Apple’s War on Android
In her black robe and strand of white pearls, Lucy Koh projects the serious, deliberate demeanor befitting a U.S. District Court judge. The Harvard-educated former federal prosecutor has served on the California state bench and as a partner in a Silicon Valley law firm, where she litigated technology patent lawsuits. For all her earnestness, Koh, 43, could not resist needling the lawyers skirmishing before her at a hearing last June in San Jose.
“Last time you were here,” the judge noted, “you said that you had a business relationship—I forget what the number was—$8 million, $8 billion?”
“I think it was in excess of $7 billion,” said attorney Harold McElhinny. That’s how much McElhinny’s client, Apple (AAPL), pays annually for components made by Samsung Electronics (005930), the company Apple is suing for patent infringement. Apple is Samsung’s single biggest customer, responsible for 7.6 percent of the Korean company’s 2011 revenue of $109 billion. The dependence runs both ways: Apple’s absurdly lucrative iPad and iPhone operations would grind to a halt without Samsung’s parts. Yet here in Koh’s courtroom, the companies were bashing each other’s brains out.
“Seven billion,” Judge Koh mused. “Can we all just get along here? Can I send you out to ADR?” she wondered, referring to alternative dispute resolution, a form of private mediation. “I will send you with boxes of chocolates,” the judge said. “I mean, whatever.”
Nine months later, the case of Apple v. Samsung shows no sign of abating. Rather than conciliate, Apple returned in February to the federal courthouse in San Jose to sue Samsung again, claiming the Korean manufacturer “slavishly copied” Apple. An unrelenting recidivist, in Apple’s portrayal, Samsung has “continued to flood the market with copycat products, including at least 18 new infringing products released over the last eight months.”
The clash reflects life in the tech big leagues: Apple sharply reminding a formidable rival who’s boss. At the same time, Apple v. Samsung is remarkable for its scale. The combatants barely notice the millions of dollars in legal expenses they’re each spending annually to flog the other in an epic struggle that will surely test their multibillion-dollar symbiotic relationship. The battle also signals a broader conflict pitting Apple against multiple mobile-device manufacturers in some three dozen legal and regulatory actions pending in 10 countries. Beyond Samsung, Apple’s notable antagonists include Motorola Mobility (MMI) and HTC (2498). As Silicon Valley sophisticates underscore, however, the phone and tablet makers are mere proxies for another foe—Android, the operating system Google (GOOG) gives away to manufacturers. Google employs a come-one, come-all business model radically at odds with Apple’s and, in the late Steve Jobs’s view, existentially threatening to his company.
In the last 18 months of his life, Jobs, who died on Oct. 5 at age 56, was obsessed with crushing Android. He explained to his authorized biographer, Walter Isaacson, that the litigation against device manufacturers was meant to communicate an unmistakable message: “Google, you f-king ripped off the iPhone, wholesale ripped us off. Grand theft.” Jobs swore he would “spend my last dying breath” and “every penny” in Apple’s coffers “to right this wrong. I’m going to destroy Android, because it’s a stolen product. I’m willing to go to thermonuclear war on this.”