Apple battles U.S. over scope of e-books injunction

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Apple battles U.S. over scope of e-books injunction

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Apple battles U.S. over scope of e-books injunction

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Apple battles U.S. over scope of e-books injunction

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Apple battles U.S. over scope of e-books injunction

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Apple, Samsung do not have to disclose profit details -court

By Dan Levine

Fri Aug 23, 2013 11:26pm BST

n">(Reuters) - Apple Inc and Samsung Electronics Co Ltd do not have to make public the financial details submitted to a U.S. court during high-profile patent litigation, a federal appeals panel ruled on Friday.

The Federal U.S. Circuit Court of Appeals in Washington reversed a lower court ruling that ordered the two companies to disclose portions of documents that contain profit and sales information.

"We recognize the importance of protecting the public's interest in judicial proceedings and of facilitating its understanding of those proceedings," the three-judge appeals panel decided. "That interest, however, does not extend to mere curiosity about the parties' confidential information where that information is not central to a decision on the merits."

Representatives for Apple and Samsung declined to comment.

Peter Scheer, executive director of the First Amendment Coalition - an advocacy group that argued in the appeals court to have the information disclosed - said he was disappointed in the outcome for the Apple/Samsung case.

However, Scheer said the ruling is not all bad for public access to court records. For instance, the ruling says companies cannot keep information secret in court merely by calling it a trade secret, and judges must scrutinize those secrecy requests, Scheer said.

"If all the cases that come after this one adhere loosely to the legal requirements articulated in this decision," Scheer said, "then those trials will be infinitely more open and transparent than otherwise would have been the case."

Apple and Samsung have been waging patent litigation across the globe since 2011, climaxing in a high-profile trial last year in San Jose, California. A jury awarded Apple over $1 billion, but U.S. District Judge Lucy Koh later slashed the award and ordered a retrial on some of the damages.

In the run-up to trial last year, attorneys for both sides submitted several documents to the court that contained financial details in order to calculate damages. The details were redacted, and Reuters filed motions in the court to unseal the documents.

Koh ruled against Apple and Samsung, saying the public's interest in understanding the proceedings outweighed the companies' rights to keep the information secret. However, the appeals court unanimously disagreed.

"While protecting the public's interest in access to the courts, we must remain mindful of the parties' right to access those same courts upon terms which will not unduly harm their competitive interest," Judge Sharon Prost wrote.

The case in the Federal Circuit is Apple Inc vs. Samsung Electronics Co Ltd et al., 12-1600.

(Reporting by Dan Levine in San Francisco; Editing by Jeffrey Benkoe and Ken Wills)

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U.S. proposes shorter injunction in Apple e-books case

NEW YORK | Fri Aug 23, 2013 11:14am EDT

NEW YORK (Reuters) - The U.S. government on Friday offered to cut in half the length of a proposed injunction to punish Apple Inc for conspiring with five major publishers to raise e-book prices.

In a court filing, the U.S. Department of Justice and 33 U.S. states and territories recommended reducing the injunction's length to five years from 10, with a chance to seek a "limited number" of one-year extensions if events warrant.

They said this change would limit the chance that the decree could outlive its usefulness and "unnecessarily harm" Apple.

They also proposed the staggered renegotiation of Apple's contracts with the publishers, in a manner proposed by U.S. District Judge Denise Cote in Manhattan, who oversees the case.

Apple did not immediately respond to requests for comment.

(Reporting by Jonathan Stempel in New York)

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Insight: At Apple, Tim Cook leads a quiet cultural revolution

1 of 3. Apple Inc. CEO Tim Cook takes the stage after the introduction of the iPhone 5 during Apple Inc.'s iPhone media event in San Francisco, California in this September 12, 2012 file photograph.

Credit: Reuters/Beck Diefenbach/Files

By Poornima Gupta and Peter Henderson

SAN FRANCISCO | Thu Aug 22, 2013 3:08am EDT

SAN FRANCISCO (Reuters) - Shortly after signing on as chief operating officer at Facebook, Sheryl Sandberg was looking to connect with people in a similar role - No. 2 to a brilliant and passionate young founder. She called Tim Cook.

