In Korea, Samsung's loss to Apple puts innovation in spotlight

The battle between Samsung Electronics and Apple, the two global leaders in mobile devices, gets at the heart of innovation versus creativity in South Korea’s rise as an industrial powerhouse since the Korean War.

Samsung Electronics, the loser in a milestone patent infringement case brought by Apple, was ordered Friday to pay $1.05 billion for violating Apple’s patents on iPhone and iPad technology. Samsung is vowing, however, to fight to overturn the verdict of the nine-person jury in a federal court in Cupertino, Calif., near Apple’s global headquarters.

Whatever the final outcome, the case may force Samsung to focus more intensively on innovation, according to analysts here.

Samsung should “stop fighting it,” says James Rooney, chairman and chief executive officer of the Seoul advisory firm Market Force. “It’s time to stop copying others. Samsung would be far better advised not to fight it. To continue fighting it is to give themselves a bad name.”

Samsung Electronics chairman Lee Kun-hee, the head of a sprawling empire that accounts for 20 percent of South Korea’s economy, has periodically called on his army of executives and engineers to “shift from copying to innovation.”

Intrinsic to Korea’s rise as an industrial power from the devastation of the Korean War has been the drive to imitate whatever worked for major economies, notably Japan and the United States.

In recent years, however, Korea has been bursting with creativity in fields ranging from motor vehicles to music as epitomized in K-Pop groups with global followings. “There is a huge capacity to create,” says Mr. Rooney, “They’ve been schooled so much in the other way of doing things. Copying has been the backbone of Korea’s economic growth since the 1960s.”

The jury in California, after deliberating for three days on a wide range of complicated issues and questions, came out with the unanimous verdict that Samsung had infringed on six of seven of Apple’s patents for mobile phones. The jury flatly rejected Samsung’s countersuit in which it had asked for $421.8 million in damages.

Although the award of $1.05 billion in damages for Apple was far less than the $2.5 billion Apple had asked for, the amount seems almost incidental when balanced against Apple’s desire to keep Samsung from intruding on its markets with Apple-like products in Samsung packages.

Samsung immediately leaped on the implications of forcing the company to retreat as a competitor. The verdict, said Samsung, was not only “not fair” but would deprive American consumers of the freedom to choose between brands and manufacturers, meaning “fewer choices, less innovation, and potentially higher prices.”

In a foretaste of the grounds on which it will battle the verdict, Samsung charged that Apple had “manipulated” the patent laws that form the basis of its case. The verdict, it said, was by no means “the final word” as Samsung pursues not only the US case but similar cases in Germany, Australia, and elsewhere.

It was “unfortunate,” said Samsung, that patent law could be “manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies."

The California jury came out with its verdict hours after a judge in a district court in Seoul ruled that Apple had actually infringed on two of Samsung’s patents for wireless technology and spurned Apple’s claims of copycat design. The judge, however, ruled that Samsung’s Galaxy had copied the capacity of the iPhone screen to “bounce-back” after reaching the bottom of the page.

Some analysts agree that Samsung has a point in disputing Apple’s claim that it had copied the rounded corners of Apple’s iPhones.

“Just because the Samsung phone looks similar, that’s a bit of a stretch,” says Hank Morris, financial adviser at Industrial Research and Consulting, a Korean firm.  Similarly, “on a store counter, one laptop looks like another,” he says. “It’s very hard to tell them apart.”

What goes on inside Samsung and Apple products is another matter. “On the internal systems, in the processes required, obviously Apple was ahead of the field,” says Mr. Morris. “Samsung was unable to show it had the technology.”

The case, though, has another dimension that inevitably draws the two giants together. Apple is one of Samsung’s major customers for memory chips.

“They clearly have an enduring relationship,” says Morris. In the end, he believes, Samsung should pay to license Apple intellectual property. “Appeals will be difficult,” he says. “I doubt if they can overturn the outcome.”

In fact, there seems to be no silver lining for Samsung in a case that will compel the company at the least to reconfigure some of its products for sale in the US. “The decision,” said Yonhap, the South Korean news agency, “cast dark clouds over Samsung's booming sales of smart phones and tablet computers in the US market.”