[Update on April 15, 2014] Thanks to everyone for your comments, which I really appreciated. I am now going to publish my own settlement proposal on the occasion of the third anniversary of the outbreak of this dispute. Please don't send any more comments on this question. [/Update]
I'm not going to do the usual preview post listing patents, products etc. before the trial in the second Apple v. Samsung litigation in the Northern District of California kicks off. I won't blog about the trial per se until after both parties' opening arguments. But almost three years after the first lawsuit was filed, it's anything but premature to think and talk about the terms on which they should settle their worldwide dispute with cases pending in at least ten countries. It took Apple less than two years to settle with Nokia (where it ended up the net payer) and less than three years to settle with HTC (where Apple is on the receiving end of the royalties). At least 29 royalty-bearing Android patent license agreements are known, most of which were concluded without the need for any litigation.
I have an opinion on what would be fair and reasonable terms based on today's state of the battle. Obviously, whatever seems to be the right choice now could appear less than fair for one party or the other further down the road. It's all a question of leverage. But that need not prevent us from thinking about what would make sense if they wanted to reach an 11th hour settlement now.
While I have my own opinion, I would like to encourage you, the sophisticated readership of this blog -- apart from those of you who are involved with that dispute, of course (that would be too sophisticated) -- to share your thoughts with me ([Update on April 15, 2014] Thanks for the comments you sent. Please don't send more comments now. [/Update] I won't publish your names, and I can't promise that I'll publish many of your comments, but I'd really like to know what the world out there thinks. I'll be able to consider your answers until I update this post accordingly and ask you not to send any further messages. (By the way, I won't be able to send you a personal thank you note, but please do know that I will be silently grateful.)
How much should Samsung pay to Apple per smartphone or tablet? How much should Apple fork over to Samsung per iPhone or iPad for its standard-essential and other patents? Should only one party pay? Should they enter into a zero-zero cross-license (no money changing hands at all), as Samsung presumably did with Google and Cisco? What seems reasonable to you in light of their leverage in litigation and their contributions to innovation? Feel free to send your thoughts with or without your rationale.
Now I hope I'll strike the right balance and provide you with helpful information while not trying to influence your thinking more than necessary:
This blog covered almost every decision worldwide in this dispute. I can't guarantee that I never missed anything, and I didn't do a separate blog post on the fact that Apple fended off a Samsung lawsuit in Japan over a standard-essential patent. You don't have to take my word for it and can easily find other reports on the decisions I covered.
The parties' royalty demands are unknown, and let's not assume that someone's damages claims are the same as their royalty demands in a settlement negotiation. Based on the public record, Samsung appears to be demanding from Apple, for its wireless SEPs, 2.4% of the price of its 3G-compatible products (for example, $12 for a $500 device), but it also proposed a cheaper or possibly even royalty-free cross-license if Apple made its own non-SEPs available. In 2010, the year before the dispute began, Apple proposed a $30 per-unit royalty with various options for Samsung to obtain discounts.
It's hard to find out what companies pay for patent licenses. There were some indications in 2011 that Apple paid hundreds of millions of dollars to Nokia (possibly even on an annual basis). Apple once told a U.S. court that if it determined that Apple should pay Google's Motorola Mobility $1 per phone for its wireless SEPs, it would accept this determination (but not one cent more). There were rumors of HTC paying between $6 and $8 per phone to Apple, but HTC's CEO called these estimates "baseless and very, very wrong" and even "outrageous". Ericsson recently announced a $650 million royalty payment from Samsung in a given quarter (right after a settlement), suggesting that over the years Samsung pays billions of dollars to Ericsson. Microsoft is rumored to generate Android patent royalties of $2 billion per year, and Samsung is one of its 23 licensees (almost every major Android device maker is paying Microsoft royalties, with Motorola Mobility and Huawei, and possibly Amazon, being the most notable exceptions).
Apple deserves credit for revolutionizing the whole smartphone space and singlehandedly creating a mass market for tablets. And Apple is obviously (as its court filings have repeatedly indicated) unhappy about the fact that Samsung is now the global smartphone market leader. However, in a recent decision to deny Apple (once again) a permanent injunction, Judge Lucy Koh (who will preside over the trial starting on Monday) said that "Apple, in other words, cannot obtain a permanent injunction merely because Samsung's lawful competition impacts Apple in a way that monetary damages cannot remedy".
A key non-monetary term to consider is that Apple says it has consistently insisted, and continues to insist, on an anti-cloning provision (disputing representations or suggestions to the contrary by Samsung).
Apple and Samsung could agree on different royalties in different markets, e.g. X amount in the U.S., Y amount in Europe, and Z amount in the rest of the world. But most of the time companies agree on a worldwide royalty rate that reflects the relevance of different markets and the leverage they gain from their patents in those markets. For the purposes of this discussion here, let's keep things simple and assume a worldwide rate. But let's consider that the U.S. market represents a decreasing percentage of the global market (here's a great Guardian article on the global marketplace, entitled "Smartphone explosion in 2014 will see ownership in India pass US"). In some of the largest markets, IP enforcement is difficult, and in Europe, where IP is reasonably strong, these parties have won practically nothing against each other, at least nothing commercial meaningful, despite patent assertions in multiple European countries (case in point, an invention that will go to trial next week was not deemed patentworthy by 10 European judges in three countries). In some large, fast-growing market like the BRIC countries (Brazil, Russia, India, China), they haven't even tried enforcing their patents against each other.
So, all things considered, if you were a mediator making a proposal to the parties for a settlement that you think is reasonably acceptable to both, what would you say? Please let me know.
[Update on April 15, 2014] Thanks to everyone for your comments, which I really appreciated. I am now going to publish my own settlement proposal on the occasion of the third anniversary of the outbreak of this dispute. Please don't send any more comments on this question. [/Update]
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