"He basically explained nicely that my job was to do the things that Mark (Zuckerberg) did not want to focus on as much," Sandberg said of the 2007 meeting that lasted several hours with the chief operating officer of Apple Inc.

"That was his job with Steve (Jobs). And he explained that the job would change over time and I should be prepared for that."

While Sandberg has enjoyed a steady run at Facebook, it is Cook's job that has changed radically since then. Now, the man who was handed one of the more daunting tasks in business - filling the shoes of the late Steve Jobs and keeping Apple on top - may himself need a spot of advice.

Two years into Cook's tenure, Apple is expected to unveil a redesigned iPhone next month. It will be a key moment for Cook. The company he inherited has become a very different creature: a mature corporate behemoth rather than a scrappy industry pioneer, with its share price down 5 percent this year, despite a recent rally. The S&P 500 is up about 15 percent this year.

A transition was, perhaps, inevitable after an astonishing five-year run in which Apple's headcount tripled, its revenues rose over six-fold, its profits grew 12-fold, and its stock price jumped from $150 to a peak of $705 last fall.

But it's been painful for some.

It is unclear whether the spread-sheeting-loving, consensus-oriented, even-keeled Cook can successfully reshape the cult-like culture that Jobs built. Though Cook has deftly managed the iPhone and iPad product lines, which continue to deliver enormous profits, Apple has yet to launch a major new product under Cook; talk of watches and televisions remains just that.

Some worry that Cook's changes to the culture have doused the fire - and perhaps the fear - that drove employees to try to achieve the impossible.

CAN NICE GUYS FINISH FIRST?

Cook is known as a workaholic who guards his privacy closely. People who know him well paint a portrait of a thoughtful, data-driven executive who knows how to listen and who can be charming and funny in small group settings.

Lisa Cooper, who went to high school with Cook in Robertsville, Alabama, and remains a friend, still laughs at memories of Cook staging prank photos for the school yearbook and crooning "The Way We Were" to her in class.

In the day to day at Apple, Cook has established a methodical, no-nonsense style, one that's as different as could be from that of his predecessor.

Jobs' bi-monthly iPhone software meeting, in which he would go through every planned features of the company's flagship product, is gone.

"That's not Tim's style at all," said one person familiar with those meetings. "He delegates."

Still, he has a tough side. In meetings, Cook is so calm as to be nearly unreadable, sitting silently with hands clasped in front of himself. Any change in the constant rocking of his chair is one sign subordinates look for: when he simply listens, they're heartened if there is no change in the pace of his rocking.

"He could skewer you with a sentence," the person said. "He would say something along the lines of 'I don't think that's good enough' and that would be the end of it and you would just want to crawl into a hole and die." Apple declined to comment on Cook or the company for this article.

Cook's fans say that his methodical manner doesn't get in the way of decisive action. They point to the Apple Maps fiasco, in which Apple replaced Google's mapping product with its own on the iPhone and it quickly became clear that Apple's maps were not ready for prime time.

Apple initially downplayed the glitches by saying Maps was a "major initiative" and they were "just getting started." But behind the scenes, Cook bypassed Scott Forstall, the mobile software chief (and Jobs favorite) who was responsible for maps, and tasked internet services honcho Eddy Cue with figuring out what exactly happened and what should be done.

Cook had a lot of questions, and the episode also prompted him to fast-track his thinking on the future direction of the critical phone and tablet software known as iOS, a person close to Apple recounted.

Cook soon issued a public apology to customers, fired Forstall, and handed responsibility for software design to Jony Ive, a Jobs soul-mate who had previously been in charge only of hardware design.

"The vision that Tim had to involve Jony and to essentially connect two very, very important Apple initiatives or areas of focus - that was a big decision on Tim's part and he made it independently and very, very resolutely," said Bob Iger, CEO of Walt Disney Co. and an Apple director.

Still, employees report some grumbling, and Apple seems to have taken note, conducting a survey of morale in the critical hardware engineering unit earlier this year.

