Apple’s Move to Stop Samsung Models Unlikely to Impact NFC Wallets

Apple Inc.’s motion to stop sales of eight Samsung Electronics Co. handset models may not have a strong immediate impact on the major mobile wallet providers but could give Apple important advantages in the mobile-payments market later on, experts tell Digital Transactions News.

Apple cited the Samsung models on Monday in a filing with the U.S. District Court for the Northern District of California following a jury verdict Friday awarding the Cupertino, Calif.-based iPhone and iPad maker $1.05 billion in damages in a case in which Apple accused Samsung of copying some of its smart-phone and tablet inventions. Of the 28 Samsung models found to have infringed its patents, Apple picked eight for the preliminary injunction it requested on Monday.

Some of these eight are obsolete models, but one, the Galaxy S II, is one of three smart phones that support the Isis mobile wallet. Isis, a joint venture of AT&T Mobility, T-Mobile USA, and Verizon Wireless, relies on near-field communication (NFC) technology to transmit payment details from a secure chip in users’ handsets to point-of-sale readers. The venture is expected to launch its service this summer in Austin, Texas, and Salt Lake City.

The other major wallet initiative that uses NFC comes from Web giant Google Inc., whose Google Wallet launched commercially nearly a year ago but has struggled to attract mobile carriers and card issuers. Still, of the four Samsung models that support Google Wallet, none is on the list Apple submitted to federal judge Lucy Koh (four other devices, from LG, HTC, and Asus, also support Google Wallet). Samsung’s latest Galaxy model, the Galaxy S III, works with Google Wallet but was not included in Apple’s suit.

Google earlier this month unveiled a revamp of its wallet that it hopes will make it more attractive to consumers. Among other changes, the tweaked product moves card credentials from the phone’s secure element to the cloud.

It was not immediately apparent how extensively the Isis wallet will depend on the Galaxy S II once the service launches. Isis did not respond to a request for comment regarding either Apple’s requested injunction or its expected launch date as summer draws to a close. Two other handsets, the Samsung Galaxy S Blaze and HTC’s Amaze 4G, also support Isis. “It could obviously create problems for Isis if the number of NFC-equipped models available gets reduced, but they have access to other models and manufacturers so they should be able to bridge any short-term gaps,” observes Rick Oglesby, a senior analyst with the Aite Group LLC, Boston, in an e-mail message. Also, plenty of the devices are already in the market, with 24 million units having been sold worldwide by June 1, according to a Samsung announcement.

It remains far from certain that the injunction will be granted, and even if it is, observers say, Samsung is likely to ask for a stay pending its appeal of the jury verdict. As things stand, a hearing on the requested injunction will not be held until Dec. 6.

Instead, the impact of Apple’s effort may have longer-term reverberations. It could make it harder for rival smart-phone makers to design and manufacture products, giving Apple an advantage. “Regardless of the capabilities of the phone (NFC or otherwise), manufacturers will need to very carefully assess every product that they bring to market, so it will slow down their production cycle and ability to launch new products / technologies,” says Oglesby. That, he says, might increase Apple’s control of the handset market and allow it to introduce NFC products while rivals are hamstrung.

But even this scenario, while possible, doesn’t seem likely, given the fact that only a tiny minority of retail locations are equipped with the contactless readers needed to consummate transactions, and even fewer have the technology to make NFC-based loyalty programs and offers possible, Oglesby says.