Patent Bet Turns Sour For Korean Behemoth

The Apple-Samsung verdict was a vivid example of strategic gamble gone wrong. Though a South Korea court in a separate case ruled in Samsung's favor, the U.S. decision will have far more financial impact and leaves Samsung weaker in the rivals' nine-nation legal battle over patents for smartphones and tablet computers. The U.S. trial judge can triple the damages and bar some Samsung products from the U.S. Samsung said it would appeal the verdict, but clearly there is other damage control to do as well.

Vice Chairman Choi Gee-sung and J.K. Shin, president of Samsung's telecom division held an emergency meeting at the company's headquarters August 26, spending much of the day with deputies, attorneys and public-relations officials. The verdict won't affect Samsung's immediate financial performance nor its lead over Apple as the world's top seller of smartphones, analysts said. "Samsung has more than enough money to pay $1.05 billion in damages, so that won't be a major issue for the company," said Mark Newman, an analyst at Sanford Bernstein in Hong Kong. "The verdict's biggest impact on Samsung is the damage to its reputation and brand image—mainly in the U.S. but also possibly world-wide." That damage could have been avoided were it not for a bad bet. Trial testimony revealed that Samsung executives had rejected an Apple offer to sell smartphone and tablet patent licenses for $24 a unit. Based on the 21.3 million smartphones and 1.4 million tablets that Samsung has sold in the U.S. that infringed the Apple patents, Samsung would have paid $545 million so far had the company accepted the licensing offer. That is quite a ways from Samsung's current situation, given the possibility that damages could be trebled, the U.S. judge could bar some U.S. sales and Samsung has doubtless accumulated millions of dollars in litigation costs.