VIETNAM GENERAL CONFEDERATION OF LABOUR

TON DUC THANG UNIVERSITY FACULTY OF BUSINESS

ADMINISTRATION

NEGOTIATION IN BUSINESS

Topic: The dispute on intellectual property rights of giants

in the electronics industry

(The art of negotiating results case study about patent dispute between
Samsung and Apple companies)

Intructing lecturer: MBA. Trần Khánh

Students:
1. Vương Tú Lệ / 71802236
2. Đào Ngọc Ánh / 718H1834
3. Huỳnh Thị Phương Nhi / 718H1965
4. Nguyễn Phương Anh / 718H1829
5. Nguyễn Thị Hoàng Thuận / 718H2023
6. Huỳnh Linh Chi / 718H1844

Ho Chi Minh City, December 2021

 TEAM EVALUATION

Student name Student Tasks Degree of Signature

ID completion

1 Vương Tú Lệ 71802236 Contents and 100% Signed

presentation, report.

2 Đào Ngọc Ánh 718H1834 Contents 100% Signed

3 Huỳnh Thị Phương Nhi 718H1965 Contents 100% Signed

4 Nguyễn Phương Anh 718H1829 Contents 100% Signed

5 Nguyễn Thị Hoàng Thuận 718H2023 Contents 100% Signed

6 Huỳnh Linh Chi 718H1844 Contents 100% Signed

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EVALUATION OF LECTURER

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 TABLE OF CONTENTS

LIST OF ABBREVIATIONS AND ACRONYMS......................................................... 5

LIST OF TABLES AND GRAPHS ................................................................................. 6
LIST OF FIGURES ........................................................................................................... 7
1. INTRODUCTION ......................................................................................................... 8
1.1 Electronics market overview ..................................................................................... 8
1.2 Brief information about Samsung and Apple company .......................................... 11
1.3 Timelines ................................................................................................................. 12
1.4 Issues ....................................................................................................................... 13
1.5 Objectives ................................................................................................................ 14
2. LITERATURE REVIEW ........................................................................................... 15
2.1 The best choices in negotiation (BATNAs) ............................................................ 15
2.2. The worst choices in negotiation (WATNAs) ........................................................ 16
2.3 The era of negotiation .............................................................................................. 17
3. ANALYSIS ................................................................................................................... 19
3.1 Overview of the case study...................................................................................... 19
3.2 BATNAs of Samsung and Apple company ............................................................ 21
3.3 WATNAS of Samsung and Apple company ........................................................... 22
3.4 Theories applied in case study................................................................................. 24
3.5 Evaluation of authors ............................................................................................... 29
4. SOLUTIONS ................................................................................................................ 30
CONCLUSION ................................................................................................................ 32
REFERENCES ................................................................................................................ 33
APPENDIX ...................................................................................................................... 34

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 LIST OF ABBREVIATIONS AND ACRONYMS

BATNAs Best Alternative To a Negotiated Agreement

WATNAs Worst Alternative To a Negotiated Agreement

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 LIST OF TABLES AND GRAPHS

Table 1.1: The patent dispute between Samsung and Apple timeline

Table 3.1: Tactics used in the patent dispute by Apple and Samsung.

Table 4.1: The Best Alternative to a Negotiated Agreement in each scenario

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 LIST OF FIGURES

Figure 1.1: The change of global personal electronics market by product (2012 – 2020)

Figure 1.2: Global Electronic Products Market and forecast market size (2020 -2025)

Figure 1.3: Top 10 largest electronics companies by revenue (2020)

Figure 2.1: Illustration of each party’s BATNA

Figure 3.1: The summary of patents dispute between Samsung and Apple companies.

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 1. INTRODUCTION

1.1 Electronics market overview

In the modern world, new electronics technologies are one of the most visible aspects
of the dramatic transformation of society and economy which appears to be in progress at
the end of the 20th century, involving daily life, work relations, and all aspects of economic
organization. The electronics industry consists of various sectors. However, smartphone
proliferation is the key factor expected to fuel global consumer electronics market size.
Technological advancements, the emergence of 4G, 5G technologies and innovation are
also expected to drive demand.

Figure 1.1: The change of global personal electronics market by product (2012 – 2020)
Unit: Millions

The global electronic products market is expected to grow from $948.78 billion in
2020 to $1055.29 billion in 2021 at a compound annual growth rate (CAGR) of 11.2%.
The growth is mainly due to the companies rearranging their operations and recovering

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from the COVID-19 impact, which had earlier led to restrictive containment measures
involving social distancing, remote working, and the closure of commercial activities that
resulted in operational challenges. The electronic devices market size is expected to reach
$1291.14 billion in 2025 at a CAGR of 5%.

Figure 1.2: Global Electronic Products Market and forecast market size (2020 -2025)
Unit: USD Billions

(Source: the business research company)

Amid the tremendous shifts in the technological domain, consumer electronics
companies across the globe are focusing on introducing new and attractive features to the
widely used devices like smartphones, laptops, computers, cameras, televisions, speakers,
etc. It has become more important than ever for the companies operating in the consumer
electronics market to seek new ways to innovate their products to reach a large consumer
base.
As economies prosper all over the world, the top 10 largest electronics companies in
the world are contributing to stellar growth through the manufacturing, exports, imports,
and sales of consumer electronics — the segment driving a vast majority of this growth. At
the forefront of an evolving electronics market are companies like Apple, innovating with
iPhones and Samsung with their Samsung Galaxy devices and the leading manufacturer of
semiconductors for the global electronics market.

