Here’s What’s Behind the Samsung/Apple Patent Showdown


Samsung has released a dramatic response to a patent infringement lawsuit Apple (s aapl) filed Friday against Samsung. The suit, which was filed with the U.S. District Court in Northern California, claimed patent violations regarding the Galaxy line of smartphones and tablets. In the complaint, Apple argues Samsung’s Galaxy line of devices resemble Apple’s iPhone and iPad too closely to be a coincidence. But like a play, most of this back-and-forth is just for show while the real action happens behinds the scenes.

“Samsung will respond actively to this legal action taken against us through appropriate legal measures to protect our intellectual property,” was the official word from Samsung Tuesday according to the AFP. Samsung officials also have been quoted by Korea’s Yonhap news agency as suspecting that in fact, it’s Apple that violated Samsung’s patents. One Samsung official even brought up the cozy supplier relationship enjoyed between the companies, noting that “Apple is one of our key buyers of semiconductors and display panels. However, we have no choice but respond strongly this time.”

Even calling Apple “one of [Samsung’s] key buyers” might be understating the case a little bit. Apple was the second-largest revenue source for Samsung in 2010, representing four percent of the firm’s total annual revenue of $142 billion. Recent reports have only indicated a deepening of the supply relationship between the two companies, thanks to a reported large-scale contract for touchscreens and the apparent addition of Samsung as a supplier for MacBook Air SSDs.

A rocky relationship between the two companies could have significant consequences for both going forward. Demand still outpaces supply for the iPad 2, for instance, and it’s still unclear whether the disaster in Japan will ultimately have had an effect on Apple’s ability to get products in the hands of consumers. If the supply relationship between Samsung and Apple becomes strained as a result of this lawsuit, it could eventually make it harder for Apple to source parts, and it could also significantly affect Samsung’s bottom line. And Apple has already been lining up some alternate supply relationships that could help it sidestep Samsung altogether, should the need arise.

Apple knows that Samsung is currently crucial to its ability to get product in stores, but because of the way patent law works, Apple basically had to sue Samsung to protect its intellectual property since Galaxy devices blatantly copy Apple’s designs. My colleague Kevin Tofel has noted that Samsung is clearly trying to mimic Apple’s successful branding strategy with Galaxy devices, and the similarities surely aren’t lost on customers. Basically, because of the way patent law is set up, Apple had to sue first and then can negotiate later in order to work out potential licensing deals with Samsung. Continuing to let things slide would have weakened its claims regarding held patents. Behind the scenes, the two companies are doubtless negotiating furiously over who will get paid what for various licenses — a fight occurring all over the smartphone word at this moment.

Apple’s timing with this suit is a good sign that Samsung is currently or is rapidly becoming the iPhone-maker’s biggest current competitor, but despite bold talk from both sides, it isn’t a showdown that will result in the survival of only one or the other. The relationship between the two companies may change as a result of these legal proceedings, but expect both the iPhone and the Galaxy brands to survive the clash.

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