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December 31, 2012

Samsung Could Lose $15 Billion in European Apple Patent Case

By Colleen Lynch, TMCnet Contributor

Bad news for Samsung (News - Alert)—the electronics giant could be facing a fine for its attempts to ban Apple’s (News - Alert) products in Europe. “But wait, that’s okay,” you say, “a successful company like Samsung can afford to pay a measly fine.” You would be right, except in this case you are dead wrong: Samsung might have to pay $15 billion (that’s right, with a b) to Apple if it loses the current legal war going on between the two companies.

Samsung knows what losing to Apple feels like, as the company recently lost a $1 billion dollar lawsuit for patent infringements relating to among other products, the iPad. It seems Apple is still steamed with its competitor, however, and intends to milk the company for all it’s worth, or at least a good chunk of it’s worth.

The issue at hand this time is Samsung’s use of “standard-essential” patents in order to ban Apple devices in the European Union. For those unfamiliar with the term, standard-essential patents work in this way: a company makes a formal commitment to license its technologies to all parties interested in using the products. Interested parties are required to pay a fee to the company in order to use the technologies they wish, and if the fee cannot be paid or agreed upon by all involved, the fee price must be set legally by a court.

So what’s the problem with this? Essentially, with Apple involved, Samsung could not strike an agreement on the fee price for the licensing of the patents for Apple products.

The potential result of this stubbornness between the two companies is that Samsung could face a fine of up to 10 percent of its total global revenue, which was calculated in 2011 at $148.9 billion. Ten percent of this number roughly translates to $14.8 billion dollars, and this would apply to Europe alone.

Apple isn’t totally innocent in the matter of patents, however. Coming on the heels of its $1 billion win against Samsung earlier this year, the U.S. Patent and Trademark Office (USPTO) invalidated a patent Apple used to win the case. Soon after, the USPTO invalidated another patent important to Apple and its battle with Samsung.

Granted, these specific patent issues reside in the U.S. and the newest case is focused in Europe, but the argument is much the same: how exactly can a company license another company’s products when the companies cannot come to a price agreement? Maybe more importantly, how can one company stop the other from using legal loopholes to skirt patents and do what they please?

Many more companies than just Samsung and Apple have found themselves struggling with this same issue, including Google (owner of Motorola Mobility) and Microsoft (News - Alert), so the outcome of Samsung’s newest case (and whether they will be charged with the overwhelming fine) should make such conflicts clearer for 2013 and beyond.

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