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Thanks to the recent judgment in Apple's lawsuit against Samsung, next month we could see a potential import ban placed on Samsung on top of the damages awarded to Apple.

So how is this a good thing for mobile payments and NFC? 

First, the phones listed in the judgment are at the end of, or even past, their life cycle. Some are still on sale in carrier stores, but very few are enabled with NFC. Samsung’s latest and greatest phones, such as the Galaxy SIII, are not part of the ban.

Second, Samsung’s market share in the U.S. is sizeable, and many carriers will have to clear their shelves of the phones listed in the ban. This will give consumers fewer Samsung choices, but also funnel consumers to buy the newer models, such as the upcoming Galaxy Relay. The Galaxy Relay does have NFC. You choose from the choices you’ve got. Think of it this way: right now you have about 10 phone choices. Two of those phones have NFC. Now Apple forces carriers to remove four of those 10 phones. So instead of having one in five of the phones in the store having NFC, you now have one in three.

Here’s the creative thing Samsung is doing, which is not unprecedented. A few weeks back, Samsung announced up to $300 to trade in an iPhone for a Galaxy SIII. Samsung is being ordered to pay more than $1 billion in damages, but they could reduce the amount they have to pay Apple by setting up a buy-back or replacement program for their phones that are listed in the judgment against them. Sure, they may take a hit on profits, but if they replace the phones they don’t have those units as ones that Apple can collect infringement fees from. 

This is not unheard of. Companies in the past have sent out replacement units or updated software to get around issues caused by a patent suit. Take HTC’s recent move to modify its software to get around an import ban caused by Apple. The HTC One X and EVO had to add one small aspect onto the process of linking phone numbers, web links, etc. to get around the ban. While Samsung could do the something similar with software for the current phones out there, it’s more likely going to be easier, and hurt Apple, if the number of Galaxy SIII phones increases even further.

What's more, many of the phones that are listed in the suit were low and mid-tier phones. These are for consumers who more likely can't afford (or won't buy) an iPhone but are still buying smartphones. That means they are still paying for data connections to their respective carriers. Samsung can show in an appeal that by sending the replacement units they are removing the profits that Apple says Samsung gained, and stating a loss. This could legally be considered Samsung showing that specific claims from the law suit have been addressed by creating a loss of profit and removing from the market the devices the suit claims were infringing on Apple. Apple cannot prove a loss of sales because based on most of the affected phones, the consumers who buy them could not (or would not) buy the iPhone even if it was the only choice.

On the other hand, Samsung is now offering its Galaxy SIII through all the top carriers and even through mobile virtual network operators like Virgin and MetroPCS. It’s in Samsung's best interest to get as many Galaxy SIII phones on the market as they can and into the hands of as many users as possible.

Also note that a good chunk of the suit was focused on trade dress, or the "look" of Samsung's devices relative to Apple's iPhone. Putting a phone that doesn’t infringe the specific trade dress as defined by the case, and doing it as a replacement, can satisfy the courts.  As well, many of the aspects of utility that focused on things like pinch for zoom and bounce back, can be modified via software, much like what HTC did. 

This case may be in appeals for many years, so Samsung will more likely pay a great deal less than what was ordered — or possibly nothing. The jurors have already begun speaking publicly about their decision, and every lawyer I’ve spoken to about the case has told me that this creates some strong and documented arguments that could get the decision overturned. Even though the judge may still ban the import of some phones into the U.S., the Galaxy SIII will not be banned. At the end of the day, every single Galaxy SIII sold creates another consumer with NFC mobile payment capabilities. 

Expect some Samsung partners such as Google to aid in this strategy. To quote Sun Tzu, “The enemy of my enemy is my friend."  Apple’s got a lot of enemies. Don’t be surprised if companies like Microsoft, Nokia, HTC, and others jump in with negative image campaigns against Apple. That would benefit Samsung in turn. Apple has a lot of people angry and scared. These are all global giants. Are they just going to shell out $40 per phone in licensing to Apple? That would not only eat into their profits, but it would also set a precedent for Apple to hold them all hostage. Somewhere in Korea, Samsung’s CEO must be thinking the same thing every president has said.  “We do not negotiate with (monopolistic) terrorists."