"As our business continues to grow and face new challenges, it becomes increasingly important to get feedback about your perceptions and experiences working in hardware engineering," Dan Riccio, Apple's senior vice president of Hardware Engineering, wrote to his team in February in an email seen by Reuters.

Some Silicon Valley recruiters and former Apple employees at rival companies say they are seeing more Apple resumes than ever before, especially from hardware engineers, though the depth and breadth of any brain-drain remains difficult to quantify, especially given the recent expansion in staff numbers.

"I am being inundated by LinkedIn messages and emails both by people who I never imagined would leave Apple and by people who have been at Apple for a year, and who joined expecting something different than what they encountered," said one recruiter with ties to Apple.

Still, the Cook regime is also seen as kinder and gentler, and that's been a welcome change for many.

"It is not as crazy as it used to be. It is not as draconian," said Beth Fox, a recruiting consultant and former Apple employee, adding that the people she knows are staying put. "They like Tim. They tend to err on the optimistic side."

SOCIAL SIDE

There does seem to be, under Cook, a new willingness to admit mistakes and a more open approach to problems such as poor working conditions at Chinese contract manufacturers.

"On the social side, the only way for Apple to make a difference in the world in a broad way is to be - I believe strongly - is to be totally transparent," Cook said earlier this year at what was, paradoxically, a closed-door talk at his business school reunion.

"When you do that, you make a decision to report the bad and the good, and we hope that by doing that, that it puts pressure on everyone else to join."

Under pressure from investors, Cook not only agreed to share more of Apple's $150 billion cash hoard with shareholders, he voluntarily tied his own pay more closely to stock performance.

Yet critics wonder whether Cook's stated commitments to transparency and workers' rights really amount to much. Cook set up the global manufacturing system being criticized, and the company and its CEO remain highly secretive about matters large and small. Conditions at some Chinese factories have improved —Apple now tracks and reports hours of a million workers to avoid illegal overtime - but allegations of unfair working conditions continue to be made.

Apple has also come under scrutiny over its tax structure, under which it has kept billions of dollars in profits in Irish subsidiaries so as to pay little or no taxes. Cook defended the policy, which is legal, at a Congressional hearing in May.

Shareholders, meanwhile, are focused on the bottom line, and the next big product launch. A sharp drop in China revenue in April-June underscores the challenges Apple faces in its second-largest market as the technology gap with cheaper local rivals narrows and as Samsung Electronics keeps up a steady stream of new models across all price ranges.

Cook got a vote of confidence this month when activist investor Carl Icahn disclosed he had amassed a large position in Apple stock.

Bob Iger, the Apple director, said Cook had taken on "a very, very difficult role given the person that he's succeeded and the company he's running."

"I think he's done so with a deft hand, a strong sense of himself," said Iger, who himself long toiled as the number two to a celebrated CEO, Michael Eisner. "With that comes a real self-honesty that he is who he is, and not what the world expects him to be, or what Steve was. And I like that."

(Editing by Jonathan Weber, Edwin Chan and Claudia Parsons)

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Insight: How Samsung is beating Apple in China

By Melanie Lee and Miyoung Kim

GUANGZHOU, China/SEOUL (Reuters) - Apple Chief Executive Tim Cook believes that "over the arc of time" China is a huge opportunity for his pathbreaking company. But time looks to be on the side of rival Samsung Electronics Co Ltd, which has been around far longer and penetrated much deeper into the world's most populous country.

Apple Inc this week said its revenue in Greater China, which also includes Hong Kong and Taiwan, slumped 43 percent to $4.65 billion from the previous quarter. That was also 14 percent lower from the year-ago quarter. Sales were weighed down by a sharp drop in revenues from Hong Kong. "It's not totally clear why that occurred," Cook said on a conference call with analysts.

Neither is it totally clear what Apple's strategy is to deal with Samsung - not to mention a host of smaller, nimbler Chinese challengers.

