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Apple's Secrets Revealed at Trial

發表於 2012-8-5 09:40:53 | 顯示全部樓層 |閱讀模式
[size=1em]TECHNOLOGY Updated August 3, 2012, 7:58 p.m. ET

SAN JOSE, Calif.— [size=1.4em] Apple Inc., one of the world's most secretive companies, is finding there's a price in pushing its grievances against rival Samsung Electronics Co. in federal court: disclosure.

In just the first few days of its patent trial this week, Apple has publicly discussed how it created the iPhone and iPad, showed early designs of the devices and described intimate details about its product team.

Bloomberg News

[size=1.4em]Apple's marketing chief, Phil Schiller, entered the court in San Jose on Friday where he testified about the company's advertising budget.

[size=1.4em]It also gave glimpses into its strategy and customers, and each fact—like an internal survey showing that 78% of iPhone owners buy cases—was quickly disseminated and discussed in tweets and blog posts by people tracking the high-stakes case.

[size=1.4em]Phil Schiller, Apple's senior vice president of world-wide marketing, took the stand Friday and revealed how much Apple spends on marketing the devices at the center of the case. He discussed a document that said Apple had spent $647 million advertising the iPhone in the U.S., from its release in 2007 through its fiscal year 2011. For the iPad, which debuted in 2010, he put the amount at $457.2 million.

[size=1em]The iPhone That Should Have Been[size=1em]

View Slideshow

[size=1.1em]Apple experimented with making the iPhone silver and boxy.

[size=1.4em]Much of the trial so far has concentrated on how Apple's design teams came up with the ideas for iPhones and iPads. Apple is trying to prove that Samsung copied its designs, while Samsung is demonstrating to the jury that its devices are different and that Apple was inspired by Sony Corp.'s products.

[size=1.4em]On Friday, Scott Forstall, a senior vice president who oversees the software used on the company's mobile devices, testified that as early as January 2011, an Apple executive advocated that the company build a tablet with a 7-inch screen. Apple has generally disputed the appeal of devices smaller than its 9.7-inch iPad, despite reports the company is developing a smaller model.

[size=1.4em]In cross-examination, Mr. Forstall said Eddy Cue, now head of Apple's Internet services efforts, had used a 7-inch Samsung tablet for a time, and sent an email to Chief Executive Tim Cook that he believed "there will be a 7-inch market and we should do one."

[size=1.4em]Mr. Forstall also testified that Apple in 2004 placed unusual rules around how it would assemble a team to build the iPhone, or "Project Purple," as it was called then.

[size=1.4em]Mr. Forstall said co-founder Steve Jobs told him he couldn't hire anyone from outside the company to work on the user interface, or the buttons and images that appear on the screen. So, he said, he found "superstars" from within Apple and said he was starting a secret project and he wanted help.


[size=1.4em]He recalled telling them, "If you choose to accept this role, you will work harder than you ever have in your entire life."

[size=1.4em]Mr. Forstall described "locking down" one floor of the company's buildings at first with cameras and keycard readers to beef up security regarding the project. He also took to calling it the "purple dorm," after the project's code-name, purple. They also put a sign up on the front door with the words "Fight Club" written on it, referring to the hit book and movie in which characters are told not to talk about what they were doing.

[size=1.4em]He cited numerous challenges to developing the iPhone, because his teams had until then only worked with keyboards and mice. "Every single part of the device had to be rebuilt for touch," Mr. Forstall said.

[size=1.4em]Mr. Forstall also told the court that his team consisted of 1,000 people who directly reported to him. When he holds all-staff meetings, he said that number usually comes to 2,000.

[size=1.4em]Mr. Forstall said he invented a patent for double-tapping on Web pages because as he had been using a prototype of the iPhone to surf the web, he realized he was spending a lot of time pinching and zooming the page to fit text perfectly on the screen.

[size=1.4em]"I realized I have this incredibly powerful device, why can't it figure out the right size for me?" he said. So, he challenged his team to make the software automatically size the text into the center of the screen when he double-tapped around a webpage.

[size=1.4em]Documents: Lawsuit and Counterclaim
[size=1.2em]See annotated versions of Apple's lawsuit and Samsung's counterclaim in the case.

View Interactive

Documents: Trial Briefs
[size=1.2em]See Apple's and Samsung's trial briefs, filed days ahead of the trial.
[size=1em]View Interactive

Photos: What's at Stake
[size=1.2em]See some of the products at stake in the case.
View Slideshow

Park Jae-Hee/Xinhua/Zuma Press

[size=1.1em]Samsung's Galaxy Tab 10.1 tablet

Timeline: Tablet Tiff
[size=1.2em]See major events of Samsung's legal woes in patent infringement cases versus Apple.
[size=1em]View Interactive

[size=1.4em]Earlier in the week a 99-page document filed in the case revealed some early iPhone prototypes considered by the company. The renderings, dating back to at least early 2006, show what could have been—from bulbous backsides to angled edges. Other documents disclosed variations on the iPad design, including the fact the company considered a kickstand for the device.

