Chapter 23: Possessed by Murong of Gusu

Kwon Sun-woo didn’t beat around the bush and went straight to the point: “Remember last year when you and I helped Deputy Director Pan rack up some achievements at that MP3 electronics factory in Kaesong? Since then, I’ve been paying attention to the MP3 industry layout. Recently, Samsung and Apple are gearing up for a patent lawsuit over MP3s. The Foreign Trade Department has already stepped in to mediate. I’ve got a few friends there, so I’m well informed.”

In Dongyi, the Ministry of Foreign Affairs and the Ministry of Commerce are merged. Anyone with a few contacts in this circle can get early intel on multinational trade disputes and lawsuits, sometimes even on pre-trial preparations and evidence exchanges.

Samsung, the top of Dongyi’s five major conglomerates and the largest exporter, naturally has the Foreign Trade Department involved in mediating every foreign-related lawsuit it faces.

Last May, Gu Cheng rushed to file several MP3 patents domestically, trying to trap Apple. Naturally, he was keenly interested in the insider details. Upon hearing Kwon’s topic, he urged him, “Cut to the chase!”

Kwon laid out the facts clearly: “Samsung copied part of the iPod’s design and launched a brand-new MP3 player in Q2. It sold well locally and in Fusang. Apple then sued Samsung using the iPod’s patents.”

Gu Cheng was stunned. “They blatantly copied the design? Isn’t Samsung afraid of lawsuits and having to pay damages?”

Kwon smiled knowingly. “You don’t understand the game here. When Apple launched the iPod, they didn’t immediately publish the patents. So even if Samsung copied it, it’s not ‘willful infringement’—at worst, they owe some ‘reasonable usage fees.’”

With that explanation, Gu Cheng immediately grasped the situation.

Patents don’t receive legal protection immediately upon application. After filing, if the owner doesn’t request disclosure, there’s an 18-month confidential examination period. Plus, the substantive review can take up to three years.

Especially during those first 18 months, because it’s a ‘secret review,’ the public is theoretically unaware of the patent application. So even if someone infringes, it’s legally deemed ‘innocent.’

In reality, anyone with half a brain knows a giant like Apple would file the patents before product launch. But as long as “theoretically I’m allowed not to know,” Samsung can feign ignorance, copy the design, produce, and sell for a while.

Once Apple challenges, proactively discloses their previously secret application, Samsung stops the infringement and pays a small sum as a token.

At that point, what Samsung pays is far less than the punitive damages owed if they knowingly infringed after the patent was public.

If the patent’s already public and Samsung still infringes, the compensation is punitive. But before disclosure, ‘innocent use’ only requires reasonable licensing fees as compensation, which Apple can’t arbitrarily inflate.

In this case, Samsung is clearly playing dumb while knowingly exploiting the loophole, but Apple isn’t entirely innocent either.

Gu Cheng could easily imagine that if the infringer wasn’t a behemoth like Samsung but a smaller company with minor infringement and low sales, Apple might not disclose their patent early. Instead, they’d keep the application secret for the full 18 or even 30 months (including priority dates after withdrawal and refiling).

This strategy is like baiting—intentionally leaving a trap, letting small rabbits and cats step in unnoticed, then waiting for cautious tigers and leopards to fall, and finally closing the net.

Gu Cheng wasn’t concerned with the mutual scheming of Samsung and Apple; he focused on his own matters. “So once this case goes public, the iPod’s patent application date should be revealed, right? Do we know when Jobs applied?”

Kwon replied without hesitation, “July last year—he released the iPod in late October and started mass shipping in January this year. Given the development cycle, the iPod wasn’t difficult—just three months to develop. When Samsung filed their complaint, they even emphasized this, arguing Apple’s patent lacked ‘substantial innovation’ and asked for invalidation.”

Gu Cheng felt relieved; he’d applied domestically in May last year, two months before Jobs.

Gu Cheng and Jobs were like two hunters setting traps in a forest, both disguised as snipers, unaware of each other’s locations. Gu Cheng had worried whether his pit was early enough, ahead of Apple’s.

Now, with Samsung as the nighttime scout triggering Apple’s trap prematurely, Gu Cheng hidden in the shadows happily realized he had indeed set his trap earlier.

“No rush,” he thought. “I’ll sell physical albums for another year. Once China’s internet winter passes, speeds improve, and MP3s become widespread, I’ll set off this patent bomb.”