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 Figure 1.3: Top 10 largest electronics companies by revenue (2020)

Note: Detailed information about the data will be shown in appendix No.1

The number of smartphone users reached 5.22 billion by the end of 2020, which
represents 66% of the world’s population (DataReportal, 2021). 2020 brought in an
additional 93 million users, a 1.8% increase from 2019’s year-end total. While in the last
quarter of 2020, Apple sold almost 18 million more smartphones than previous leader
Samsung according to Gartner. Apple sold 79.9 million iPhones to Samsung’s 62.1 million
in a massive change from 2019’s numbers, capturing 21% of global market share. That’s
up 15% from the previous year, while Samsung dipped 12% on strong competition from
Xiaomi, OPPO, and Vivo.

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1.2 Brief information about Samsung and Apple company

 Samsung: Samsung is a giant Korean multinational corporation with its headquarters

in Korea. It currently owns many subsidiaries, chain of sales systems, and
representative offices on a global scale, the majority of which are in Korea. It is all
widely recognized by the brand name 'Samsung.' Samsung electronics, in particular, is
now the most valuable subsidiary. Samsung Electronics expands its operations on a
global scale, focusing on investing the most in research and strategic development in
the fields of high technology and consumer electronics. and grow into a major producer
of electronic products such as monitors, lithium-ion batteries, semiconductors, chips,
memory, RAM, and hard disks.

 Apple: Apple Inc. is a multinational technology corporation based in California, USA

that designs, develops, and sells client electronics, laptop software programs, and online
services. Along with Amazon, Google, Microsoft, and Facebook, it's far appeared as
one of the Big Five corporations within side the US information technology industry.
In particular, iPhone smartphones, iPad tablets, Macbook laptops, Mac private
computers, iPod transportable track players, Apple Watch clever watches, multi-
participant Apple TV virtual media, AirPods wi-fi headphones, AirPods Max
headphones, and HomePod smart speakers are amongst its hardware product lines.
Apple software program consists of the macOS, iOS, iPadOS, watchOS, and tvOS
working systems. Furthermore, Apple is likewise one in all the most important clients
of Samsung.

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 1.3 Timelines

Table 1.1: The patent dispute between Samsung and Apple timeline

Timeline Events

Apple claimed that Samsung had contravened Apple patents and wants to
August 2010
reach an agreement.

Apple and Samsung sat down and discussed to solve the matter through
October
licensing rights, in which Samsung would pay Apple for each phone and tablet
2010
manufactured by Samsung. Samsung disapproved.

Apple initiated legal action against Samsung. Samsung files an international

April 2011
countersuit against Apple for violating 3G technology patents.

August-
The court ordered that Samsung tablets be removed from store shelves due to
September
high similarity to iPad.
2011

Apple was ordered in the United Kingdom to admit that Samsung did not copy
July 2012
the iPad design.

December Apple underwent a setback when the United States Patent and Trademark
2012 Office tentatively refuses to admit a patent for the "pinch-to-zoom" feature

The International Trade Commission reigned that older iPhones and iPads
June 2013
encroached on Samsung patents and should be banned in the United States

Apple and Samsung reached a settlement of all patent disputes outside of the
August 2014
United States.

December
Samsung agreed to pay Apple $548 million
2015

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1.4 Issues

Through many years being key counterparts in the personal computing industry, the
working partnership between Apple and Samsung took an unexpected turn when Samsung
first released the Galaxy S line smartphone in 2010. Apple believed that Samsung’s new
smartphone line had seriously infringed on the Iphone and Ipad display and appearance.
Apple intended to resolve the issue amicably by holding a meeting between two sides,
whereas Samsung must pay the royalty fee for each smartphone and tablet made. But no
deal worked out.

In 2011, Apple first sued Samsung Electronics Company in the Northern District of
California, Apple stated: “The lawsuits . . . were about much more than patents or money.
They were about values. At Apple, we value originality and innovation and pour our lives
into making the best products on earth. We make these products to delight our customers,
not for our competitors to flagrantly copy. We applaud the court for . . . sending a loud and
clear message that stealing isn’t right.” (Brian X. Chen, 2013). In the lawsuit, Apple
declared that Samsung severely violated four industrial design and three utility patents.

Samsung Electronics Company filed an International countersuit against Apple,

proclaimed that Apple infringed on Samsung 3G technology and camera patents. Samsung
wrote in its trial brief: “Apple, which sold its first iPhone nearly 20 years after Samsung
started developing mobile phone technology, could not have sold a single iPhone without
the benefit of Samsung’s patented technology.” (Connie Guglielmo, 2012).
Apple and Samsung had been entangled in their intellectual property lawsuits for
almost ten years, claiming millions of dollars in damages. Both companies felt that they
have significant innovations in the technology industry and wanted to secure their utilities.

