RafaelFajardo

It was the same old pattern: when caught red-handed, countersue, claiming Samsung actually owned the patent or another one that the plaintiff company had used. Then, as the litigation dragged on, snap up a greater share of the market and settle when Samsung imports were about to be barred. Sharp had filed its lawsuit in 2007; as the lawsuit played out, Samsung built up its flat-screen business until, by the end of 2009, it held 23.6 percent of the global market in TV sets, while Sharp had only 5.4 percent. All in all, not a bad outcome for Samsung.

The same thing happened with Pioneer, a Japanese multi-national that specializes in digital entertainment products, which holds patents related to plasma televisions. Samsung once again decided to use the technology without bothering to pay for it. In 2006, Pioneer sued in federal court in the Eastern District of Texas, so Samsung countersued. The Samsung claim was thrown out before trial, but one document revealed in the course of the litigation was particularly damaging—a memo from a Samsung engineer stating explicitly that the company was violating the Pioneer patent. A jury awarded Pioneer $59 million in 2008. But with appeals and continued battles looming, the financially troubled Pioneer agreed to settle with Samsung for an undisclosed amount in 2009. By then, it was too late. In 2010, Pioneer shut down its television operations, tossing 10,000 people out of work.

Even when other companies have honored competitors’ patents, Samsung has used the same technology for years without paying royalties. For example, a small Pennsylvania company named InterDigital developed and patented technology and was paid for its use under licensing agreements with such giant corporations as Apple and LG Electronics. But for years Samsung refused to cough up any cash, forcing InterDigital to go to court to enforce its patents. In 2008, shortly before the International Trade Commission was set to make a decision that could have banned the importation of some of Samsung’s most popular phones into the United States, Samsung settled, agreeing to pay $400 million to the tiny American company.

Around the same time, Kodak also got fed up with Samsung’s shenanigans. It filed suit against the Korean company, contending that it was stealing Kodak’s patented digital imaging technology to use in mobile phones. Once again, Samsung countersued and agreed to pay royalties only after the International Trade Commission found for Kodak.

It was a clever business model. But everything changed when Apple introduced the iPhone, because Samsung wasn’t ready for the technology to advance so dramatically, so quickly.