July 23, 2017

Apple-Samsung Round Two: And the Winner ….?

The outcome of the second patent trial of the century between Apple and Samsung which resulted in the jury finding that Samsung must pay Apple $119.6 million and that Apple must pay Samsung $158,400 for its counterclaims of patent infringement has been described as a “mixed verdict” for Apple. Indeed, it was far less than the $2.2 billion in damages sought by Apple and well short of the nearly $1 billion that Apple had been awarded in the first Apple-Samsung patent trial of the century. What went wrong this time around for Apple? Why was Apple awarded far less in damages when it was seeking roughly the same amount as in the first trial? The answers to these questions, in part, may depend on Apple’s difficulty in selling the second jury a story of how Samsung stole its intellectual property and the success of tactical decisions made by Samsung’s attorneys.

Unlike in the most recent trial, Apple was able to turn the first trial into validating Steve Job’s core belief that Apple’s intellectual property was “ripped off” by its competitors. Apple asserted in the first trial that Samsung “systematically copied Apple’s innovative technology and products, features, and designs, and has deluged markets with infringing devices in an effort to usurp market share from Apple.” Because that trial involved design patents and, essentially, the overall similarity of the competing products, Apple was able to turn what otherwise would have been a boring patent trial involving highly technical matters into an inquiry as to whether Samsung flagrantly copied the “look and feel” of the iPhone and iPad. Because the second trial did not involve design patents and focused on whether Samsung infringed highly technical Apple utility patents, the issues confronted by the jury were not as easily understood.

On this point, it is important to understand that there are two very different kinds of patents that can be obtained from the United States Patent and Trademark Office, utility patents and design patents. Utility patents are the most common type of patents and generally involve the manner in which an invention is used and work and may be granted to anyone who invents a new and useful method, process, machine, device, or any new and useful improvement of the same. A utility patent may be awarded for a computer software invention.

In contrast, a design patent protects only the ornamental appearance of an invention, not its utilitarian features. The general test for infringement of a design patent is relatively simple: whether the alleged infringer’s product designs appear substantially the same as the patentee’s designs. While a patentee can buttress its evidence of the similarity of designs through the testimony, for example, of industry observers, consumers, and business partners, the jury can often decide themselves by using their own eyes in a side-by-side comparison if the products are substantially the same. It is far easier for a jury to decide whether a party has infringed a design patent than a utility patent, and certainly does not depend on understanding highly complex technical matters.

The claims of design patent infringement in the first trial gave Apple the opportunity for being able to tell the jury the “story” of how Samsung “ripped off” Apple, and provided the jury with an opportunity to decide with their own eyes whether the products were similar. Given the similarity in appearance between these products and Samsung’s competing products, the Samsung attorneys faced the almost impossible task of convincing the jury that Samsung did slavishly copy Apple’s products.

In comparison, the second trial did not involve allegations that Samsung infringed Apple design patents. Apple asserted that Samsung infringed 5 utility patents for the sale and importation of certain products. All of these patents relate to software features, such as quick-links, universal search, background synching, slide-to-unlock, and automatic word correction. Overall, Apple argued that the patents enable ease of use and make a user interface more engaging. Samsung also alleged that Apple infringed two utility patents for the sale of the iPhone 4, 4S, 5 and two generations of the iPod Touch. The jury determined that certain of Samsung products infringed three of the five patents asserted by Apple and awarded Apple $119.6 million. Apple was ordered to pay Samsung $158,400 for infringing one of Samsung’s patents. Samsung had asked for $6.2 million in damages, and it had argued that even if it had infringed all of Apple’s patents, it only owed $38.4 million.

Because the second trial did not involve claims of design patent infringement, the jury could not decide the matter of infringement based simply on a side by a side comparison, but had to make their determination based on evidence relating to complex technical matters that the jury reportedly used a whiteboard to decipher. Based on this and intricate determination of how to assess damages in a patent infringement matter, it becomes easier to understand why the jury only awarded Apple 6% of what it was seeking.

Apart from the second trial involving more complex technology, Samsung’s attorneys’ litigation strategy in making the trial about something other than Samsung’s infringing acts apparently was also successful. Indeed, the comments from the jurors after the trial made clear that they believed that Google should have been at the defendant’s table as well. Unlike the first litigation which involved Samsung’s own design of phones and tablets, the second case involved patents relating to the Android operating system which Google had provided to Samsung without cost. Apple argued that Samsung’s patent infringement was unrelated to Google and the Android operation system, but it was disclosed at trial, that Google was assisting Samsung with its defense for two of the patents. The story of the second trial was not how Samsung copied Apple’s products but how Google supplied Samsung with allegedly infringing technology and that the real fight should be between Apple and Google. While the jury found that Samsung did not infringe these patents, the jury said it was influenced by information that Goggle was helping Samsung mount and fund its defense. According to press reports, the foreman of the juror, Tom Dundam, a retired IBM software exec, stated after the trial, “I guess if you really feel that Google is something that the cause behind this, as I think everybody observed, then don’t beat around the bust. The fact is Apple has [intellectual property] they believe in. So does Samsung. So does Google. Let the courts decide, but a more direct approach might be something to thing about.” Given this sentiment, the jurors may have felt reluctant to award Apple two billion dollars in damages, when it believed that the dispute was really between Apple and Google and Samsung was simply a stand-in.

Samsung’s trial strategy in seeking to diminish the value of patents in general also was apparently successful. Samsung filed counterclaims against Apple asserting that Apple infringed two of its patents relating to camera and folder organization functionality and video transmission functionality. However, instead of seeking hundred of millions or even billions of dollars in damages for infringement of these patents or asserting other patents that conceivably were worth more, Samsung sought a mere $6.2 million in damages. Putting aside the trial advantages gained by being a counterclaimant as opposed to simply being a defendant, the jury on some level was probably asking themselves why are the Apple patents worth so much more than Samsung’s. While this is an apple to orange comparison, it does tacitly support Samsung’s defense that at most it only owed $38.4 million and not the $2.2 billion sought by Apple.

It is unlikely that the outcome of the most recent trial will have a major impact on the smartphone patent infringement war. In the short term, it is almost certain that both Apple and Samsung will appeal the verdict. Apple will challenge the jury’s verdict to award only $119.6 million in damages and Samsung will likely assert that even that damage award is grossly exaggerated. In the long term, the mixed verdict will likely mean that both Apple and Samsung will use patent litigation as one way to chip at the other’s smartphone market share. However, the settlement between Apple and Google that occurred after the verdict in this case may be the necessary catalyst to push the parties to settle their differences. But since the settlement agreement apparently did not include cross-licensing, the patent war between Apple and Samsung is likely to continue for the foreseeable future.

 

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