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1.5 Objectives

Although the controversy occurred, the author's desires are to investigate this negotiation
further because it is not only integrative negotiation but also mixed-motive bargaining. All
through 2010 to August 2014, a brutal patent war raged between two of the largest
corporations in the IT and smartphone industries. What started as a strategy for Apple to
recoup royalties for a copycat activity ended up in court and outside court mediation
sessions in the hopes of finding a deal that would sufficiently satisfy both parties.
Nevertheless, Samsung and Apple have offered opposing tones, making it impossible to
resolve their disagreement and potential damages on both companies seeming too high and
too expansive.
In the scope of the author, this litigation will come to an end. Samsung and Apple CEOs
should reject their hard positioning approaches and competing strategies intended at self-
enrichment in favor of a problem-solving approach that allows all companies to do business
with one another. The agreement's most important features were appropriate payment rates
for Apple, given that Samsung supplied about a third of Apple's total components, and a
sizable payout for Samsung's use of Apple's innovations. The essay would like to analysis
the dispute which regards to the patent of two goliaths in the technology industry is Apple
and Samsung, including:
- Investigation of the key point in the patents dispute between giants in electronics
field.
- Offering solutions in the third perspective to two technological companies.\
- Lessons conducted from the case study

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 2. LITERATURE REVIEW

2.1 The best choices in negotiation (BATNAs)

BATNAs is an acronym for Best Alternative to a Negotiated Agreement. It is a term

that refers to the most profitable alternative process that a party can undertake if
negotiations fail and an agreement cannot be reached. BATNA is the primary focus and
driving force of a successful negotiator. A party should generally not accept a solution
worse than its own BATNA.

The term BATNA was originally used by Roger Fisher and William Ury in 1981. The
basis for explaining the concept of BATNA comes from a series of books on negotiation
principles, starting with the book "Getting to Yes: Negotiating Agreement Without Giving
in". In these cases, the negotiator will ask the parties to think about what would happen if
mediation fails and what they believe is the best alternative. The value of knowing the best
alternatives to a negotiated deal is that it can provide an alternative if negotiations fail, also
indicates negotiating power which helps establish the crux of the matter and determine the
reservation point (the worst price that a party is willing to accept).

The diagram below illustrates each party’s best alternative to a negotiated agreement:

Figure 2.1: Illustration of each party’s BATNA

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 ● Zone of possible agreement - ZOPA: it is the overlap between the buyer's and the
seller's settlement range.
● Seller’s settlement range is a biddable range acceptable to the seller.
● Buyer’s settlement range is a biddable range acceptable to the buyer.
● Buyer’s/Seller’s worst case is the reservation point of the respective parties.

If Buyer offers a price that is lower than the seller’s worst case, then the seller is better
off using an alternative. Vice versa, if Seller offers a price that is higher than the buyer’s
worst case, then the buyer is better off going with an alternative.

As for Apple, they state that they are responsible for more than 200 of their patents
and that they take a clear position on protecting the ownership of those patents. Meanwhile,
Samsung thinks that rival patents cover the basic patents that phone technology needs, so
it rejects the idea that the opponent owns these patents. over there. In addition, Samsung
believes that Apple is using its technology in its own products, and that Samsung wants
their rival to pay them royalties at a rate of 2.4%. In fact, after Samsung products hit the
market, Apple discovered that these products infringed their patents. From there, they
calculated the total amount that Samsung earned from these patents and then immediately
prosecuted. This action has helped Apple avoid more harm from Samsung.

2.2. The worst choices in negotiation (WATNAs)

The opposite of BATNAs is WATNAs, an acronym that stands for Worst Alternative
to a Negotiated Agreement. The concept of WATNA can be described as the least favorable
situation possible. In negotiation, the negotiator needs to find the worst alternatives in the
negotiation process to apply in cases where the agreements are not met as desired, the
negotiator needs to accept and use the alternative project with unfavorable conditions to
partially satisfy a particular goal. The worst alternative to a negotiated agreement gives
each party a sense of purpose at the negotiating table. With greater awareness of their
respective worst-case scenarios, each party will have a better understanding as a result.

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Knowing WATNA can help to evaluate when it is time to walk away from the bargaining
table, if a party’s WATNA is better than the offer from the other party the bargaining
should stop at this point. In other words, WATNA provides a benchmark against which to
evaluate settlement offers. It gives one party the confidence to accept an outcome that is
far from ideal, but it is not the worst possible outcome.

In 2011 Apple took action against Samsung, arguing that the competitor had copied
four of theirs patents. Samsung immediately rejected that argument and went back to
saying that Apple was the one who copied their phone technology. A rather rigorous
argument from Samsung claims that Apple has launched phone technology almost 20 years
after Samsung has done it and that it is entirely possible to benefit from Samsung's previous
patent technologies. However, Apple only said that they decided to prosecute to show
respect for creativity rather than pursue more financial profit from it, which has helped it
gain more support from the public