Jobs thought he had outsmarted Li Zairong but surely didn’t expect someone behind him ready to strike from the shadows.

Yet Gu Cheng wasn’t ready to relax completely. He needed to know the details of Samsung’s invalidation claim against Apple’s patent. So he humbly asked, “Brother, you’ve got friends in the Foreign Trade Department, right? Can you keep an eye on this case and help me collect all of Jobs’ defense statements? I’m interested in the details.”

Kwon knew Gu Cheng had collaborated on an MP3 electronics factory shell and had some R&D products but didn’t know Gu Cheng was setting a trap for Jobs. Surprised by his interest in details, Kwon nonetheless shared everything he’d heard.

“You might not fully understand patent law,” he began. “For an invention to qualify, it must show ‘outstanding substantive innovation’ and ‘significant technical progress.’ You can’t just get a patent for something with a little novelty.

“If a technology is deemed a ‘simple combination of existing technologies or is an obvious result deducible by professionals from known knowledge,’ it can’t get a patent.

“Even granted patents can be invalidated if competitors sue and the patent office finds the invention ‘a simple combination of existing tech and common knowledge, lacking substantial innovation.’

“In this case, Samsung argues that MP3-related features—large storage hardware, LCD display for lyrics and playlists, scroll wheel controls—are all obvious existing tech. Jobs just combined these three, so how is it an invention? The short two to three months’ development cycle proves it wasn’t difficult, just a quick realization of an idea.”

Gu Cheng nodded slightly; Samsung’s legal team was sharp, hitting the core issue.

“What’s Apple’s defense?”

“Kudos to Jobs’ side. Their main argument is that whether a technology shows ‘outstanding innovation and significant progress’ shouldn’t be judged solely by whether it’s a combination of existing technologies and common knowledge.

“In other words, difficulty of development isn’t the yardstick for innovation. If the invention ‘overcomes existing technical biases and achieves unexpected effects not anticipated by experts,’ it qualifies as ‘outstanding substantive innovation.’”

A brilliant defense.

“Overcoming prior technical biases” is a classic argument in patent lawsuits against claims of mere combinations of known tech.

If proven, many seemingly simple inventions, just a flash of insight, can be saved and win the case.

To explain in layman’s terms:

In the late 19th century, metallurgists observed that adding manganese to steel increased hardness but also brittleness—the more manganese, the harder and more brittle the steel.

By this ‘common knowledge’ or ‘technical bias,’ any further increase in manganese wasn’t patentable—it was just an extension of existing knowledge.

But in 1882, Hadfield discovered that previous tests only went up to 5% manganese. He pushed testing beyond 12%, where the steel’s properties changed drastically: it became hard, tough, and wear-resistant, with brittleness disappearing.

In 1883, the British patent office granted him the patent.

Because this overturned ‘existing technical bias’ and produced an unexpected effect, it counted as ‘substantial innovation’ under patent law, even if it was a ‘simple combination’ of existing tech.

In other words, “You know adding manganese makes steel harder and more brittle. Why didn’t you invest to test further for unexpected effects?”

Hadfield’s case became a landmark precedent in common law countries, cited worldwide and codified under the Paris Convention as a standard for assessing patent creativity.

Jobs’ point was clear: “Li Zairong, you know large hard drives can be simply combined with MP3. Why didn’t Samsung develop new products around this technology?”

Thus, Jobs proved the iPod patent’s innovation.

Sadly, every word Jobs said today would, more than half a year later, boomerang back to him in a bitter reversal.

A cold, excited smile crept across Gu Cheng’s lips. Those who battled Murong in Suzhou knew the more exquisite your skills, the more tragic your end.

Anyone who knew him shivered when they saw this expression.

Who was he scheming against now?

“Brother, one favor. You’ve got friends in the Foreign Trade Department, right? Help me monitor this case from start to finish. Get me all of Jobs’ defense statements in full. Can you do that?”

Gu Cheng made his request, knowing Western legal procedures were slow; even out-of-court settlements could drag on for years. He’d rely on Kwon’s contacts to gather updates and save on legal fees.

Copy Jobs’ defense statements verbatim, just change the name. Then hire a cheaper lawyer and win the case.

“Why do you want these?” Kwon wondered but decided not to overthink it. “Alright, it’s no trouble. I’ll help.”

In good spirits, Gu Cheng encouraged him, “You mentioned there were two business news items earlier. What’s the second one?”