Year in review 2012: Apple, Samsung battle over patents as other disputes flare


The news: The titanic mobile patent infringement contest of the year was between Apple (NASDAQ:AAPL) and Samsung Electronics, the world's two largest smartphone makers.

In April 2011 Apple first sued Samsung for "slavishly" copying its iPhone and iPad in Samsung's Galaxy line of Android devices. The trial, in U.S. District Court in San Jose, Calif., kicked off at the end of July 2012 and was as notable for the secrets it revealed as the legal arguments about patents. Among the revelations: Former Apple CEO Steve Jobs was "very receptive" to the idea of a 7-inch iPad by early 2011 (Apple unveiled its iPad mini in October 2012); and Apple disclosed that it offered to license its patents to Samsung--if Samsung would pay $30 per smartphone and $40 per tablet.

In the end, the jury in the trial delivered a sweeping victory to Apple, awarding it $1.05 billion in damages. However, Apple's win was not total: U.S. District Judge Lucky Koh said in December that Apple could not get a U.S. sales ban on 26 Samsung products.

Meanwhile, Apple and HTC agreed to settle all outstanding patent litigation between themselves around the world, and the two firms entered into a 10-year licensing agreement. This came after some of HTC's smartphones had been held up at U.S. customs because of patent issues. Separately, U.S. Circuit Judge Richard Posner threw out a patent trial between Apple and Google's (NASDAQ:GOOG) Motorola Mobility, and ruled that the companies could not win injunctions barring sales of infringing products.

Other companies besides Apple got into the act. Ericsson (NASDAQ:ERIC) sued Samsung. Nokia sought to ban the sale of Research In Motion's (NASDAQ:RIMM) BlackBerry devices. And Motorola and Microsoft (NASDAQ:MSFT) continue to battle over patent licensing terms.

Why it was significant: The Apple-Samsung case dominated the headlines for much of the year, and was seen as a proxy battle between Apple and Google, since Samsung is the largest OEM making phones running Google's Android software. Patent litigation has often been seen as a way to kneecap competitors in the courtroom instead of the market, but this year in took on added weight. A $1 billion damages verdict, however flawed some might think it, is no small amount, even for a company as large and financially healthy as Samsung.

However, it was Judge Poser's ruling in the Apple-Motorola case that got to the heart of the industry's obsession over patents. In a scathing opinion, Posner railed against companies resorting to permanent injunctions--in effect, sales bans--to go after competitors' products, especially when the patents at issue are standards-essential patents. "Neither party is entitled to an injunction," Posner wrote. "Neither has shown that damages would not be an adequate remedy."

Nonetheless, patent lawsuits appear to be gaining steam in wireless. While the head of the U.S. Patent and Trademark Office thinks patent lawsuits are a sign of innovation enabled by the patent system, some observers think they signal that the U.S. patent system is utterly broken, and needs to be reformed. Until that happens, 2012 proved that mobile companies better lawyer-up.