So Samsung may have the last laugh, and based on their quadrupled budget for marketing the Galaxy SIII in the U.S., as well as extreme discounts and trade-ins as high as $300 for iPhones, why wouldn’t they find a way to hold and grow their leading market share and increase their strength in their user base? Samsung may already lose $1 billion from the lawsuit. If they must take that hit and lose that cash, why let it end up in Apple's pockets if they don't have to?

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User Comments – Give us your opinion!
  • pestvbz hen
    50998108
    Computer programming is not such a fundamental area of study that it deserves to be elevated to the (guild wars 2 gold)level of "math", "reading" and "writing". To a large extent this is a zero sum game. To teach programming in primary school necessarily crowds out something else. History? Foreign language? Music? Some subject other than "computer programming" is getting the shaft 154622658996535
  • Bruce Burke
    50881230
    Don't miss Einar's panel at the Social Mobile Payments Conference in Miami - November 6-8 at the Biscayne Bay Marriott in Miami. Mr. Rosenberg and a panel of distinguished experts will discuss the use, benefits & solutions offered by NFC related to social, mobile & payments.
  • pestvbz hen
    50829151
    We were all suckered..-.we actually believed in change…n-ow the people that bailed out those people can’t get jobs, loans, or homes. This is a nightmare. And I look at commercial-s and they are advertisin-g banks, stock trades, etc. like these were not the people that led us into a financial brink. I don’t understand America guild wars 2 gold
  • Mark Sibthorpe
    47554151
    The fact that Apple has dissed NFC and gone with barcodes, and the fact that merchants are finally lining up for mobile in a measurable way due to this speaks volumes. When merchants like Walmart make their distaste for NFC clear in public documents this further shows where merchant sentiment lies. And lets face it, without merchant support there will be ignition issues.

By the way, I am sure you have heard about MCX, the merchant consumer exchange. There is no way this will be based on NFC. Add to the fact that NFC can not possibly be established at POS before 2017 for a variety of reasons, and you get the picture of what we can expect from NFC, which incidentally is referred to as 'Not For Commerce' by PayPal execs.

@Jan, that said, your anticipated increase in volume may still take place but for other reasons. First, an increase in volume has already occurred because of the prevalence of players like Square, a game changer that makes it easy for millions of small merchants to process credit cards transactions; transactions that were likely either cash or cheque based before. Another trend (in Canada) is that issuers are offering incentives of up to 5% cashback for spend in Grocery stores. This suggest that issuers are looking to grow this segment and with 5% cashback they will likely influence consumers to use cards in this segment. Typically, in Canada, grocer transactions tended to used debit or cash more often. Obviously this could have an impact because grocers account for 11% of household spend. Finally, Apple Passbook will likely resolve ignition issues. Ignition issues are basically chicken vs egg problems that require two sides to make a whole. Ignition issues have plagued alternative payments (think pay-by-touch/Mondex...) for many years and resulted in many corpses.

To sum it up, if all goes to plan, Apple will put Passbook into the hands of millions, and because merchants seem eager to adopt this solution due to is relative ease of integration and low set-up costs; and also the fact that it truly adds value to the transaction. Meanwhile MCX is happening too, my guess is that it will work in harmony with Passbook. 

As for NFC, the card networks will continue to flog it because they want a closed network where they can act as gatekeepers and continue to control. However, if merchants have their way NFC will never see the light of day. Leave NFC to continue is presence in transport where it truly does resolve a real problem for low value, closed looped transactions.

BTW, how many merchants do you know with obsolete NFC terminals that were bought around 2005/6, the last time the card networks were flogging this snake oil. I can name a few that won't be caught investing millions twice. How does the saying go? Fool me once shame on you, fool me twice.....


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Latest posts by Einar Rosenberg
Einar Rosenberg
Einar Rosenberg is a recognized expert in mobile payments who has written multiple papers and spoken internationally on the topics of NFC, RFID, location-based services and Bluetooth. Mr. Rosenberg is currently the CTO of Narian Technologies.
CONNECT 2014 Mobile Innovation Summit
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