Apple Inc. (AAPL) and Samsung will now fight it out at the International Trade Commission (ITC), after Samsung lodged patent infringement complaints against the U.S. based company, as reported by news agency Bloomberg.
Samsung claimed that Apple has infringed patents related to technology used in iPhone and iPad devices. Samsung is seeking a ban on imports of the devices containing the allegedly infringed technology.
Samsung also filed a law suit against Apple at the district court of Delaware, alleging violation of its intellectual property. However, the suit will be delayed if ITC agree to investigate Samsung’s allegations. ITC typically completes its reviews in 15 to 18 months.
Earlier, Samsung had asked a federal judge in the U.S. to order Apple to showcase samples of its forthcoming iPads and iPhones. However, Samsung’s bid was rejected on June 22.
The latest suit follows litigations in at least four countries. Apple recently filed a lawsuit in South Korea against Samsung alleging infringement of several patents. The lawsuit countered Samsung’s patent infringement claims against Apple. Samsung filed a number of lawsuits in South Korea, Japan and Germany in April 2011.
The legal tussle initiated over Samsung’s Galaxy line of tablet and smartphone products, which Apple claimed to have been copied from its popular iPad tablet and iPhone 3 smartphone.
Earlier in April 2011, Apple filed lawsuits against Samsung claiming infringement of seven patents related to the Galaxy devices’ mechanism of interpreting user gestures, including selecting, scrolling, pinching and zooming. Apple also alleged that Samsung copied three patents on the design, including the flat black face of the iPhone and iPad. The suit also covers the Epic 4G, and the Nexus S products.
At the end of the first quarter of 2011, Apple was Samsung’s biggest customer, mainly by virtue of the semiconductors it purchased, according to Samsung's quarterly report.
However, in the recent past, their relationship has deteriorated due to increasing competition. Samsung is one of the fastest growing smartphone makers based on strong growth of Google Inc.’s (GOOG) android operating system and has emerged as Apple's strongest competitor in the tablet market.
Apple released its iconic iPad 2 in March 2011. Simultaneously, Samsung unveiled an upgraded version of its Galaxy Tab in the same month.
Our Take
Apple remains heavily dependent on iPhone sales (50% of second quarter sales) and we believe the company will undertake every possible step to safeguard its dominant position in the smartphone and tablet market, including further lawsuits against major competitors such as Samsung.
However, in recent months, Apple has received unfavorable verdicts in a couple of cases at the International Trade Commission (ITC). As ITC has the authority to block import of products that infringe U.S patents, the lawsuits could dent Apple’s very sizeable cash balance. It may have to pay a hefty fine or a recurring license fee, which will hurt its profitability going forward.
Recently, Apple settled a patent dispute with Nokia Corp. (NOK), but will have to make a one-time payment to the latter and will have to pay regular royalties going forward.
Apple remains entangled in a number of lawsuits against HTC and Eastman Kodak (EK). Apple is also battling Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT) over the use of the name "app store."
With a loyal customer base, international expansion, competitive pricing strategy and a solid cash position, we remain positive on Apple’s long-term growth. However, increasing competition in most of its major product segments, possible delays in product launch, higher operating expenses and increasing legal complexities compel us to maintain our Hold rating over the long term (6-12 months).
Currently, Apple has a Rank #3, which implies a Hold rating in the near term.
APPLE INC (AAPL): Free Stock Analysis Report
AMAZON.COM INC (AMZN): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
Be the first to comment