It's now official that a new Apple v. Samsung trial in California could lead to a total damages award exceeding the original $1 billion verdict. It could also result in a reduction. But Samsung itself has just confirmed in a pleading that the new trial is an opportunity for Apple to win even more than before. On March 1 there were fundamental misconceptions out there with a lot of people believing that the verdict had been "slashed" (down from $1.05 billion to $600 million), but I immediately pointed out that "the second damages trial over the 14 products with respect to which the jury award has been vacated (Galaxy Prevail, Gem, Indulge, Infuse 4G, Galaxy SII AT&T, Captivate, Continuum, Droid Charge, Epic 4G, Exhibit 4G, Galaxy Tab, Nexus S 4G, Replenish, and Transform) could result in a figure that is lower or higher than (or, theoretically but unlikely, identical to) the one reached by the jury in August".
On Tuesday I mentioned this fact again and explained that "a new jury [...] could theoretically even arrive at a higher number given that the first jury granted Apple only about 40% of what the court allowed it to present as a damages claim". Judges are gatekeepers with respect to what damages theories are presented to a jury, so Apple apparently had a plausible, defensible claim to a total of $2.5 billion. The jury sided with Apple on the vast majority of liability issues, but it didn't award Apple even half of what it legitimately asked for in damages.
Now Samsung has just confirmed in a late-Friday filing that "Apple can seek even more damages on these products in the new trial".
Just like Samsung, I was always talking about a possibility, not about the likelihood of such an outcome. I'm sure that if you asked Samsung, they'd tell you that while Apple can seek even more damages, Samsung is convinced it's not entitled to them and believes that it's now in a position to at least bring down the damages figure. The $600 million part of the verdict that stands is what Apple has already won (unless the appeals court overrules Judge Koh) -- and the vacated amount of $450 million can theoretically be lost in its entirety (rather unlikely), may be lost in part (far more likely), or it could also be replaced with a greater amount.
In some ways the March 1 damages order ups the ante for Apple. In particular, it shortened the product-specific periods of time with respect to which Apple is allowed to seek damages because Judge Koh corrected some of Apple's notice dates (without constructive notice of actual knowledge, no damages). But the impact of this on the damages base isn't huge: even the most conservative notice dates are in the spring of 2011 (when Apple filed and once amended its complaint), and Samsung's U.S. sales have been on a hockey-stick curve, making sales in late 2010 and early 2011 far less significant than sales between the second quarter of 2011 and the summer 2012 trial. Also, the first jury clearly misapplied the law with respect to the Galaxy Prevail (I agreed with Samsung on this one already in September). That mistake was worth tens of millions of dollars. Still, even after all of the necessary adjustments Apple will still be able to demand far more than $450 million with respect to the 14 "vacated damages" products. If the new jury doesn't reevaluate liability, or if it does but arrives at a result materially consistent with the first jury's findings, and if the new jury adopts Apple's damages claims as the right number or alternatively decides to adopt a higher pecentage (than the first jury's 40%), then the total damages award could be substantially greater. It's hard to predict what the future jury will do, but between 40% and 100% there's a whole lot of room for improvement in Apple's favor, while the extent to which Judge Koh's March 1, 2013 decisions limit Apple's claims in a subsequent trial is actually not dramatic (if she had sided with Samsung on a whole liability claim, especially with respect to design patents, where most of the money is in this case, then it would be accurate to assume, or it might then even be a certainty, that the second trial can't work out better for Apple than the first, but the adjustments that have happened aren't that huge).
The focus of most reports and comments has been on what Apple presumably "lost". Samsung certainly wanted to vacate as large a portion of the damages award as possible, and getting $450 million vacated is no small achievement -- but it would be foolish to think (or at least ignorant of the damages claim Apple was actually allowed to present last year) that the only way is down at this stage.