Today, in the war for what both sides acknowledge is the 21st century's most important market, Samsung is whipping its American rival. The South Korean giant now has a 19 percent share of the $80 billion smartphone market in China, a market expected to surge to $117 billion by 2017, according to International Data Corp (IDC). That's 10 percentage points ahead of Apple, which has fallen to 5th in terms of China market share.

Cook said Apple planned to double the number of its retail stores over the next two years - it currently has 8 flagship stores in China and 3 in Hong Kong. But, he added, Apple will invest in distribution "very cautiously because we want to do it with great quality."

Samsung, with a longer history in China, now has three times the number of retail stores as Apple, and has been more aggressive in courting consumers and creating partnerships with phone operators. It also appears to be in better position, over an arc of time, to fend off the growing assault of homegrown competitors such as Lenovo Group Ltd, Huawei Technologies Co Ltd and ZTE Corp, former company executives, analysts and industry sources say.

Apple declined requests for comment for this article.

VARIED MODELS

Samsung's history and corporate culture could hardly be more different than Apple's, the iconic Silicon Valley start-up founded by Steve Jobs and Steve Wozniak in 1976. Lee Byung-Chull started Samsung in 1938 as a noodle and sugar maker. It grew over the decades into an industrial powerhouse, or chaebol as Koreans call the family owned conglomerates that dominate the nation's economy and are run with military-like discipline.

Apple, by contrast, became the epitome of Californian cool, an image the company revels in. That hip image translates in China - its stores are routinely packed - but hasn't been enough to overcome the more entrenched Samsung.

A stuffy electronics bazaar in the southern Chinese city of Shenzhen illustrates part of the reason why.

Samsung Galaxys and Apple iPhones of different generations sit side by side, glinting under bright display lights as vendors call out to get customers' attention. With its varied models, Samsung smartphones outnumber iPhones at least four to one.

While Apple releases only one smartphone a year, priced at the premium end of the market, Samsung brings out multiple models annually with different specifications and at different price points in China.

And those models, analysts say, are loaded with features tailored specifically for the local market: apps such POCO.cn, the most popular photo sharing site in China, or the two slots for SIM cards (Apple offers one), which allows service from multiple cell carriers, either at home or abroad.

"The Chinese just love features. They want their phone to have 50 different things that they're never going to use," said Michael Clendenin, managing director of technology consultancy RedTech Advisors. "Apple just doesn't play that game. Unfortunately, if you want to hit the mainstream market in China, and you want a lot of market share percentage points, you have to offer the Swiss army knife of cellphones."

"SETTING THE PACE"

Analysts believe Samsung's increasing strength in China is a critical reason behind its rival's possible intention to introduce globally a new and cheaper iPhone model, as well as one with bigger screens - a staple of Samsung's offerings.

Said a Samsung executive with experience in China: "We definitely think we're setting the pace there. They are having to respond to us."

Most audaciously, Samsung has gone after Apple not simply by offering lower priced smartphones, but by attacking its rival directly in the pricier end of the market. "We put a lot of emphasis on the high end market in China," co-CEO J.K. Shin told Reuters in an interview.

Samsung launched a China-only luxury smartphone together with China Telecom marketed by actor Jackie Chan that retails for about 12,000 yuan ($2,000). The flip phone, named "heart to the world," is encased in a slim black and rose gold metal body. The sleek look - called "da qi" (elegantly grand) - is coveted by Chinese when they shop for cars, sofas or phones.

"There are a lot of 'VVIP's' in China, and for them we launched luxury phones promoted by Jackie Chan. This helps target niche customers and build brand equity," said Lee Young-hee, executive vice president of Samsung's mobile business.

While Samsung won't sell millions of these smartphones, the creation of the phone in conjunction with a carrier reinforces Samsung's willingness to go local - and tap into niche markets.

"The key point is that Samsung consistently adapts to the local market," said TZ Wong, a Singapore-based technology analyst with IDC.

Apple's latest mobile operating system offers links to popular Chinese applications like Sina's microblogging platform Weibo, but the application itself must be downloaded onto the phone. On all of Samsung's entries, it's already there.

