Apple,Samsung CEOs in U.S. court talks over patent row

SAN FRANCISCO Mon May 21, 2012 3:13am EDT

Samsung Electronics' Galaxy tablet computers are displayed at a store in Seoul March 14, 2012. REUTERS/Kim Hong-Ji

Samsung Electronics' Galaxy tablet computers are displayed at a store in Seoul March 14, 2012.

Credit: Reuters/Kim Hong-Ji

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SAN FRANCISCO (Reuters) - The chief executives of Apple Inc and Samsung Electronics Co Ltd come face to face on Monday in court-directed mediation in the United States over a dispute in which the iPhone maker claims the Korean firm has "slavishly" copied some of its products.

Apple's Tim Cook and Samsung's Choi Gee-sung have been instructed by a federal judge to appear for mediation in San Francisco to help resolve the bitter patent litigation between the two firms.

The U.S. case, the most closely watched in a global patent war between the two companies involving some 20 cases in 10 countries, is set for trial at the end of July in San Jose, California. Each company denies the other's allegations of patent infringement.

Patent expert Florian Mueller cautioned against any expectations that mediation, which is being increasingly used to try to resolve U.S. civil disputes, would lead to a significant breakthrough in the case.

"This dispute isn't ripe for settlement," he said. "Under the present circumstances, the two companies' delegations should spend a couple of fun days in Yosemite Park or Napa Valley, rather than meet in court only to pretend they're being constructive."

Apple, the maker of hit products such as the iPod, iPad and iPhone, has a complex relationship with Samsung, a conglomerate that makes computer chips, gadgets including its Galaxy range of smartphones, and televisions.

While Samsung's smartphones and tablets run on Google's Android operating system and compete with Apple's products, Samsung is also a key components supplier to Apple.

The U.S. company, which investors value at close to $600 billion, has accused Samsung of "slavishly" copying the iPhone and iPad through products that run on Android. Samsung, which has a stock market value of about $161 billion, has counter-sued with claims accusing Apple of infringing its patents.

A Samsung representative declined to comment, while Apple spokeswoman Kristin Huguet reiterated a prior statement that Apple needs to protect its intellectual property against "blatant copying".

Both companies have a lot at stake in the case. Their share prices hit record highs this year as they reported soaring profits, partly fueled by their dominant position in the smartphone sector.

Samsung sold 44.5 million smartphones in the first quarter of 2012, giving it a 30.6 percent share of the global high-end market. Apple's sales of 35.1 million iPhones gave it a 24.1 percent share.

"BIG GAP"

On Sunday in Seoul, the head of Samsung's mobile division said the South Korean company wanted to resolve differences with Apple.

"There is still a big gap in the patent war with Apple," JK Shin said, before departing for the United States for the mediation talks. "But we still have several negotiation options."

Court documents show the two companies have had at least one mediation session, although it is not clear if Cook and Choi were involved.

The latest mediation session scheduled for Monday and Tuesday will be overseen by U.S. Magistrate Judge Joseph Spero. He declined to comment.

Legal experts say the two firms are far from a settlement.

Samsung, for example, argues its technologies are worth 402,000 won ($350), or 60 percent of the iPhone retail price of 671,000 won, on the basis that 3G is the only function differentiating the phone from Apple's digital music player iPod Touch.

Apple says Samsung's technology should be confined to modem chip prices, or 2.9 percent of iPhone prices at best.

In July 2010, just a month after Samsung introduced its first Galaxy product, Apple expressed its concerns to Samsung over its smartphone design and interface and demanded changes, according to Apple lawyers.

Samsung didn't reflect those issues and continued to release products that copied Apple's innovation, they said.

"Apple needs more time than it originally thought to reach a tipping point at which it has serious leverage over Samsung," said Mueller.

Cook became Apple CEO last year, taking over from the company's co-founder and inspiration, Steve Jobs, who had told his biographer he intended to go "thermonuclear" on Android. Jobs died in October after a long illness.

Cook has echoed Jobs' mantra that Apple's top priority is to make "great products" but he has also made his mark by revealing the U.S. company's production partners and initiating investigations into allegations of labor abuses in its supply chain.

Choi, 61, became Samsung's leader in 2010, after more than three decades with the company. He is seen as a mentor to Jay Lee, the only son and heir apparent of Samsung Chairman Lee Kun-hee. Choi, asked by reporters on Sunday about the court mediation, declined to comment.

An eventual Apple and Samsung settlement could have wider implications because the U.S. company is locked in disputes with major Android phone makers HTC Corp of Taiwan and Motorola Mobility Holdings Inc of the United States.

U.S. courts are increasingly demanding parties in civil disputes try mediation, although success if far from certain.

Last year, Oracle's Larry Ellison and Google's Larry Page undertook mediation in an intellectual property fight over Android, but no settlement was reached and a trial in the case is entering its sixth week.

"I can't imagine that the heads of a major enterprise of that kind would take any more seriously a decision of that magnitude, simply because they are in the room together," said Vaughn Walker, a former northern California federal judge who now works as a mediator.

(Additional reporting by Kim Miyoung in SEOUL; Editing by Amy Stevens, Vicki Allen, Maureen Bavdek and Dale Hudson)

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