enabled devices – the iPhone and the iPad infringe on GPRS patents held by Motorola. In TMV’s view that is three clear-cut cases of the tide turning against Apple’s quest to halt Samsung and the rise of Android.

What is interesting here is that Samsung is also suing Apple for infringing its patents related to delivery of a 3G signal to its handsets. Every single other handset manufacturer has agreed Samsung’s 2.3% royalty payment to be able to use the stated patent, yet Apple has refused to pay up. This recent Motorola win has very similar echoes in terms of Apple refusing to pay a royalty to use the patent they state Apple has been infringing since 2007. Each of these technology patents, are critical to the smooth 3G running of both the iPhone and iPad.

A Motorola spokesman stated after the court win in Germany that “We have been negotiating with Apple and offering them reasonable licensing terms and conditions since 2007”. TMV believe this coupled with the fact Apple has also refused to pay a royalty to Samsung for using its technology since 2007 could seriously hamper Apple’s credibility in accusing others of “slavishly copying” its iPhone and iPad products.

Drilling down, the facts are as follows; Samsung has been prevented from selling its products in certain territories and that has only been since August this year. Yet, on the flip side Apple has refused to pay royalties for five years to both Motorola and Samsung. The fact is Apple has sold tens of millions (if not hundreds of millions) of iPhones and iPads in that same period. So, it is TMV’s view that the payouts that will be awarded against Apple will be significantly higher than any payouts that Apple may win against Samsung next year.

Crunching some crude numbers if Samsung win their case, Apple will technically owe Samsung 2.3% of the retail price of every single iPhone ever sold and millions of iPads. For arguments sake let’s say two hundred and fifty million iPhones have been sold since its launch. The minimum Apple would owe per iPhone sale is roughly $5USD times that by two hundred and fifty million and it’s already over $1.25 billion USD owed to Samsung. It is probably similar to the payout that would be required to Motorola. Obviously, this is purely speculation and very crude, but you no doubt get the picture.

Reputationally, the more the issue of Apple’s refusal to pay what every other mobile handset manufacturer deems to be reasonable in terms of royalties to both Motorola and Samsung is mentioned in the media, the more Apple’s behavior will be perceived as hypocritical by consumers. The potential damage to Apple’s brand from this issue alone is sizeable in TMV’s view.

Adding to the pressure is the fact Samsung’s Anti-Apple marketing campaign appears to be working. Apparently in the United States where the television advertisement below has run, Samsung overtook the iPhone for U.S. brand perception the week after its launch. In Australia Samsung has also stated that Apple’s campaign to prevent the sale of the Galaxy 10.1 tablet probably backfired in that it ensured media attention the Galaxy tablet would probably not have received.

These legal decisions lead to TMV’s view that the tide is indeed turning on Apple. We would go further and state it’s aggressive use of these patent infringement legal actions may come back to bite Apple’s proverbial butt – especially considering Apple has so blatantly infringed on both Samsung and Motorola patents for over five years and counting. TMV would suggest that Apple may yet have to eat some humble pie which will no doubt include possible billion dollar plus payouts to the companies whose patents Apple has infringe upon.

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