[size=1.4em]Veteran Apple designer Christopher Stringer—the company's first witness—walked through many of the prototypes on Tuesday and said the design team often works around a table in a kitchen, translating ideas to sketches to computer designs to 3-D models. When asked how Apple arrived at the final iPhone design, Mr. Stringer said: "It was the most beautiful of our designs…When we realized what we got, we knew."

[size=1.4em]But the iPhone almost didn't get off the ground. Mr. Stringer said even Mr. Jobs had doubts Apple could deliver the unprecedented design.

[size=1.4em]Mr. Schiller, in another part of his testimony, discussed a customer survey of iPhone buyers. The issue of market research is of special interest to Apple watchers, because Mr. Jobs famously maintained that the company didn't rely on tools like focus group in deciding how to craft new products.

[size=1.4em]Before the trial opened, however, a May 2011 survey of iPhone owners was filed as evidence. The Apple document showed, among other things, that trust in the company's brand was a decisive factor in buying decisions in countries that include the U.S. and China.

[size=1.4em]Mr. Schiller testified that such surveys are considered important trade secrets because while it is easy for an individual company to survey its own customers, it is very hard to survey a competitor's customers.

[size=1.4em]Information that was not shared with jurors has triggered some of the biggest fireworks so far in the trial, which kicked off with jury selection Monday and testimony Tuesday and Friday. U.S. District Judge Lucy Koh blocked Samsung from introducing evidence that it says shows the iPhone design was inspired by Sony products, an attempt to weaken Apple positions that the iPhone was an original design copied by Samsung.

[size=1.4em]A Samsung representative shared the information with reporters, prompting a request from Apple for the court to sanction Samsung. On Friday, Judge Koh denied Apple's request, but criticized Samsung's legal team and polled each juror individually to make sure they hadn't read about it.

[size=1.4em]"I will not let any theatrics or sideshow keep us from doing what we're here to do," she said.

—Jessica E. Vascellaro and Ina Fried contributed to this article.
[size=1.4em]Write to Ian Sherr at [email protected]

[size=1.2em]A version of this article appeared August 4, 2012, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Apple's Secrets Revealed at Trial.
 樓主| 發表於 2012-8-7 17:50:03 | 顯示全部樓層

Apple Ties to Samsung in Sharp Contrast to Courtoom Clash

By Ian King and Adam Satariano - Aug 6, 2012, Bloomberg

Whatever the jury decides at the end of Apple Inc. (AAPL)’s trial against Samsung Electronics Co., Apple’s deep ties to Samsung are becoming more apparent even as the two companies clash in court.

As the trial enters its second week, Apple is producing testimony intended to prove that the South Korean company copied patented technology for smartphones and tablet computers.

“There are a number of Samsung phones and two Samsung tablets that are substantially the same as those” described by Apple patents, Peter Bressler, an inventor of 70 design and utility patents, said yesterday before a jury in federal court in San Jose, California.

Bressler, who teaches product design at the University of Pennsylvania, was the latest expert to testify for Apple, laying the groundwork for infringement claims. The Cupertino, California-based company seeks $2.5 billion in damages.

Apple’s reliance on Samsung (005930) chips for its best-selling phones and tablets will be worth as much as $7.5 billion to Samsung this year, a 60 percent jump from 2011, Gartner Inc. estimates. Because Apple would struggle to find an alternate supplier for the main processor in its mobile devices, the computer maker can’t quit buying from its competitor anytime soon, whatever the trial’s outcome.
‘Ugly Divorce’

“As much as these companies go head to head, there’s a definite intertwining there that makes it a real ugly divorce if it were to take place,” said Len Jelinek, an analyst at market researcher IHS Inc. “Apple cannot, under any circumstances, be caught in a capacity-crunch situation.”

Apple’s spending has helped arm Samsung with resources to fuel a surging mobile-phone business that’s now the global leader. At a time when there are few other manufacturers able to reliably produce the millions of key chips Apple needs each quarter, switching to an unproven partner could result in parts shortages that might help Samsung grab even more market share. Samsung, meanwhile, would risk losing the business of its biggest customer if Apple were to move elsewhere.

The two companies on July 30 began a jury trial in federal court in San Jose to try Apple’s claims that Samsung copied its iPad and iPhone designs and Samsung’s counterclaims that it is the victim of patent infringement by Apple. The companies also have sued each other in the U.K., Australia and South Korea, among other countries, in a bid for dominance of a mobile-phone market that Bloomberg Industries estimated at $320.4 billion last year.
Samsung Ties

Apple accounts for 8.8 percent of Samsung’s revenue, making it the company’s largest customer, according to a Bloomberg supply-chain analysis. The next biggest is Hewlett-Packard Co., providing 3.2 percent.

