19 April 2012

Could Apple and Samsung CEOs Reach a Global Settlement?

MediationAs has been widely reported over the last 24 hours, United States District Court Judge in the Northern District of California, Lucy H. Koh, has issued orders for Apple and Samsung to participate in a ‘Magistrate Judge Settlement Conference’.  (See, e.g., US judge sends Apple, Samsung to settlement talks, via Reuters.)

On the face of it, the two companies are going willingly to mediation, although it is quite likely a case of Judge Koh having made clear that they could either attend voluntarily, or else she would make them go!  Nonetheless, the discussions will be taking place at the absolute highest levels of the two companies, with each being represented by their respective CEOs (i.e. Tim Cook of Apple, and Choi Gee-Sung of Samsung) and General Counsel. 

While pre-trial mediation is frequently unsuccessful, top executives of large corporations are not known for wasting their time on pointless exercises, and the fact is that the people in the room will actually have the power to make decisions which could terminate, or dramatically alter, the course of litigation between the two companies not only in the US, but in the other eight countries (including Australia) in which they are suing one another for infringement of patents and other intellectual property rights.

PURPOSE OF COURT-ORDERED MEDIATION

With the heightened popular interest in high-tech IP disputes generally, and the various Apple versus Samsung cases in particular, it is easy to forget that – aside from the media attention – there is nothing particularly special or unusual about this litigation.  The courts hearing these matters adjudicate on IP disputes all the time, and if they were not hearing Apple and Samsung, they would hardly be sitting idle, waiting for the next litigant to come knocking.

In the case of civil (as opposed to criminal) matters, the courts exist for the primary purpose of ruling on disputes which the parties coming before them have been unable to resolve between themselves.  Companies like Apple and Samsung are well-aware of this purpose, and while they may endeavour to play the system for strategic advantage, it is all ultimately just another aspect of their businesses in which they can well afford to engage.

From the courts’ perspective, however, there is an additional public interest to consider.  The legal system does not exist purely for the benefit of large corporations, and court resources are limited.  The courts’ time should therefore not be taken up by matters that the parties could settle themselves, if only they would try a little harder.

It is for this reason that court-ordered mediation, and other forms of alternative dispute resolution (ADR), are becoming increasingly popular in many jurisdictions.  Even if mediation does not result in a complete settlement of all issues, it may significantly reduce or simplify the specific points of dispute which the court is asked to resolve.

COURT ORDER

Judge Koh’s order (PDF, 40kB) reads as follows:

The parties have indicated that they are willing to participate in a Magistrate Judge Settlement Conference (“MJSC”). ECF No. 873. Therefore, the parties are hereby referred to an MJSC with Magistrate Judge Joseph Spero with a 90-day deadline. As the parties have indicated in their joint statement, the chief executive officer and general counsel of Apple and the chief executive officer and general counsel of Samsung shall appear and participate at the MJSC.

According to Apple and Samsung’s Joint Status Report (PDF, 122kB):

As directed by the Court, Apple and Samsung are both willing to participate in a Magistrate Judge Settlement Conference with Judge Spero as mediator. At Apple, the chief executive officer and general counsel are the appropriate decision-makers, and they will represent Apple during the upcoming settlement discussions. At Samsung, the chief executive officer and general counsel are also the appropriate decision-makers, and they will represent Samsung during these settlement discussions.

In this case, therefore, it is clear that Apple and Samsung have consented in advance to the order.  Even so, a court order is not something to be taken lightly, and Judge Koh will have a clear expectation that Cook and Choi will make a genuine effort to reach agreement on at least some of the issues currently before the court.

COMPLEX RELATIONSHIP

With the amount of time, energy and money being expended on litigation, it would seem to make little sense for the most important people in the top two manufacturers of mobile devices to get together to reach some agreement on the conduct of only one of the numerous legal disputes in which they are involved. 

And while the companies’ right-hands may be battling for dominance in the market for smartphones and tablets, their left-hands continue to do substantial business with one another.  A teardown of the new iPad by IHS iSuppli indicates that Samsung continues to reign as the largest single supplier of components to Apple, with around a 30% share of the bill of materials for the latest device – including its stand-out retina display, and the A5X processor.

These are two companies whose fates are now intertwined on so many levels that they must, at some stage, at the very least simplify the scope of their global disputes.  There must surely be some common subset of patented features which Apple would be willing to tolerate in Samsung products, in exchange for a reasonable licensing deal.  At the same time, if there are features which Apple considers to be absolutely non-negotiable, it hardly seems necessary to litigate over them independently in multiple jurisdictions.

GLOBAL RESOLUTION?

The sensible approach, if Cook and Choi are unable to settle all of their companies’ differences, would be to pare back the global litigation to a limited number of core issues in key jurisdictions.  While there is no doubt strategic advantage in engaging on multiple fronts, it is difficult to believe that the cost of expansive litigation in a relatively small market such as Australia is justifiable on purely economic terms, compared to the value of spending an equivalent amount on litigation in a large market such as the US.

It also seems reasonable to suppose that both Apple and Samsung would prefer to have as little variation as possible in the devices they produce for different markets.

A single, global, resolution is therefore the most likely ultimate outcome.

The question is whether this will come out of the conference to be held in San Francisco some time in the next 90 days, or if Apple and Samsung will go a few further rounds in the world’s courts before finally calling a truce.

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