U.S. judge says Samsung tablets infringe Apple patents (Reuters)

SAN JOSE, California (Reuters) – A U.S. judge said Samsung Electronic's Galaxy tablets infringe Apple Inc's iPad patents, but also that Apple has a problem establishing the validity of its patents.

The comments from U.S. District Judge Lucy Koh came on Thursday in a court hearing on Apple's request to bar some Galaxy products from being sold in the United States.

Apple and Samsung are engaged in a bruising legal battle that includes more than 20 cases in 10 countries as the two jostle for the top spot in the smartphone and tablet markets.

Earlier on Thursday, an Australian court slapped a temporary ban on the sale of Samsung's latest computer tablet in that country.

Apple sued Samsung in the United States in April, saying the South Korean company's Galaxy line of mobile phones and tablets "slavishly" copies the iPhone and iPad.

Apple then filed a request in July to bar some Samsung products from U.S. sale, including the Galaxy S 4G smartphone and the Galaxy Tab 10.1 tablet.

Mobile providers Verizon Wireless and T-Mobile USA have opposed Apple's request, arguing that a ban on Galaxy products would cut into holiday sales.

Apple must show that Samsung infringed its patents and that its patents are valid under the law.

Samsung attorney Kathleen Sullivan argued that in order to defeat an injunction bid, Samsung need only show that it has raised strong enough questions about the validity of Apple's patents.

"We think we've clearly raised substantial questions," Sullivan said at the hearing on Thursday in a San Jose, California federal court.

Apple attorney Harold McElhinny said Apple's product design is far superior to previous tablets, so Apple's patents should not be invalidated by designs that came before.

"It was the design that made the difference," McElhinny said.

Koh frequently remarked on the similarity between each company's tablets. At one point during the hearing, she held one black glass tablet in each hand above her head, and asked Sullivan if she could identify which company produced which.

"Not at this distance your honor," said Sullivan, who stood at a podium roughly ten feet away.

"Can any of Samsung's lawyers tell me which one is Samsung and which one is Apple?" Koh asked. A moment later, one of the lawyers supplied the right answer.

Additionally, at the hearing Koh said she would deny Apple's request for an injunction based on one of Apple's so-called "utility" patents.

She did not say whether she would grant the injunction based on three other Apple "design" patents.

Koh characterized her thoughts on the utility patent as "tentative" but said she would issue a formal order "fairly promptly."

"It took a long time to make that distinction," Koh said.

After the hearing, Samsung spokesman Kim Titus said Apple's injunction request is "groundless."

Apple spokeswoman Kristen Huguet said, "It's no coincidence that Samsung's latest products look a lot like the iPhone and iPad ... This kind of blatant copying is wrong, and we need to protect Apple's intellectual property when companies steal our ideas."

The case in U.S. District Court, Northern District of California is Apple Inc v. Samsung Electronics Co Ltd et al, 11-1846.

(Editing by Tim Dobbyn, Steve Orlofsky and Richard Chang)

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Samsung says third-quarter to top consensus as phones boom (Reuters)

SEOUL (Reuters) – Samsung Electronics said its quarterly profit should top the most bullish market forecasts, with smartphones becoming its main profit engine despite intense competition from bigger rival Apple.

Indeed, analysts expect Samsung to report record profit from handset sales in the third quarter and overtake Apple as the world's biggest smartphone vendor in unit terms.

The South Korean firm estimated its quarterly operating profit at 4.2 trillion won ($3.5 billion) versus a consensus forecast of 3.4 trillion won by analysts surveyed by Thomson Reuters I/B/E/S. That would be down 14 percent from a year ago but up 12 percent from the preceding quarter.

The estimate released on Friday was higher than even the most bullish street view of 3.95 trillion won. Detailed earnings for July to September will be released later this month, Samsung said.

"Samsung's estimates are far better than expected," said Park Jong-min, a fund manager at ING Investment Management. "Its telecommunications business is seen very positive as shipments of smartphones and other high-end handsets expanded."

