11/23/2008

Patent Bullies vs. Samsung

Patent Bullies
By Sean Hayes (Korea Times 11/24/08)

Samsung is embroiled in one of the world's largest patent infringement suits. Most large profitable companies, from Apple to GE, are facing increasing exposure to such suits.

These companies must take a more aggressive stance by engaging in more concerted efforts, creating systematic internal mechanisms to handle disputes and aggressively defend, in court, against attacks that are without merit.Without such efforts from our companies, patent bullies and patent trolls will gain at the expense of consumers, employees, and our most successful companies.

For example, Samsung, for the benefit of its reputation and its bottom-line, needs to devise a coherent, transparent, and yet aggressive, legal structure and system to deal with patent infringement suits, while engaging in more cross-licensing schemes.

The answer to Samsung's problems must come from a revamping of the role of in-house and outside counsel. If Samsung, the lifeblood of the Korean economy, is not willing to adapt to the realities in the intellectual property realm, I fear that its brand image and eventually its bottom-line will be negatively affected.

This, of course, will have lasting effects on all of Korean society.The most recent battle facing Samsung is over two suits filed by Spansion, the third largest maker of flash memory chips, behind Samsung and Toshiba, for infringing on Spansion's patents. In an aggressive posture, it filed a complaint at the U.S. International Trade Commission (ITC) for exclusion of the allegedly infringing products from entry.

Spansion also filed, in a federal district, a case requesting an injunction and Treble damages. If the ITC complaint prevails, it would effect the import of over 100 million gadgets, including phones, MP3 players, cameras, and digital recorders. The ITC usually takes little less than one and a half years to make a disposition.

If Spansion's case at the district court prevails, an injunction against the sale and import of the infringing products could be ordered, along with damages not specifically alleged in the filing, which, based on Samsung sales, could reach a sum of over $20 billion. A decision at the district court could take multiple years to reach.

Over the past two decades, Samsung has been investigated and has initiated investigations at the ITC on almost two-dozen occasions. In the vast majority of completed investigations, a settlement was reached before a relevant disposition. In a recent case, Samsung reached a settlement with Renesas Technology Japan.

Both Renesas and Samsung claimed violation of their respective patents.Samsung is also no stranger to actions in U.S. district courts and has also been willing to settle matters prior to disposition in the district court.

If the past is a sign of the future, Samsung again will settle the case.We will likely hear more of Spansion in the future. Spansion recently purchased an Israeli semiconductor company with numerous ``high-level" patents.

Spansion seems to be transforming itself from a producer of flash memory chips into an intellectual property licensing house.Spansion, in the future, may make little in the way of tangible products and rely on its thousands of patents for revenues.

Its first foray into large-scale complex intellectual property litigation may be simply a tool to increase awareness, stock value, and get their hands in the deep pockets of one of the world's most profitable companies. The outcome, if Samsung follows its not so distant past, is a settlement with a little gravy in the hands of a possible emerging patent bully.

Samsung, if the Spansion claims are not valid, must fight this case to the end in order to avoid the increasing number of patent bullies and trolls pursuing the deep pockets of our most successful companies.

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SeanHayes@ipglegal.com