Sunday, October 7, 2012

Samsung leverages jury verdict and preliminary ITC ruling against Apple's FRAND theories

We are now less than two months away from the big Apple v. Samsung post-trial hearing at which the parties will try to convince Judge Koh of their positions on what consequences the jury trial should have (or whether there should be a whole new trial, which is Samsung's preference). Besides issues relating to remedies and ways in which the court might overrule the jury as a matter of law, non-jury claims will also be on the agenda after Judge Koh granted an Apple motion to brief its non-jury FRAND defenses and claims separately from the other post-trial issues and also allowed Samsung to bring such claims.

It was clear from the beginning that Samsung's primary interest was to receive more space for its post-trial argument. Having lost on the vast majority of issues put before the jury, Samsung has so much Rule 50 (overrule-the-jury) stuff to raise that its Rule 50 motion per se just consists of conclusory statements and references to previously-filed documents. Apple has fewer Rule 50 issues and can afford the luxury of making a more elaborate and coherent case. But a couple of days ago Samsung accused Apple of circumventing the page limits imposed by the court. Samsung complained that Apple put information into its declarations and exhibits that ought to appear in the actual motion. I don't have an opinion on that claim. What I can say, however, is that Samsung's so-called "non-jury claims" include, besides patent indefiniteness issues that I believe Judge Koh would have addressed a while ago in order to streamline the case for trial, some typical Rule 50 stuff such as a request to deem Apple's patents-in-suit obvious and a question related to willful conduct. By contrast, Apple's FRAND theories are undoubtedly claims that were not put before the jury (though some FRAND-related counterclaims were addressed by the jury and decided in Samsung's favor).

The parties filed their motions on September 21 and their opposition briefs late on Friday, October 5. For the reasons I just outlined, I really think Apple's FRAND defenses and counterclaims are the most important part of these non-jury claims.

The introductory part of Samsung's pleading ends with the remark that "Apple's nearly identical claims have already been rejected at the ITC". Yesterday I published my analysis of that preliminary ITC ruling. It's true that Administrative Law Judge E. James Gildea's initial determination is completely unfavorable to Apple's FRAND defenses in that investigation.

Samsung also argues that the jury verdict against a couple of Apple's FRAND counterclaims necessarily make all of Apple's FRAND theories fail, which I think goes too far. There's no question that the jury verdict poses a credibility problem to certain parts of Apple's FRAND theories, but the failure of one doesn't dictate the failure of the other. For example, an antitrust claim can fail just because there is no evidence of past damage (as it happened in an Apple v. Motorola FRAND obligations lawsuit in Wisconsin), but an injunction would result in future damage and the same competition issues could therefore serve as a defense. There are major overlaps between what the jury decided and what Apple brought as a non-jury claim, but the tests aren't absolutely identical. That's why Apple's FRAND defenses are still going to be a priority item at the December 6 hearing.

One item on which Samsung may indeed be right about the impact of the jury verdict is Apple's claim under California unfair competition law. Samsung points to something which I remember well: Judge Koh looked at the California competition claims as pretty much a mirror image of Apple's federal antitrust claims (Sherman Act) in her ruling on a Samsung motion to dismiss an amended version of those claims. Apple thnks that if the court overrules the jury on its FRAND contract claims (even if it doesn't overrule it on Apple's federal antitrust claims), its California competition claim can succeed. I haven't researched this question in detail, but this is definitely the claim on which Samsung has its relatively strongest point that the jury verdict, unless there's a new trial or a Rule 50 decision, allows only one outcome.

In terms of Apple's theories, Samsung points to the fact that the jury neither believed that antitrust law was violated by untimely disclosure of essential patents nor that there was an antitrust violation due to unFRANDly royalty demands. But again, a "No" by the jury to an antitrust claim could have had different reasons.

After watching this wide-ranging dispute (not just the California lawsuit) for a while, I believe Apple is right on the 2.4% royalty demand but I'm increasingly skeptical of Apple's allegations of what would amount to ambush tactics on Samsung's part through the allegedly untimely disclosure of essential patents (including patent applications. Apple has been making these claims for a while. It even tried to prevail on them ahead of trial, but that effort never went anywhere and was abandoned. It couldn't convince the jury, nor Judge Gildea at the ITC. I wasn't there when Samsung participated in ETSI working group meetings relating to 3G/UMTS, and I haven't seen all the evidence. Maybe Apple has a point, but so far there's really no indication of standard-setting-related misconduct by Samsung.

This is just not about the presumption of innocence. There are things to admire about both Apple and Samsung, and it's not like one of them is inherently evil. Looking at how difficult it is for Apple to make headway with its allegations of standard-setting misconduct and at what the decisions and filings in the different proceedings indicate, I'm inclined to believe that Samsung used to be a good citizen of the standard-setting universe until it got sued by Apple and decided to cling to its SEPs as a strategic weapon, in an act of desperation because it lacks powerful non-standard-essential patents of the kind that would give it leverage against Apple.

I don't think Samsung's 2.4%-of-average-selling-price royalty demand is defensible. Nor do I believe that rejection of such a ludicrous demand entitles Samsung to the pursuit of injunctive relief in an unprecedented global enforcement campaign. But I don't see any indications of Samsung having a history of SEP abuse. It appears that Samsung was very cooperative and used its SEPs for bartering with other SEP holders. It actually had to defend itself in court against SEP assertions by others. It's just trying to get maximum leverage out of its SEPs in the current situation, which is not an excuse, but an explanation.

In a letter sent to Samsung on April 30, 2012 (which was also mentioned in the preliminary ITC ruling I analyzed yesterday), Apple addresses in detail why Samsung's 2.4%-of-ASP demand is anything but FRAND. In light of page limits and limited speaking time at hearings, it would probably serve Apple well to focus on this key issue (and the related issue of injunctive relief). But the usual strategy in these disputes is to throw in the kitchen sink and Apple will probably keep trying to prove that Samsung made untimely disclosures of essential patents. So far, that effort doesn't have traction, and if it still doesn't get traction at the December 6 hearing, I'll be even more skeptical of those allegations than I am today.

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