There are three kinds of people who are responsible for the widespread misconceptions concerning a "slashing" or likely reduction of the damages award:
A lot of people who comment on these issues simply don't analyze them -- and the law -- in sufficient depth. Judge Koh's order said that damages of $450 million were "stricken". It was correct, and I, too, adopted that term in the headline of my post, but I immediately clarified in the first paragraph that "stricken" in this case means "vacated" -- a clarification many others failed to provide.
I saw some commentary from undisputed experts in patent law who avoided the mistake of the first group but according to whom the final amount would be somewhere between $600 million and the original $1.05 billion ("will get smaller", "less than the original $1 billion"). Samsung's filing now shows that these statements, at least in that definitive form, were wrong. A reduction is neither a given nor can it be reasonably predicted considering that there is still so much upside left for Apple. I guess it's just that this is a huge case and the devil is in the details, including the detail that the jury awarded only 40% of the Daubert-surviving claims. At first sight the billion-dollar verdict looked like Apple had won it all, making it easy to forget that it could have obtained more than twice as much.
There may also be a third and small group out there: people who knew that anything including a higher award could happen but who didn't want to say so because they're biased. Or, more likely, who could have researched this in detail if they had wanted but would only have done so if they had expected to identify something that makes Apple look bad or weak.
It sometimes feels like swimming against the tide when you have reporters who reach many millions of readers, recognized experts in patent law (whom you, too, respect a great deal but who just may not have followed this particular case in full detail) and anti-Apple/anti-patent zealots unanimously (though for different reasons) say the opposite of what you consider to be a reality. That's why I'm always glad in this environment, in which a rational person striving to get it right may be misperceived to be a pro-Apple and/or anti-Android propagandist, when a minority position I take gets validated later. Like in this case. I wish to thank all those who already knew before that whatever I say, I say out of honest conviction and based on very hard work in terms of granular monitoring and research.
Procedural context and parties' proposals for how to proceed from here
Samsung made the statement confirming a potentially higher damages award in a reply brief (which it filed late on Friday and which I've uploaded to Scribd) reinforcing its arguments for a partial final judgment and a stay pending appeal of that partial judgment, and for the first time addressing Apple's claim that the court's March 1, 2013 damages order erroneously vacated $85 million in damages relating to two Samsung phones (the Infuse 4G and the Galaxy S II AT&T).
The parties are presently debating, in filings with the appeals court (for the Federal Circuit) and Judge Lucy Koh's court in the Northern District of California, the best way to resolve the case against the background of the aformentioned March 1, 2013 order vacating approximately $450 million in damages and requiring a new trial to fill the void created by that order. In a nutshell, these are the parties' related positions and preferences (at a high level, Samsung obviously wants to stall because it currently isn't affected by any remedies despite a multiplicity of infringement findings, while Apple wants to press on even if there's a risk of needing a third trial in this case):
Samsung says that a new trial that would focus exclusively on damages with respect to 14 (of the 28) accused products violates its Seventh Amendment rights, so a new jury would also have to reevaluate the merits (liability issues such as infringement and validity) with respect to those products. Whatever the scope of a second trial will be, Samsung has already requested a partial final judgment with respect to the other 14 products (the ones with respect to which the damages verdict is still intact) under Rule 54(b). If the court enters such partial judgment, Samsung will immediately appeal it to the Federal Circuit, wants Judge Koh to stay the proceedings in California pending the appeal, and will seek consolidation of its appeal with Apple's already-ongoing appeal of the mid-December denial of a permanent injunction, which will delay resolution of the question of injunctive relief, which is the most important one in this dispute.
The strength of Samsung's proposal lies in the fact that even if only parts of it were adopted (for example, partial final judgment is granted, but the appeals court keeps injunctive relief and liability/damages issues separate), the courts would conserve resources and a second California trial in this first case (as an aside, there will also have to be, presumably next year, a first trial in a second California case) would have the benefit of guidance from the appeals court on some of the relevant issues, which might greatly reduce the likelihood of needing a third trial.