"People know intellectually that Samsung is from Korea, but when it comes to the messaging there is always a local face," Wong said.

RETAIL PRESENCE

Samsung opened its first office in China in 1985 in Beijing - an era in which it was all but inconceivable that Apple and Samsung would end up in one of the world's most intense corporate grudge matches. Like other South Korean chaebols, Samsung was a first mover in China, using the market primarily as a base to produce electronics for the world.

In contrast, Apple's big push in China came only recently, with the advent of the smartphone age roughly five years ago.

The early entry gave Samsung an undeniable edge, and it adapted fast to a rapidly changing environment. By the mid-1990s, with the economy booming, Samsung made the strategic decision to treat the Chinese market not just as a production base, but to start marketing to China higher-priced electronics, said Nomura researcher Choi Chang-hee, who wrote a history of Samsung's experience in China.

That shift has meant Samsung's retail presence in China far outstrips Apple's. Aside from selling via the distribution outlets of the three major telecom carriers, Samsung also has a strong retail presence through its partners Gome Electrical Appliances and Suning Commerce Group, as well as its own "Experience" stores and small retailers all over the country.

Apple works through the same channels, but its relatively late entry means it has a significantly smaller presence. Samsung, for example, has more than 200 official distributors and resellers in Guangzhou province, while Apple lists 95.

Over the last two decades, Samsung has also taken pains to build relationships with Chinese government officials and -perhaps more critically - the three major telecom carriers.

The notion of the importance of connections - or "guanxi" - in China is occasionally overrated in business. Not, according to Samsung's Shin, in this case. "It's our core policy to keep friendly relationships with the operators," he said. In China, each carrier uses a different technology and that requires Samsung "to tweak our smartphones to their request."

"It's not easy," Shin said, "but we do this to be more operator friendly."

Contrast that with the ongoing negotiations Apple has had with China Mobile, the largest cellphone operator. For years the two sides have been unable to come to an agreement on revenue sharing, effectively precluding Apple from hundreds of millions of potential customers.

SCRUTINY FROM THE TOP

Samsung's reach extends higher than just the CEOs of the top state-owned telecom companies. Top executives have met each of the last several Chinese leaders, most recently Xi Jinping, who spent time in April with vice chairman Jay Y. Lee, son of K.H. Lee, Samsung Electronics chairman.

"What surprised me most," said Lee later, "was that they (Chinese leadership) know very well about Samsung. They even have a group studying us."

The Chinese government has also made clear it's well aware of Apple - though not always in a good way. In April, state media bashed Apple for its "arrogance," protesting among other things that its current 1-year service warranty was insufficient. Apple initially dismissed those criticisms, but Cook later apologized to Chinese consumers.

Samsung's success in China has its roots, one former executive said, in a previous obsession for the company: its desire not to replicate the mistakes made by Japanese rivals.

"Samsung spent a lot of time benchmarking Sony, Toshiba and Panasonic," said Mark Newman, who spent six years in Samsung's global strategy group and is now an industry analyst at Sanford C. Bernstein in Hong Kong.

"One of the things that came out of that is the realization that the insular approach has its drawbacks, and so Samsung has made an effort over the last 10 years to be much more global."

This strategy of decentralization is plainly evident in China, he said, home now to more Samsung employees than any country outside South Korea.

FIGHTING HIGH AND LOW

Samsung now leads in both low-end and high-end segments in China, according to IDC, and its logic of going after both ends of the market is straightforward. In China, where the average wage is roughly $640 per month, many users looking to upgrade from feature phones to smartphones cannot afford Apple.

By bracketing the market with multiple models, Samsung can breed deep relationships with customers, many of whom, market research shows, trade up to more expensive models as they get older. Playing high and low also positions Samsung to fend off the intensifying competition from Chinese firms such as Lenovo and Huawei and literally hundreds of smaller local players.

"That's where the next battle for Samsung will be fought," said Newman. "We'll have to see if Apple does introduce a new, cheaper model for China - and the world."

(Writing by Bill Powell, Editing by Bill Tarrant and Ian Geoghegan)

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