In this blog post, we examine why Samsung Electronics lost its design patent lawsuit in the U.S. and why its communication patent claims were dismissed.
On August 24, 2012, Samsung Electronics, South Korea’s largest electronics company, lost a patent dispute with Apple and was ordered to pay a massive fine. Furthermore, Apple filed a lawsuit seeking a sales ban on certain Samsung phones, creating a situation that inevitably put the relevant South Korean industry on edge. The lawsuit began when Apple claimed that Samsung had copied the design of its phones. Samsung countered by arguing that Apple’s phones infringed on its telecommunications patents, citing the use of its technology in Apple’s devices, but this argument was completely dismissed by the U.S. jury. This case led many people to reevaluate the value of design patents and realize that technology alone is not everything.
Even if one cannot deny that there was borrowing in terms of design, one regretful aspect remains. It is the fact that the U.S. jury completely disregarded Samsung Electronics’ claim of communication patent infringement. It was difficult to understand how the U.S., home to Silicon Valley—the global hub of technology development—could ignore technical aspects to such an extent. Every year, many Korean companies pay royalties to firms in the U.S., Japan, and other countries for the use of their technology, yet it felt deeply unfair that they receive no protection when their own technology patents are infringed upon. I wondered how to interpret the fact that, no matter how powerful a nation may be, it always ensures its own companies pay royalties while turning a blind eye when its companies infringe on foreign patents.
Observing this attitude of the American jurors, I was reminded of the case of H. Collbran, an American engineer who, during the decline of the Korean Empire, took control of a company in exchange for introducing electrical technology, and then handed the company over to Japan when its debts grew.
After the opening of its ports in 1876, Korea began to actively embrace Western civilization. Among these, the West’s advanced science and technology were objects of admiration and wonder, and adopting such technology was seen as a crucial means of avoiding imperialist aggression. Electricity, in particular, was regarded as a symbol of modernization due to its practicality and convenience, and the state also sought to introduce it as quickly as possible. In 1887, just seven years after the invention of the incandescent light bulb, electric lights were lit in the palace, and in 1898, construction began on an electric railway in Hanseong. The company overseeing this project was the Hanseong Electric Company, established with full funding from the Imperial Household of the Korean Empire.
Although the Hanseong Electric Company was established with full funding from the Imperial Household as part of the Korean Empire’s policy to promote industry and commerce, ownership soon passed into American hands. When operational control was transferred to the American H. Colbran, the company was left entirely at his mercy without any consideration for technology transfer. As debts accumulated, the company was eventually transferred to Japan without the Imperial Household’s permission. In the process of the Hanseong Electric Company being transferred to Japan, the imperial court of the Korean Empire made a grave mistake. Specifically, it failed to quickly acquire the technology and regain control over the company’s operations. A Korean researcher assessed the Korean Empire’s handling of the Hanseong Electric Company at the time as follows:
“I assess that the company ultimately fell into Japanese hands because the imperial court failed to prevent American technological monopoly, driven by an excessive faith in the practicality of Western cutting-edge technology and the simplistic belief that technology transfer would occur naturally.”
In other words, the Hanseong Electric Company fell into Japanese hands due to the naive notion that technology would naturally be transferred once it was brought in. This leads to the following conclusion:
“Although Emperor Gojong of the Korean Empire invested massive funds in the Hanseong Electric Company, the royal family ultimately handed the company over to Japan without securing control over electrical technology because they failed to establish the necessary measures to retain ownership of the technology.”
Just as in this historical case, one cannot help but wonder if Samsung Electronics has made a similar mistake. The naivety of the Korean Empire—which, isolated by the ambitions of Western powers and Japan, relied entirely on the American H. Colbran—seems strikingly similar to Samsung Electronics’ situation: initially downplaying Apple’s design patent lawsuit amid the international landscape, only to later claim that Apple had infringed on its own communication patents once the issue had escalated. Samsung Electronics initially reacted nonchalantly to Apple’s design patent lawsuit, but as the case escalated, it shifted to a defensive stance by alleging infringement of its communication patents. However, it appears the company had made no preparations whatsoever regarding whether that technology would actually be protected in the U.S.
Of course, I do not believe there was a complete lack of response at the corporate level. However, rather than relying on the arrogance that their communication patents would certainly be protected, it would have been wiser to assert their rights after considering all possible scenarios. Furthermore, they should have taken into account the existence of the jury system in the U.S. Juries are composed of citizens from various professions, not telecommunications technology experts. They should have presented clear evidence and arguments to the jury regarding the design patent infringement, stating, “We did not copy it.” It is questionable whether their attempt to defuse the case by asserting telecommunications patent infringement was the right approach. Ultimately, Samsung not only lost the lawsuit but also saw its claims regarding telecommunications patents dismissed.
The Korean Empire was not entirely without measures regarding technology transfer either. When Colbran attempted to sell the Hanseong Electric Company to the Japanese, Emperor Gojong sought to reclaim the company and even requested assistance from the U.S. Embassy, but ultimately failed to exert any influence. Not only had Colbran driven the company into a severe financial deficit, but there were very few Korean technicians capable of handling trams or electric lighting, and the financial deficit was largely caused by the enormous salaries that had to be paid to American and Japanese technicians. Because they assumed technology transfer would happen naturally and failed to establish schools to train technicians, the company ultimately fell into Japanese hands, and the technology transfer never materialized. As this example shows, if you do not thoroughly prepare for rights over technology, you will lose control without even having sufficient say, just like the Hanseong Electric Company or Samsung Electronics. Ultimately, only thorough management of technology guarantees sufficient influence.
The perspective I am presenting here might be perceived as nationalistic or as taking Samsung Electronics’ side. However, this patent litigation dispute is merely one example; what I ultimately wish to emphasize is that technology management is just as important as technology development. The “management” I refer to here means preparing to fully assert rights over developed technologies and thoroughly preparing to secure sufficient influence as the technology owner in the event of infringement. The more unstable the international situation becomes, the greater the likelihood of domestically biased rulings, so it is essential to prepare for this. Otherwise, companies risk losing their technological leadership, just as Hanseong Electric did.
