If Apple Inc. (NASDAQ: AAPL) has its way, Samsung will be unable to import many of it most popular smartphones into the Unites States. That would leave the South Korean company the difficult choice of either changing some portion of the hardware and software of its handsets by producing new ones or, alternatively, offering “fixes” to its current products to comply with a legal judgment that says Samsung products infringe on seven of Apple’s important patents. Each of Samsung’s solutions would be tremendously expensive. It may as well replace its smartphones, for the time being, with ones that have not had patent challenges. That universe has only one company and its products, for now, and that is floundering Research In Motion Ltd. (NASDAQ: RIMM). Samsung could always give away BlackBerry smartphones to its customers while it makes its own products into ones that do not violate Apple’s intellectual property rights.
Samsung almost certainly will appeal the Apple victory, which, among other things, will cost it more than $1 billion if the current judgment stands. As the appeal process moves along, Apple will continue to pressure the federal district court in San Jose to add at least four more patents to the list of those that Samsung has violated. Damages from the sale of Samsung products may prove to be so severe for Apple, in the eyes of the law, that their sale could be blocked.
Samsung’s biggest single problem in the short term involves whether it can sell its successful Galaxy S III in America. It has been described as the only viable iPhone-killer on the market. A look at the patents it does or may violate could force Samsung to change some of the software it runs, the size of the screen and the portion of the front of the smartphone that it covers. Samsung might even have to square off the rounded edges on the phone. Imagine a kit sent to each Galaxy S III owner that updates software, adds a physical keyboard and has glued-on edges that turn the handset into a rectangle. The owner might spend hours with glue, scissors and screwdrivers to make the alterations. The customer service involved to support the changes would be unimaginable.
Samsung could turn to Research In Motion for a perfectly good temporary replacement for the Galaxy S III. The BlackBerry Torch, Bold or Curve has features similar to those of the Samsung flagship smartphone. And they run on RIM’s BlackBerry 7.1 OS, which will soon be updated. The BlackBerrys are sold by the same carriers as the Samsung product. AT&T (NYSE: T) offers the Galaxy S III for $299 with a two-year subscription plan. The wireless provider sells the BlackBerry Bold 9700 for a single penny ($.01) with the same type of plan.
Which would be less expensive for Samsung as it sorts out its legal problems with Apple? Substantial modifications to its current smartphones, the invention and manufacture of completely new ones, or a free giveaway of BlackBerry products to buy it time? Probably the BlackBerry alternative.
Douglas A. McIntyre
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