Apple’s $707M, U.S. Sales Ban Filings Against Samsung Underscore One Of Apple’s Biggest Concerns

Late on Friday night in California, Apple made more legal filings against Samsung (we’ve embedded them below), in which it is requesting a further $707 million in damages related to the $1.05 billion verdict against Samsung in Apple’s patent case — and along with it, a request for a sales ban on all of Samsung’s Android handsets — potentially far more damaging to Samsung longer term. The text of one of the filings makes a couple of references to something that is of great concern to Apple, and is particularly timely given that the filing was made just as Apple went into its first weekend of retail iPhone 5 sales: it doesn’t want Samsung to get an edge on brand loyalty among first-time smartphone buyers, which it considers a “highly coveted group.”

Apple’s makes a couple of longish arguments in reference to this. The first is in Apple’s explanation of how it is losing market share to Samsung because of devices that have been found to infringe on its patents:

“‘[E]vidence shows that Samsung is now Apple’s largest smartphone competitor worldwide and is rapidly becoming Apple’s largest competitor in the U.S. market,'” Apple notes, citing dockets from its earlier patent case.  “The direct competition extends particularly to consumers who ‘are looking to make first-time smartphone purchases,’ who both account for a major portion of new Apple and Samsung customers and are a highly coveted group. “

It comes up again in a discussion of losing future and downstream sales:

“This Court has recognized that this is a critical transition period for the mobile phone market, because a large number of potential customers are abandoning feature phones for smartphones. (Dkt. No. 452 at 31-32; Apple II, Dkt. No. 221 at 71-72.) These first-time smartphone purchasers are likely to develop brand and platform loyalty that will affect future sales and market share for years to come (id.), which makes the harm to Apple from loss of follow-on and downstream sales particularly severe.”

Currently, several developed markets — including the U.S. and many in Europe — have just passed or are approaching smartphone tipping points, in which there are more smartphone users than there are feature phone users. Apple has been doing very well among those early adopters (although it would argue that it could have done better if Samsung and others hadn’t been stealing its thunder; at the moment Samsung leads in worldwide smartphone sales).

But with mobile sales in general slowing down in the last year, competition for new users is getting particularly tight.

In this light, the non-smartphone-owning public is a crucial demographic for Apple. There are still millions of feature phone users out there — and millions who don’t own any mobile phone at all. But this is a demographic at which they are at somewhat of a disadvantage against Samsung. The Korean giant has a huge business in low-cost feature phone devices, which it has managed to leverage into a smartphone user base with a large range of smartphones that include low-end “entry-level” Android devices.

Yes, Apple has its older iPhone models, which have become like the lower-end part of its range. With fewer features than the newer iPhones, they can often be found free when you buy them on contract. But just as importantly it has its newest device, making its retail debut this weekend. The launch of the iPhone 5 is a key moment to pick up new users yet again, especially in a quarter following one in which Apple saw a softening in sales due to people anticipating Apple’s newest device.

Apple has been shown to demonstrate that it has high brand loyalty, and their big worry is that they won’t be able to work that magic if they don’t get a look in from the start.

Florian Mueller has a good breakdown of how Apple arrived at its $707 million figure. The case related to this filing is due to be heard on December 6 in Judge Lucy Koh’s court. Reuters reports that Samsung has responded by asking for a new trial:

“The Court’s constraints on trial time, witnesses and exhibits were unprecedented for a patent case of this complexity and magnitude, and prevented Samsung from presenting a full and fair case in response to Apple’s many claims,” Reuters quotes from Samsung’s filing. “Samsung therefore respectfully requests that the Court grant a new trial enabling adequate time and even-handed treatment of the parties.”

That document is also embedded below.