Investors are looking for signs the telecoms business can sustain strong growth for the year-end holiday season as its flagship Galaxy line of smartphones and tablets squares off against Apple's new iPhone, which goes on sale next week.

Stellar growth and strong profit margins from its telecom business mark a big transformation for a company, which has relied for years on its mainstay computer memory chips to boost profit. It had a negligible share of the smartphone market until early last year.

Samsung shares held steady on Friday, while the broader market rose 2.6 percent, an underperformance that analysts blamed on the prospects for a tougher fourth quarter owing to weak prices for memory chips and flat screens. However, Samsung shares had risen sharply in September as the wider market fell.

Earnings at the world's biggest technology firm with sales of $130 billion last year, are set to slide to 3.4 trillion won in the fourth quarter, consensus estimates show.

Profit from Samsung's telecoms division is widely expected to top earnings from the semiconductor business at the world's biggest memory chip maker.

Analysts say Samsung is one of the best placed companies to deliver something fresh and exciting to rival Apple, which has released a string of big-hit products in the past two decades.

It already makes the closest competing tablet by sales to Apple's iPad.

Samsung sold 19 million smartphones in the second quarter and shipments are expected by analysts to have risen to more than 28 million units in the third quarter compared to the 60 million units Samsung is targeting for 2011.

Samsung sold about 1 million fewer smartphones than Apple in the second quarter.

It plans to release its first smartphone based on the latest version of Microsoft's mobile operating system this month, while a 5.3-inch screen Galaxy Note, a hybrid of a smartphone and a tablet, is set to go on sale later this year.

Samsung leads a pack of companies selling phones on Google's Android operating system.

"The Galaxy S II probably played a key role in boosting the company's earnings and it will continue to do so pretty much unchallenged, until Apple unveils a better new version of iPhone," said Kyung Woo-hyun, a fund manager at Daishin Asset Management.

Samsung, which worked out how to make black and white TVs in the 1970s by tearing apart Japanese models, has become a top global brand over the past decade.

It boasts a market value of $118 billion, much bigger than the combined value of Sony Corp, Nokia, Research In Motion, Toshiba and Panasonic Corp.

Samsung's shares have fallen 5 percent over the past three months versus a 12 percent drop in Apple's shares.

APPLE CHALLENGER

Expectations for further momentum in Samsung's smartphone business grew after Apple's newest iPhone, unveiled this week, left investors and Apple's fans wishing for more than a souped-up version of its previous device introduced more than a year ago.

"I previously thought Apple's new iPhone would slow Samsung's handset earnings momentum, but there was no iPhone 5, and the iPhone 4S will not be a burden on Samsung in the fourth quarter," said Ahn Seong-ho, an analyst at Hanwha Securities.

But an intensifying legal battle with Apple over patents and designs threatens to dent growth of Samsung's handset and component business. Apple is also Samsung's biggest customer, buying mainly chips and displays.

"I am very surprised at the (profit) numbers. I am guessing either a particular lineup of products with higher margins sold well, or cost cutting measures were aggressively implemented," said James Song, an analyst at HI Investment & Securities.

Some analysts expected one-off gains such as reduced provisioning costs relating to royalty payments to Microsoft over smartphones and tablets using Android, or a cheaper won currency to boost profitability.

The South Korean won tumbled 9.4 percent against the dollar in the third quarter, making Korean products cheaper to overseas consumers.

Chips and flat screens are underperforming as consumers delay buying TVs and computers in a slowing global economy. This has pushed down prices of key components.

Prices of dynamic random access memory (DRAM) chips used in PCs tumbled about 50 percent in the third quarter and many analysts, including those at Citi and UBS, believe Samsung was the sole profitable DRAM maker in the third quarter.

Major global technology companies from Hynix Semiconductor to LG Display and Sony Corp are expected to report operating losses from their core businesses in July-September.

($1=1191 won)

(Additional reporting by Hyunjoo Jin and Jungyoun Park; Editing by Jonathan Hopfner and Anshuman Daga)

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