2.3 The era of negotiation

There are 3 types of negotiation that Samsung and Apple applied in negotiation to
take their advantages as well as possible, which are integrative negotiation, distributive
negotiation and mixed-motive negotiation.
First and foremost, integrative negotiations are non-zero-sum encounters in which
there is the possibility for joint gain from the negotiation. In the purely integrative case,
there is no conflict between the two parties, if they can find appropriate solutions. Few
negotiations are purely integrative; most have both integrative and distributive aspects
(Walton & McKersie, 1965) and are described as mixed-motive. To the extent that
negotiators want to extract from a negotiation whatever joint gains are possible, different
tactics are required than for distributive bargaining (Lax & Sebenius, 1986). Only when
there are multiple issues at stake in the negotiation does there exist the possibility of
integration. This is due to the fact that in order for both parties to be satisfied with the
outcome, the parties must be able to make trade-offs across issues. Integrative negotiation

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is generally more satisfying for all parties involved in the negotiation because they address
the true needs and concerns of both parties to some extent. Because it is a collaborative
process, the parties end up helping each other. This prevents ill will from lingering after
the negotiation is over. Rather, integrative negotiation fosters constructive, positive
relationships between former adversaries.
Secondly, distributive negotiations are those in which the issues at stake involve fixed
sums of goods or resources to be allocated among the negotiating parties. In the purely
distributive case, the interests of the parties are negatively correlated, with an increase in
the utility of one party's outcome associated with a corresponding decrease in the utility of
the other party's outcome (e.g., Walton & McKersie, 1965). A classic example is a haggle
over the purchase price of a single item, such as a used car, where the seller seeks the
highest price possible and the buyer hopes to pay as little as possible. In this type of
situation, each negotiator presumably has in mind a reservation price (also known as a
resistance point or a bottom line) beyond which he or she will not go in reaching an
agreement (Raiffa, 1982). To the extent that a spread exists between the two parties'
reservation prices, a "bargaining range" of potential agreements exists (Lewicki et al.,
1994). The process of distributive negotiation involves the interaction of one's walk away
value (the lowest or highest amount one can accept before "walking away" from the deal)
and the adversary's walk away value. The trick is to figure out what our opponent's walk
away value is and then try to negotiate a result that is closer to our own goals than theirs.
The strategies and tactics used by parties in distributive bargaining determine whether or
not they achieve their goals. Thirdly, when both parties obtain something they desire, but
with the awareness that the added value may not be enough for everyone to get the same
amount or everything they want, and hence we have mixed-motive negotiation, which are
combined integrative negotiation and distributive negotiation. There is no one-size-fits-all
approach to mixed motive negotiations. The parties can combine integrative and
distributive bargaining methods, or they may switch from one strategy to the other. When
the parties involved are unsure if their interests are compatible, mixed motive negotiation
is frequently used.

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 3. ANALYSIS
3.1 Overview of the case study

Patent infringement is an illegal practice involving the use of a patented invention

without the permission of the patent owner. Although violating patent law is unacceptable,
there are many disputes in this area in the business world. In the face of such disputes,
lawsuits are considered as one of the most effective solutions, however, such cases can
become extremely complicated when the parties involved in the dispute still have
substantial, privileged interests. Meanwhile, the definition of patent infringement can also
vary from country to country and can sometimes be very vague and difficult to assess.
Thus, all of these factors contribute to great uncertainty for these lawsuits.

So, in fact, patent disputes can be said to be an extremely complicated process, with
trade-offs and ongoing negotiations between the negotiating parties. In this situation,
negotiation strategies become extremely important to determine if problems can be
resolved effectively. Therefore, this case study attempts to discuss two famous patent
dispute negotiation cases between Apple and Samsung. This case study will shed light on
the future area of business negotiation, particularly on how to resolve patent-related
disputes between technology companies.

To briefly introduce the parties involved in this case study, Apple Inc. was founded
by Steve Jobs and his partners in 1976 and is currently headquartered in California. By far,
Apple is one of the world's largest hardware manufacturers in the personal computer and
smartphone sectors. It is also one of the largest mobile software and service providers in
the world. Its products range from iMac, iPhone, iWatch, and other operating systems and
software such as App Store, IOS, cloud services, apple music, and payment systems.
Samsung, founded in 1938, is the largest multinational conglomerate company in Korea.
Over the next 30 years, the company diversified into food processing, textiles, insurance,
securities and retail. Not until in the late 1960s Samsung entered the electronics industry.

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 The dispute between Apple and Samsung was initiated due to the fact that Samsung
plagiarized the product design of the iPhone and iPad. As Apple has stated, the iconic
designs of the iPhone and iPad are the result of years of work and millions of investments.
However, Apple noticed that Samsung applied a similar product design to the Samsung
Galaxy series of phones. According to feedback, in April 2011, Apple decided to sue
Samsung for design patent infringement. In response, Samsung objected to Apple for
violating its mobile communications technology. Thus, four months after the first lawsuit,
there were more than 20 legal disputes between Apple and Samsung in about ten different
countries. Since then, this patent war has heated up. As of July 2012, more than 50 lawsuits
between Apple and Samsung have been filed in courts worldwide, valued at millions of US
dollars. At the same time, these lawsuits were widely reported all over the world.

Figure 3.1: The summary of patents dispute between Samsung and Apple companies.

