Defeat in a bitter patent wrangle with Apple Inc, its smartphone rival and biggest customer, will dent Samsung Electronics Co’s $21 billion (€17 billion) cash-pile, but could actually help cement its leadership in the global smartphone market.

While the verdict was a big win for Apple, the damages are less than half the $2.5 billion compensation it sought

A US court has ordered Samsung – which sold around 50 million phones in April-June, almost twice the number of iPhones – to pay $1.05 billion (€839 million) damages, after ruling that the South Korean firm infringed on some Apple patents.

While the verdict was a big win for Apple, the damages are less than half the $2.5 billion (€2 billion) compensation it sought – although that could yet be increased by the judge – and are just 1.5 per cent of annual revenues from Samsung’s telecoms business.

That phone and tablet business is the powerhouse behind Samsung’s growth, earning around 70 per cent of total profit. The group had net profit of $4.5 billion in April-June.

Samsung could also see its popular Galaxy smartphone banned from sale in the US. But its skill as a “fast executioner” – quick to match others’ innovations – would likely mean tweaked, non-patent infringing devices would be on the market soon after any ban came into place.

“Samsung has already made some design changes to new products since the litigation first started more than a year ago,” said Seo Won-seok, an analyst at Korea Investment & Securities.

“With the ruling, they are now more likely to make further changes or they could simply decide to raise product prices to cover patent-related payments.”

Also, Apple’s demands for Samsung to pay it a royalty on its phone sales could hit rival phones using Google’s Android operating system more than it hits Samsung. If anything, the blaze of publicity from the high-profile, high-stakes US litigation has made Samsung’s brand more recognisable.

The California jury had only begun deliberating on Wednesday after a complex weeks-long trial. Friday’s verdict on seven Apple patent claims and five Samsung patent claims suggests the nine-person panel had little difficulty in concluding that Samsung had copied some features of Apple’s iPhone and iPad.

It could lead to an outright ban on sales of key Samsung products, with Apple saying it planned to file for a sales injunction within seven days and the judge in the case setting a hearing on September 20.

Because the jury found “wilful” infringement, Apple could seek triple damages.

The US ruling, read out to a packed federal courtroom in San Jose, just miles from Apple’s headquarters, came less than 24 hours after a Seoul court found that while the iPhone and Galaxy look very similar Samsung hadn’t violated Apple’s design.

Samsung issued a defiant response to the US decision, which it called “a loss for the American consumer”, indicating the legal tussle is far from over.

“This is not the final word in this case or in battles being waged in courts and tribunals around the world, some of which have already rejected many of Apple’s claims,” Samsung said in a statement.

Nomura analyst C.W. Chung, speaking before the verdict, predicted it could take “many years” for Apple and Samsung to settle the case whatever the result of this round, leaving the two firmly in control of the $200 billion-plus (€160 billion) global smartphone market.

“The litigation may end up with both parties entering a cross-licensing agreement, which should enable them to build a higher patent wall in the smartphone market,” said Chung.

“This would have a positive impact on the share prices of Samsung and Apple, while posing a substantial threat to other competitors.”

Based on the damages ruling, Samsung is asked to pay Apple around $10 royalty per phone,a move seen aimed at slowing rival phones that run on Android.

Outside the box

In a research note before the verdict, UBS analysts said an Apple win could, in the long-run, hurt the US firm “as the real threat is not a competitor beating Apple at its own game, but instead changing the game.

“The likelihood of Apple being leapfrogged or a rival creating a new category (of device) is greater if they have to think out of the box. If they just copy Apple, like Coke, Apple can claim to be ‘the real thing’.”

Samsung also looks to be staying ahead of the curve – by reviving the stylus function, derided by Apple’s Steve Jobs, in its latest tablets and by creating the hybrid phone-cum-tablet, or phablet, category, with its 5.3-inch Note.

Apple, which has largely stood by its original form and design, is taking note, with speculation that the next iPhone will have a bigger screen and new iPads may be smaller.

In China, set to become the world’s biggest smartphone market this year, Samsung has almost twice Apple’s market share, and the iPhone slipped to fourth in the market in April-June, overtaken by both Lenovo Group Ltd and ZTE Corp, according to latest data from industry research firm IDC.

Despite, or because of, the publicity from the US case, and more than a dozen pending cases elsewhere around the globe, the Samsung brand has gained recognition – as an equal to Apple rather than merely a supplier.

In a recent Campaign Asia-Pacific brand ranking, Samsung came top... ahead of second-placed Apple.

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