Samsung and Apple’s interdependence traces its roots to the beginning of the iPhone. Ahead of the 2007 debut, Apple realized it needed a processor better tailored to the device. A microprocessor acts as the brains of a device, determining how fast it runs and letting it perform critical tasks. Apple turned to Samsung, then ramping up a division that makes so-called logic chips, which handle the devices’ other functions.

The two companies, which had already worked together in screens and memory chips, cut a deal that resulted in Samsung becoming the sole manufacturer of the so-called A-series of chips, which are at the heart of the iPhone and iPad.

Together, those products generated $67.4 billion in sales for Apple in the latest fiscal year. The company may spend about $2.1 billion on A-series chips this year alone, according to Gartner. About 20 percent of Apple’s iPhone is comprised of Samsung technology, the Suwon, South Korea-based company said at the trial last week.
Scant Alternatives

Other chipmakers would probably welcome Apple’s business. Taiwan Semiconductor Manufacturing Co., the largest maker of chips to order, said last month that it was open to devoting one or more factories to a single customer. The statement was aimed at Apple or Qualcomm Inc., another maker of mobile chips, according to Sam Wang, an analyst at Gartner.

Still, switching to another foundry such as TSMC would bring challenges. TSMC would have to limit orders from other customers to accommodate Apple’s needs, and it uses a different production technology than Samsung, requiring a redesign of the processors from the ground up, Wang said. TSMC rival United Microelectronics Corp. (2303) is too small, and Globalfoundries Inc. is too far behind on production technology, he said.

“There’s an incredible cost to doing that, and it would be very difficult,” said Michael Hasler, a former supply-chain management executive at chipmaker Applied Materials Inc., who now lectures at the University of Texas at Austin. “On the surface it seems like an obvious thing to do, but actually executing it would be very expensive.”
SK Hynix

Samsung’s dominance of the market for key parts doesn’t end with processors. All modern mobile devices use so-called flash- memory chips to store music, video and program files -- features essential to their allure for consumers. Samsung has a third of that market. The company is also the largest maker of liquid crystal displays, with Apple’s Retina displays being made in Samsung plants, the South Korean company said in court.

There are signs Apple is taking steps away from Samsung. Some of the memory components in the iPhone 4S, which was released last year, come from SK Hynix Inc., said Stuart Robinson, an analyst who studies the smartphone-component industry for Strategy Analytics. New screen technology that will be part of the next version of the iPhone, to be released this year, is being made by LG Display Co., Sharp Corp. and Japan Display KK, according to Sanford Bernstein & Co. research.

“They are trying to reduce their dependency on Samsung as much as possible,” Robinson said.
Buckle Down

What complicates those efforts is that Samsung has contributed technology to Apple’s chip designs, according to Jim McGregor, founder of Arizona-based Tirias Research. Shifting to another manufacturer would make Apple vulnerable to more litigation or force it to pay license fees, he said.

Making processors is only becoming more complex, and the designs of the products more intricate, McGregor said. In the past, foundries would gradually introduce new machinery via limited runs on products that only required small volumes. With phone manufacturers’ current need for hundreds of millions of chips built on the latest technology, the risk is increasing of a hiccup that might limit output.

Apple can’t take that chance. As Samsung, Google, Microsoft Corp. (MSFT) and Nokia Oyj vie for a piece of the smartphone business, “now is not the time to be jumping ship,” McGregor said.

“Now is time to be buckling down and making sure you’ve got a partner that you can work with,” he said. “It’s only going to get worse going forward.”
Line ‘Crossed’

The relationship began to fray when Samsung started to release smartphones and tablets that compete with the iPhone and iPad. Samsung, relying on Google’s Android software, has become the world’s largest smartphone manufacturer, accounting for 33 percent of global shipments in the second quarter, compared with 17 percent for Apple, according to IDC.

That doesn’t mean that Samsung holds all the cards. Apple has more than $117 billion in cash and investments, and will use part of that hoard to extend its lead as the biggest purchaser of semiconductors. Apple will increase its orders by 15 percent to almost $28 billion, according to an estimate from IHS. Apple also buys chips from suppliers such as Qualcomm and Broadcom Corp.

The tension between being Samsung’s chief buyer and toughest rival isn’t lost on Apple Chief Executive Officer Tim Cook.

“We are Samsung’s largest customer. And Samsung is a very valued component supplier to us, and I expect the strong relationship will continue,” Cook said on a conference call last year. “Separately from this, we felt the mobile- communication division of Samsung had crossed the line. And after trying for some time to work the issue, we decided we needed to rely on the courts.”
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