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3.2 BATNAs of Samsung and Apple company

3.2.1 BATNAs of Samsung

Since the first meeting over the patent between Apple and Samsung, it is reasonable
to assume that Samsung has expressed its desire to continue selling its electronic products
in the market and not incur royalty fees. Samsung wrote in its trial brief: “Apple, which
sold its first iPhone nearly 20 years after Samsung started developing mobile phone
technology, could not have sold a single iPhone without the benefit of Samsung’s patented
technology.” (Connie Guglielmo, 2012).

After Apple first sued Samsung in 2011, Samsung filed an International countersuit
against Apple, proclaimed that Apple infringed on Samsung 3G technology and camera.
Samsung's retaliatory action shows that it is carefully prepared in advance, in case Samsung
cannot reach an agreement with Apple, then Samsung will prolong the lawsuit as they have
a high possibility to lose the case more than Apple in the patent war. Although the legal
battle dragged on for years, it had little impact on sales of Samsung devices that allegedly
infringed on Apple’s copyrights. In the long term, Samsung will gain competitive
advantage over Apple and capture market share in the electronic field.

3.2.2 BATNAs of Apple

Since the dispute of copyright arises from Apple and Samsung, it was apparent that
Apple had expressed their expectation that they wanted to settle down the dispute of
infringement through a fine deal without having court legal actions in order to receive a
payment for an innovation in use, and to have the good allied relationship with Samsung,
the key supplier of Apple.
At the outset of the matter, Apple had made their decision on a resolution ensuring
both parties' benefits by integrative negotiation tactics. Apple thoroughly understood their
place as a consistent trail-blazer with invention and innovation in the electronics field, so
they wanted to exploit those elements by having Samsung stopped applying their

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technology in accordance with an announcement that they had caused a decrease in Apple’s
sales on the market. Additionally, Apple sufficiently prepared by arranging their desired
results which included maintaining services from Samsung as their prominent supplier, in
long term, is to gain a huge amount of money from copyright in use of their latest
technology and make payment as low as they can to Samsung as in a debate outside the
court. Obviously, Apple was able to achieve almost their targets, especially thanks to their
deep and wide research.

3.3 WATNAS of Samsung and Apple company

3.3.1 WATNAs of Samsung

After Apple sued Samsung for copyright infringement, Samsung also had sufficient
documents and evidence to respond to Apple for seriously violating their 10 smartphone
and computer patents. Samsung's lawsuit has been filed in courts in Seoul (Korea), Tokyo
(Japan) and Mannheim (Germany). This is a move to retaliate against the US technology
company after Apple sued Samsung for the same reason just a few days ago in a US court.
It is clear that without prior preparation, Samsung could not respond so quickly. In the case
that a deal cannot be reached with Apple, they want to take Samsung to court, and in the
worst case Samsung loses, Samsung must compensate Apple in cash based on sales of the
alleged products and revenue that Apple believes it has suffered. But more importantly,
Samsung products will not be allowed to sell in places where they lose the lawsuit and
goods in stock will also be confiscated. Samsung's losses are predicted to be enormous.
Therefore, Samsung used their WATNA by compensating in moderation and possibly
giving Apple some incentives in the purchase and sale of electronic components.

Finally, legally, Apple defeated Samsung, but they failed in their aim to gain
competitive advantage over Samsung in the market. After many years of disputes, spending
a lot of money and valuable management time, Apple came out of court with a negligible
profit, in the context of the company's cash reserves of only 267, 2 billion dollars.

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3.3.2 WATNAs of Apple

Firstly, after the proposal of paying a royalty fee for every Samsung’s device sold
was not succeeded in 2010, Apple used their WATNAs by suing Samsung in California
for patent and trademark infringements namely through products including the Samsung
Galaxy Tab. Apple was the first to dig into their position by suing Samsung in the state of
California for patent violations and trademark infringements (Mogg, 2011) Following
Samsung's harsh retaliation, Apple continued to sue Samsung in numerous countries
around the world, including Germany, Australia, the United Kingdom, Japan and so on, in
order to halt Samsung's sales flow. This move by Apple has shifted the lawsuit into a zero-
tolerance mode, requiring Samsung to recognize Apple's copyright in its designs and
trademarks.

During the California (2012) litigation proceedings, both Apple and Samsung
resorted to using underhanded tricks to undermine each other’s efforts in court. For
instance, when Samsung was denied by the judge to make the argument that Apple’s
iPhone design was derived from Sony ideas (to illustrate that Apple was just as much of a
conceptual plagiarizer as Samsung) they released the information to the media
(Paczkowski, 2012). Conversely, Apple submitted at the last minute a 75-page list of
potential witnesses (Duncan, 2014) to potentially increase the duration of proceedings. In
proceedings, Apple had the ability to look for win alone as they recognized their ability to
exploit Samsung’s submission of their patents under FRAND terms: as long as Apple is
willing to pay for the use of Samsung’s patents, Samsung is required to negotiate terms
that are fair and reasonable and don’t try to unduly punish Apple. Apple is under no such
obligation with regard to its patents. If it doesn’t want a competitor to use its proprietary
technologies, it doesn’t have to license them under any terms. (Elmer-DeWitt, 2012)

After Samsung was found to have copied critical features of the iPhones and iPads,
Apple was awarded more than $1 billion in damages, concluding that 26 Samsung devices

23
 infringed on Apple software and patents. Without further ado, Apple files a second U.S.
lawsuit against Samsung, alleging that 21 additional devices released since August 2011
infringe on Apple patents, including the Galaxy S3 and Galaxy Note.

