Apple Inc. (AAPL) gained a major advantage in a closely-watched patent infringement battle against Samsung, as the U.S. District Court in San Jose, California, ruled in favor of the iPhone maker. The nine-member jury ruled that Samsung had infringed upon six of Apple’s patents and also rejected all counter claims by Samsung. Samsung was ordered to pay $1.05 billion to Apple.
This verdict solidifies Apple’s claims that Samsung had in fact copied its designs and a few of its software features. The latest verdict is surely a morale booster for the company, but we believe that the fight for the $219.1 billion smartphone market domination is far from over.
Over the last couple of years, Apple has been highly vocal about defending its intellectual property from misuse and violations. The company has also been aggressive in filing lawsuits against other handset makers like HTC and Motorola in order to protect its patents. Apple has accused these manufacturers of blatantly copying its iPhone and iPad designs.
Thus, this verdict also serves as an eye-opener for companies who are currently engaged in design and software-related patent infringement suits with Apple.
This verdict will serve as precedent in other cases, so other smartphone makers may be compelled to alter their product designs in case they are found guilty of infringement.
The win for Apple could act as a stumbling block for Samsung and curb the proliferation of Google Inc.‘s (GOOG) Android operating systems in the near term. Going forward, Samsung, along with other smartphone makers, would most likely be required to make software changes in order to avoid further legal tussles. This is evident from the fact that Samsung’s relatively new offering Galaxy SIII was not impacted by the verdict.
Apple remains the biggest growth story based on its product pipeline, popular apps, iCloud, iPhone 4S, the new iPad, Apple TV and a loyal customer base. With a solid balance sheet and robust revenues, we expect Apple to outperform its peers in the long run.
Recently, sale of certain Apple and Samsung devices were banned in South Korea, as the Seoul Central District Court found both the companies guilty of infringing on each others’ patents.
However, Apple has pending litigation cases in nine countries with other handset makers and their outcome could remain an overhang on the stock in the near-term.
Currently, Apple has a Zacks #3 Rank, which implies a Hold rating in the near term.
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