Court battle gives glimpse into Apple's core

6 Aug, 2012

Struck by a daily onslaught of rumours and speculation about the next iPhone or iPad, Apple always refuses to discuss future product launches.

Surprise is an essential ingredient for Apple's product launches, generating millions of dollars in free press coverage, as testimony from senior Apple executives in the technology group's court battle in California with its South Korean arch-rival Samsung showed.

However, Apple's battle over intellectual property rights has undermined its arsenal of marketing strategies and reliance on secrecy as evidence obtained and submitted to the public court by Samsung has spoiled some of its plans with the revelation of discussions last year about a smaller iPad.

A San Jose courtroom last week heard detailed testimony from Apple executives who rarely give press interviews, detailing the development and marketing strategies behind the technology industry's biggest hype machine.

The secretive technology group was required to reveal that it spent $535m marketing the iPad and iPhone last year, with the budget for its tablet computer doubling over 2010 to overtake the smartphone's ad spend, figures it does not usually disclose in financial filings.

The nine men and women who make up the jury in the four-week trial have to decide how novel the iPhone and its tablet successor really were. Apple accuses Samsung of copying its designs while Samsung says touchscreen smartphones with black glass faces and rounded corners predate the iPhone, invalidating Apple's claimed intellectual-property protection.

Samsung's courtroom strategy interferes with Apple's launch plans at the same time as aiming to show the jury that its US rival looks to competitors for inspiration, as well as having its team of designers create inventions around, according to one testimony, a kitchen table.

Scott Forstall, Apple's senior vice-president of iOS, the iPhone and iPad operating system, and Phil Schiller, its head of worldwide marketing, both members of its executive board, told a San Jose court that the idea for the iPhone originated in 2004 from early work on what would later become the iPad.

On Friday, the jury heard from Mr Forstall, who had worked with Mr Jobs since 1992, and led development of the current Mac operating system, OSX, before joining a top-secret initiative to develop a tablet device in 2004.

Jurors were shown several tablet prototypes and were told that Apple's success with the iPod had prompted discussion both internally and externally about what the company could do next, ranging from cameras to cars. The tablet initiative was put on hold for a few years and development efforts were transferred to "Project Purple" "the code name for what would become the iPhone.

Questioning and evidence by Samsung's legal team revealed that Apple had originally discussed using the original iPod's "click wheel" on the iPhone. Internal Apple discussions about a Samsung device with a circular keypad were shown to the court which, Samsung's attorney argued, showed the iPhone's developers had looked to its South Korean rival for "inspiration" – part of its attempt to undermine Apple's patent claims.

"I never instructed anyone to copy anything from Samsung," Mr Forstall said later.

During Mr Schiller's testimony on Friday, he described how Apple builds the hype around new products.

Immediately after the first iPhone was unveiled in January 2007, Apple did not spend any money on advertising, instead trading on the excitement when Mr Jobs unveiled the device. Dedicated Apple employees are charged with "buzz marketing" and securing product placement in TV shows and films, Mr Schiller said.

Then closer to the June launch date, Apple began a TV, billboard and press ad campaign that taught people how to use the new device, he said. Total advertising spending for the iPhone has grown from $98m in 2008 to $226m in 2011.

Apple's market research into iPhone owners showed that its customers valued its design and its user interface highly – key planks of its case against Samsung. This approach makes copycat products particularly damaging, Mr Schiller argued, because customers might become confused.

In cross-examination, Samsung's legal team sought to show that touchscreen phones and mobiles that could play music and movies predated the iPhone.

Samsung went on to show other market research, which it suggested that design was a lower priority than other factors, such as price, when Americans bought smartphones.

But one Apple secret remained intact. Apple's public-relations team looked on nervously on as Mr Forstall was asked by Samsung's attorney about details of the next iPhone, which his questioner suggested would have a different design.

To the disappointment of the assembled press pack, and relief of the PRs, Mr Forstall declined to answer.

The trial continues.

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