3.4 Theories applied in case study

Table 3.1: Tactics used in the patent dispute by Apple and Samsung.

Timelines Apple Samsung

Aug 2010  Compromise tactic: Since
Samsung is a major Apple
supplier and a “trusted partner,”
Apple wants to work out a deal
based on common interests.

Oct 2010  Compromise tactic: Compromises  Ignore them’s tactic: Samsung

of Apple illustrates Apple's desire declined the licensing deal where
to resolve disputes outside of the Samsung would pay Apple up to
courtroom based on common $30 per phone and $40 per tablet
interests.

Apr 2011  Intimidation tactic: Negotiators  Intimidation tactic: Samsung

attempt to force Samsung to agree countersues over 3G technology
by alleging that the latter patents by filing claims against
"slavishly" copied its product Apple in Japan, Germany, and
designs. Korea.

Aug - Sept  Aggressive Behavior tactic:  Aggressive Behavior tactic:

2011 Apple has halted sales of Samsung’s complaints center on
Samsung's Galaxy Tab 10.1 in standards-essential patents for 3G
Australia and obtained an mobile technology that are
injunction on Galaxy Tab 10.1 supposed to be available to
sales in the EU, arguing the anyone on fair, reasonable, and
device's appearance was too non-discriminatory (FRAND)
similar to the iPad. The EU terms.

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 injunction is rapidly reduced to
just Germany.
 Play chicken tactic: Samsung has
 Play chicken tactic: Apple has threatened action as it takes the
sales of Samsung’s Galaxy Tab fight internationally by filing
10.1 put on hold both in Australia claims against Apple in Japan,
and the EU to force Samsung to Germany, and Korea.
chicken out and give in to a
request.
Jul 2012  Bogey tactic: Apple posted public  Ignore them’s tactic: Samsung
notice that Samsung didn’t copy immediately incurs Judge Koh’s
the iPad’s design — ostensibly ire by publicly disclosing material
because Samsung’s tablets just that had been excluded from the
weren’t as cool to pretend that an trial and for failing to prevent
issue is of no importance to Apple. deletion of relevant evidence.
This disguises the value that the
negotiator is receiving in a
proposed concession or package
deal.

 Lowball - Highball tactic: Apple

seeking about $2.5 billion in
damages in the Jury trial.

 Respond in kind tactic: Apple

submitted a 75-page list of
potential witnesses at the last
minute. They try to throw a lot of
evidence to make Samsung
submit.

 Aggressive Behavior tactic:

Apple quickly files a second U.S
lawsuit against Samsung,
asserting 21 more devices
released since August 2011

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 infringe on Apple patents,
including the Galaxy S3 and
Galaxy Note.

Dec 2012  Snow Job tactic: Because

Samsung made to overwhelm
Judge Koh with so much
information that she has trouble
determining which facts are real,
The U.S. Patent of Trademark
Office tentatively rejects all
claims of Apple’s 915 “pinch-to-
zoom” patent and Samsung’s
infringing products remain on
sale.
Jun 2013  Lowball - Highball tactic: The  Lowball - Highball tactic:
retrial on damages invalidated, Samsung argues the amount
Apple claimed a high should be $52 million to
compensation of about $379.8 determine if the other party is
million to negotiate informed about the actual value of
the interest at hand.

Mar 2014  Lowball - Highball tactic: Apple  Logroll tactic: Samsung has
seeks roughly $2 billion in withdrawn its standards-essential
damages. The second trial mostly patents from the case.
concerns different patents and
different products than the first
trial.

Dec 2015  Compromise tactic: Apple and  Compromise tactic: After

Samsung mutually decided to negotiating, Samsung agreed to
drop patent lawsuits outside of the pay Apple $548 million to aim for
United States demonstrating a integrative negotiation.
willingness to pursue some win-
win opportunities

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 In August 2010, Apple started the patent wars with a first move being consistent with
an interest based bargaining approach and were initially open about their interests. This is
the reason why they use a Compromise tactic to propose a licensing deal to Samsung. In
their proposal they pointed out how “Samsung adopted, embraced and imitated the
iPhone’s archetype” however they recognized Samsung as a strategic partner and offered
a solution that entailed Samsung paying a royalty fee for every device sold of that type.
Apple’s proposal highlights a willingness to settle disagreements outside of court based on
shared interests. Instead of seeking further negotiation, Samsung refused Apple’s proposal
and this action sparked the start of hard positional bargaining. Samsung's passivity
inadvertently makes them weaker.

In April 2011, a number of hard positional negotiation tactics were used by both
companies. Apple applies Aggressive Behavior tactic by suing Samsung in the state of
California for patent violations and trademark infringements in 2011. Samsung also uses
Aggressive Behavior tactic to immediately respond by counter suing Apple in Germany,
Korea, and Japan based on 3G patent violations. The desire to pursue lawsuit rather than
mediation or other comparable processes demonstrates how adamant both firms were about
their positions. Prior to the agreements for resolving the disagreements between the two
firms, Samsung opted to pursue litigation rather than the Apple-proposed way. Apple, on
the hand, knew its strong position as a consistent pacesetter in invention and innovation in
the industry. Apple prepared extensively by prioritizing their favorable outcomes which
were. If Samsung continues to oppose it, it would take long and costly. Overall, Apple is
dominant.

