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Apple blocks Samsung from selling Galaxy tablet in EU

Reuters  Seoul/San Francisco, August 10, 2011
First Published: 14:37 IST(10/8/2011) | Last Updated: 11:43 IST(12/8/2011)

Apple Inc scored its most significant victory in its intellectual property battle against Samsung Electronics after a German court temporarily barred the Korean firm from selling its flagship Galaxy tablet in most of the European Union.

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The court order comes a week after Samsung was forced to delay the Australian launch of its latest Galaxy tablet because of a separate lawsuit alleging Samsung infringed on a number of Apple's patents.

Apple has said Samsung's Galaxy line of mobile phones and tablets "slavishly" copied the iPhone and iPad. It has sued in the United States, Australia and elsewhere.

Samsung, whose tablets are based on Google Inc's Android software, has countersued Apple.

"There's no doubt the court decision will have an adverse effect on Samsung. Samsung is clashing with Apple in many places, which could result in a temporary fall in sales and increase costs related to litigation," said Lee Seung-woo, an analyst at Shinyoung Securities in Seoul.

Apple confirmed that a district court in the German city of Dusseldorf granted the preliminary injunction against the Galaxy Tab 10.1.

"It's no coincidence that Samsung's latest products look a lot like the iPhone and iPad, from the shape of the hardware to the user interface and even the packaging," said Apple's London-based spokesman Adam Howorth.

"This kind of blatant copying is wrong, and we need to protect Apple's intellectual property when companies steal our ideas."

The ban applies throughout the European Union, except the Netherlands, where a Hague-based court said separate hearings were scheduled for Wednesday and Thursday. Apple would not say why it filed a separate case in the Netherlands.

"It's a strategy Apple has adopted to completely prevent Samsung from putting its tablet into the market place," said Nathan Mattock, an intellectual property lawyer at Marque Lawyers in Sydney.

Samsung's mobile unit, which includes handsets and tablet PCs, generated 30% of the technology giant's revenue in the second quarter. The bulk of the rest comes from memory chips and televisions, sectors where Samsung is the global leader.

Samsung, the world's biggest technology company by revenues said it would challenge the court decision.

Shares in Samsung, which raked in 154.6 trillion Korean won ($142 billion) in sales last year, ended 0.6% lower in a broader market up 0.3%.

Rigorous defence
"The request for an injunction was filed with no notice to Samsung, and the order was issued without any hearing or presentation of evidence from Samsung," Samsung said in a statement.
 
"I think we will be rigorously defending our position," Younghee Lee, senior vice president of global marketing at Samsung's mobile business, told Reuters in New Delhi.

Lee, who was unveiling the Galaxy Tab in India on Wednesday, said Samsung would launch the Tab in Australia in September.

In a statement, Samsung Germany said it would file an objection immediately.

"Samsung will protect its intellectual property in Germany with legal measures. We will also actively continue to defend our rights worldwide."

Apple's move raises the stakes for Google, which has accused its biggest rivals of banding together to hamper its increasingly popular Android operating system, after it lost a bid to buy thousands of patents from bankrupt Nortel.

Without patents, companies' devices are vulnerable to challenges for royalties or, worse, demands from rivals to withdraw the products from the market place.

Samsung has been locked in a battle with Apple over smartphone and tablet patents since April. The Galaxy gadgets are seen as among the biggest challengers to Apple's mobile devices, which have achieved runaway success.

"I personally prefer the Galaxy tablet over the iPad because I do not want to be locked to any software. Because when you purchase an iPad, when you go for Apple or Mac products, you are actually tied to their software," said Nadja Ybanez, a saleswoman at an electronics retailer in Singapore.

Apple sold 14 million iPads in the first half of this year worldwide, compared with analysts' sales estimates of about 7.5 million units for the Galaxy Tab over 2011.

Some analysts said Android backers were likely to look for products from other companies.

"Many potential Galaxy Tab purchasers are committed Android fans, so are likely to look for alternatives that run the same operating system," said Tim Renowden, analyst for consumer IT at UK-based research firm Ovum.

"This will benefit the likes of ASUS, Toshiba, Acer, Dell, Lenovo, Motorola, LG and HTC, among others, but the benefit will be diluted across multiple manufacturers."

Industry executives said Samsung could launch a new variation of the Galaxy Tab 10.1 to get it on sale in Europe, as it plans to do in Australia, or settle the dispute by paying royalties to Apple.

"This will be an issue that will get settled between the two companies. Some deal will likely get made and then they will move on," said Peter Elston, Singapore-based Asia strategist at Aberdeen Asset Management Asia, which owns Samsung shares.

In Australia, Samsung has agreed to show Apple an Australian version of the Galaxy Tab 10.1 one week before its launch there, a Samsung spokesman said.
 
Web of litigation
Apple is one participant in a web of litigation among phone makers and software firms over who owns patents used in smartphones, as rivals aggressively rush into the smartphone and tablet market.

Complicating things for the two tech giants is the pair's $5 billion-plus commercial relationship, which some analysts think might be at risk. Samsung, for instance, counts Apple as its biggest customer, making chips and other parts central to Apple's mobile devices.

"Samsung's collision with Apple in the mobile arena could have a spillover effect on other businesses such as chips," said Lee.

The well-reviewed Galaxy Tab 10.1 was only recently launched in Europe and is in the early stages of being rolled out. For now, the iPad is the market leader.

Competing products including Research In Motion's PlayBook and Motorola's Xoom have received lukewarm reviews, while Hewlett Packard's TouchPad is a late entrant in the market, which already has more than 100 devices, mostly running on Android.

A US trade agency is also set to review Apple's patent-infringement complaint against Taiwanese phone market HTC Corp.

Some analysts say Samsung faces the challenge of moving beyond being a hardware company, clever at copying ideas, to becoming more creative and better adept at software at a time when consumer gadgets are getting smarter.

Brian White, an analyst with Ticonderoga, said Samsung was one of the few global companies with the ability to enjoy success in both the smartphone and tablet markets.

"However, if Samsung is violating Apple's IP (intellectual property) rights, we believe Apple could enjoy even further success in these markets in the coming years," White said in a note to clients.

Apple's approach was also not without risk, said intellectual property lawyer Mattock.

"One of the conditions of doing that is that if Apple is wrong it will have to pay Samsung a considerable amount of damages for all of its lost business and income that may have occurred in the period, so it's potentially quite a risky strategy," said Mattock.


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