Apple and Google May Be Looking to Bury the Hatchet

Agenda-Setting Financial Insight.
Aug. 31 2012 3:15 PM

Could Apple and Google Bury the Hatchet?

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How long can Apple continue its winning streak in the courts?

Photo by KIMIHIRO HOSHINO/AFP/Getty Images

Apple may bury the hatchet with Google - just not quite yet. It’s no shock their chiefs, Tim Cook and Larry Page, are talking. The iPhone maker’s sweeping U.S. patent win over Samsung is a blow to the search giant, too. But the rivals’ clashing business models make peace difficult.

The court filings read Apple v. Samsung, but the target was really Google. That’s because an unprecedented 68 percent of smartphones - largely Samsung’s - that shipped in the second quarter ran on Google’s Android software, according to research firm IDC. Apple’s iPhones garnered only a 17 percent market share. Steve Jobs, the late Apple founder, insisted that Android included “stolen” features, and his successors have pursued that line in more than 50 lawsuits against smartphone makers in 10 countries.

The suits don’t name Google, perhaps because damages are simpler to win against consumer products vendors. The strategy paid off last week, when a California jury awarded Apple $1 billion for Samsung’s infringement of U.S. patents, including some involving Android features.
That may have intensified Page’s dialogue with Cook. But a deal needn’t be imminent. Apple sells elegant devices at a high profit. Google makes money from advertising, and essentially gives Android away as a means to that end. Both companies’ success could make compromise unpalatable.

And Apple, for now, is winning. Though not as one-sidedly as in California, courts worldwide have found Android-based devices violate the company’s patents. And the iPhone maker is targeting the software in another case before the judge who presided over its Samsung victory. Agreeing peace with that kind of battlefield advantage would make Sun Tzu turn in his grave.

But outright victory is no certainty. Samsung recently nicked the Cupertino-based company in cases in Japan and Korea. U.S. Judge Richard Posner all but laughed Apple out of court in June. Even the California judgment could be vulnerable on appeal. There’s also a question of cost. News reports suggest Apple spent tens of millions of dollars on the Samsung case alone. That’s peanuts for a $625 billion company. But at some point, settling the fight from a position of strength will be Apple’s best option.

Reynolds Holding is a Breakingviews columnist who writes from New York about the law in conjunction with Reuters Legal. Before joining Breakingviews, he was a national editorial producer for the Law & Justice Unit at ABC News, a senior writer for Time magazine and the executive editor of Legal Affairs, the first general interest magazine about the law.

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