In 2012, the jury trial between Samsung and Apple opened July 22 with Apple
seeking about $2.5 billion in damages. This is a smart strategy when using Lowball/
Highball tactic with Anchoring Effect when Apple is ready to offer a First offer to adjust
the opponent's Reservation point. After three days of deliberation the U.S. jury sides with
Apple, awarding over $1 billion in damages and finding that 26 Samsung products
infringed on both Apple software and design patents. During the California litigation
proceedings both Apple and Samsung resorted to using Play chicken tactic to undermine
each other’s efforts in court. For instance, when Samsung was denied by the judge to make
the argument that Apple’s iPhone design was derived from Sony ideas they released the
information to the media. Apple, on the other hand, submitted a 75-page list of potential
witnesses at the last minute, potentially lengthening the proceedings. Apple had the ability
to seek a win on its own in the proceedings since they recognized their potential to utilize

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Samsung's submission of patents under FRAND rules. It is easy to see that Apple is
dominant over Samsung.

In March 2013, Judge Koh found the U.S. jury calculated damages incorrectly, so she
invalidates $450 million of the $1 billion awarded to Apple and orders a retrial to determine
proper damages. Because the U.S. Patent of Trademark Office tentatively rejects all claims
of Apple’s 915 “pinch-to-zoom” patent and Samsung’s infringing products remain on sale.
In August 2013 Apple applied Aggressive Behavior tactic to pulling strings in Washington
D.C. Which made the ITC block some older Samsung phones from sale in the United States
for violating two Apple patents. Until November 2013, The retrial on damages invalidated
by Judge Koh got underway. Apple seeks $379.8 million; Samsung argues the amount
should be $52 million. A Samsung representative concedes in court some of its devices
“contain some elements of Apple’s property.” Judge Koh awards Apple $290 million in
damages, bringing Samsung's total penalty in the first U.S. case down from $1.05 billion
to $929 million. In the first period of 2013, the advantage was in Samsung's favor.
However, by the end of the year, Samsung must compensate Apple. This amount of
compensation is a recognition that they have stolen Apple's invention.

Hard positional tactics continued until a thaw in the summer of 2014, when Apple
and Samsung mutually decided to drop patent lawsuits outside of the United States
demonstrating a willingness to pursue some win-win opportunities. That has been proven
by both applied Compromise tactic. From Apple’s point of view, it is reasonable to assume
that they would resume their partnership with Samsung as their iPhones and iPads are
dependent on Samsung’s 3G patented technology. In Samsung’s case, their BATNA would
be to continue litigation as they have potential to lose more than Apple in the patent wars.
Additionally, for Samsung, a loss of litigation in which they are forced to pay Apple $548
million in 2015 and recognize Apple’s intellectual property could be more damaging in
long term expenses due to the necessity of investing in technological redesign or the
imposition of royalty fees per device sold.

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3.5 Evaluation of authors

First and foremost, to evaluate the effectiveness of the dispute resolution between
Apple and Samsung, according to the law "You should make the first deal when you know
more", Apple has made a right decision. It can be seen that, after Samsung products are
launched, Apple found that these products infringed their patent rights. From there, they
calculated the total amount that Samsung earned from these patents and then immediately
prosecuted. This action has helped Apple avoid more harm from Samsung. In addition, it
is a very wise choice that Apple makes an ambitious offer to the court, which is a billion
dollars. That number is almost ten times higher than what Apple calculates. Making this
first offer gave Apple another chance to argue with Samsung. This strategy proved very
successful when helping Apple earn a higher amount than expected. Infringement of
patents is a serious question. However, Apple only said that they decided to prosecute to
show respect for creativity rather than pursue more financial profit from it, which has
helped they gain more support from the public.

However, there was a thing that Apple did not do well. A win-win situation was not
achieved, and as a result, Apple's relationship with Samsung is greatly damaged. In the
following years, Samsung used to refuse to make Apple chips in its factory. When this case
first came out, Samsung never wanted to make a patent cross-license agreement. However,
Apple rejected this option and persisted in asking for a fine. Ultimately, this decision
resulted in a lawsuit that dragged on for more than 6 years, wasting a lot of time and
financial resources. Even if Apple wins the case in the end, the associated opportunity cost
loss is extremely high.

Last but not least, in the long run, Apple may have a lot to lose. Industry insiders and
outsiders have been keeping a close eye on the patent battle between Apple and Samsung.
The United States ruling in Apple's favor has also sparked heated debate in the industry.
Despite Apple's claim that "the value of innovation has prevailed", the image of companies
as an innovator is beginning to be eclipsed by that of a technology monopolist. The industry
is starting to see Apple as the next Microsoft, accusing it of monopolizing the market,
stifling competition and stifling innovation in the name of protecting intellectual property
rights. Through lengthy and humorous court arguments, the notion that Samsung phones
are like iPhones began to ingrained in consumers' minds.

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 4. SOLUTIONS
Table 4.1: The Best Alternative to a Negotiated Agreement in each scenario

Scenario Apple Samsung

1 Apple wants to settle down the dispute of ↑↑ ↓↓

infringement through a fine deal and to have a
good allied relationship with Samsung, the key
supplier of Apple.

2 Samsung's desire is to continue selling its ↓↓ ↑↑

electronic products in the market and Samsung
will prolong the lawsuit.

3 Apple release a series of evidence against ↑↑ ↓↓

Samsung because it wanted Samsung to pay
them compensation

4 With potential damages on both companies ↑↑ ↑↑

seeming too high and too expansive, combined
with the help of a few judges, both companies
sit down and deal based on integrative
negotiation.

Solution 1: Apple wants to solve the dispute of infringement through a fine deal and
to have a good allied relationship with Samsung.
If the negotiation fails, Apple will issue a warning to Samsung. Some Samsung
phones and tablets, it claims, infringe on Apple patents. Apple intends to offer a license
contract with Samsung, which would pay Apple up to $30 each phone and $40 per tablet.
Furthermore, Apple was well aware of its position as an industry leader in terms of
invention and innovation. They offer some compelling grounds for pressuring Samsung to
quit employing its technologies, claiming that it had resulted in a major drop in market

30
sales. All in all, Apple's desire is maintaining the integrative relationship as Samsung is a
significant Apple supplier and "trusted partner".

Solution 2: Apple requires Samsung to pay compensation and put an end to their
commercial relationship.
After the failure of the negotiation, Apple, on the other hand, knew its strong position
as a consistent pacesetter in invention and innovation in the industry. A declaration of how
willing Apple is to protect what it sees as their innovations, highlighting Apple’s desire for
a one sided victory. Samsung on the other hand, knowing that they were most likely to be
the losers in the deal, decided to refuse the agreement entirely and stick to the litigation
process. Apple and Samsung continued to view each as adversaries. Apple wishes to sue
Samsung to court and require Samsung to pay compensation in damages because their
desire is pressed on Samsung to stop using their technologies. Moreover, Apply will
terminate the contract to provide components with Samsung and figure a new supplier out.
After all, both firms will put an end to their commercial partnership.

Solution 3: Both companies deal based on integrative negotiation.

Another option is that if the deal fails, Samsung and Apple CEOs will abandon their
hard positional techniques and contending strategies aimed at self-enrichment and adopt
the problem-solving approach that would see all companies continue to do business with
each other. Samsung will continue to provide some of the iPhone's most important
components such as the flash memory that holds the phone's apps, music and operating
software; the working memory and the applications processor that makes the whole thing
work. In addition, because Samsung's Galaxy S smartphone of Samsung used similar
technology to the iPhone, Samsung will pay royalties for each product when utilizing this
Apple technology. From Apple's side, they are willing to pay several equipment fees of
Samsung as mentioned in the initial commercial contract. Two companies' intentions to
settle disagreements outside of court were based on shared interests. As a result, Apple and
Samsung will cooperate with each other based on the win-win relationship.

31
 CONCLUSION
It can be argued that patent dispute resolution should never concerns only the patent
itself. Instead, negotiation should be viewed as a comprehensive negotiation of interests.
In other words, although patent holders may win their case, they will face other limitations
such as potential negative media exposure, high financial and time costs, and relationship
fractured relationship with other business partners, especially when it does not have enough
competitive advantage to survive in its own market. Even as powerful as Apple, it needs
cooperation and support from industry stylists. All in all, patent dispute resolution solutions
need to comprehensively consider all influencing factors before filing a lawsuit. As
previous studies have concluded, patents in today's technology sector should be viewed as
a market in which all decisions must be made with trade-offs.

In other words, negotiating for patent infringement should be purely interest-based,

not position-based. In this situation, patent infringement can be seen as a bargaining chip
for more gain than mere financial return. As demonstrated in this case, flexibility is crucial
for handling all types of patent disputes. After all, in today's business world, every player
to some extent has to rely on other people's patents. Therefore, when a person discovers
that his or her patent rights have been infringed, it can be a valuable opportunity to
negotiate a deeper partnership to reach a mutually beneficial solution for both parties.

Finally, regarding the implications for future research, it is suggested that future
studies may conduct comprehensive case studies to discover which specific strategies are
applicable in the negotiation process such as interest-based judgment. In addition, it is
better to apply empirical studies to measure costs and benefits in the negotiation process
and also necessary to derive some patent management best practices for technology
companies

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 APPENDIX
Appendix No.1: Detailed information about top 10 largest electronics company by
revenues in the world (2020)

Rank Company Revenue Headquarters

(USD billions)

1 Apple Inc. 260.17 USA

2 Samsung Electronics 221.6 South Korea

3 Hon Hai Precision Industry 175.62 Taiwan

4 Huawei 122.97 China

5 Dell Technologies 90.62 USA

6 Hitachi 88.42 Japan

7 Sony 80.92 Japan

8 Panasonic 74.73 Japan

9 Intel 71.9 USA

10 LG Electronics 54.39 South Korea

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