Apple wants a focused second trial only to redetermine certain parts of the damages amount. It opposes a partial final judgment because it believes the appeals court would most likely send the case back to Judge Koh without the useful guidance Samsung claims it could provide. Apple argues that its claims are patent-specific, not product-specific (product-related issues only being subsets of patent infringement claims), and that partial judgment is only an option for claims that have been resolved in their entirety. Apple obviously wants the appeal of the denial of an injunction to go forward in the meantime and says Samsung should appeal the liability and damages issues only after Apple's claims have been resolved by the district court with respect to all products.
Apple's strongest point is that "justice delayed is justice denied". Unfortunately for Apple, most U.S. courts (including the United States District Court for the Northern District of California) are much less receptive to this argument in patent infringement cases than, for example, the ITC or German courts. Case in point: Apple just lost a (minor) procedural skirmish with this argument when it opposed a Samsung request for an extension of time for its brief answering Apple's opening brief in the injunction appeal. But if Apple convinces Judge Koh that a partial final judgment is premature and that there would be considerable risk of an appeal being deemed premature, in which case there would only be a delay and somewhat of an embarrassment for the district court, then it will indeed thwart Samsung's plan and get a new damages trial before Samsung gets to appeal.
Samsung opposes Apple's request for the court to correct an "error" regarding two products
On Tuesday I reported on Apple's conditional motion for reconsideration seeking to reinstate the damages award with respect to the Infuse 4G and Galaxy S II AT&T phones. I said that publicly-accessible documents I researched supported Apple's theory, certainly with respect to the S II AT&T and probably also the Infuse 4G, though the situation concerning that one is slightly more complicated.
Samsung challenges Apple's position on procedural and substantive grounds, but mostly procedural. To the extent that Samsung makes substantive arguments, those apply only to the Infuse 4G and don't address the S II AT&T at all. The S II was released after the Infuse 4G, and Samsung doesn't give any reason for which the court made the right decision by vacating the related damages.
Samsung stresses that the standard Apple has to meet here is that it must show a "manifest error": even a "clear error" would not warrant reconsideration. And it says that Apple now raises arguments it could have raised before (when it opposed Samsung's motion for judgment as a matter of law). I'm not convinced of this claim. Apple certainly had a different focus when opposing Samsung's JMOL motion, but it also couldn't anticipate that Judge Koh was going to inconsistently apply a certain set of rules to the damages issue. Had Apple known, I'm sure it would have placed more emphasis on the joint pre-trial statement and the release dates stated in it.
Also, Samsung argues that the dates Apple is referring to are the dates of first sale by carriers to end users, not by Samsung to carriers. I doubt that there's a lot of delay between a shipment by Samsung to a carrier and the carrier's distribution of products to its own customers. At least with respect to the S II AT&T I can't see how this would be relevant; the Infuse 4G raises more difficult issues, and a few weeks could make a difference in that context.
The statement on potentially higher damages at the second trial is part of Samsung's criticism of the fact that Apple brought only a conditional motion for reconsideration. I'll now quote that entire paragraph:
"Second, Apple's gamesmanship goes further, as its request and motion for reconsideration are merely conditional: Apple asserts that the Court made 'errors,' yet wants the Court to correct these purported errors only if Samsung's motion of entry of a Rule 54(b) judgment is granted and Apple's request for a 'prompt new trial' is denied. (Dkt. 2283, at 2:11; see also Opp. 15 ('[T]he Court's March 1 Order contains errors . . . which should be corrected before judgment is entered.') (emphasis added); Dkt. 2289, at 1:2-3 ('If despite that opposition, the Court intends to enter a judgment pursuant to Rule 54(b), Apple moves pursuant to Civil Local Rule 7-9(a) . . .') (emphasis added).) Thus, Apple seeks a result that would enable it to use the $85 million final award on the Galaxy S II (AT&T) and Infuse 4G as additional leverage against Samsung during the pendency of the appeal if Samsung's Rule 54(b) motion is granted, but if Samsung's Rule 54(b) motion is denied and Apple gets an immediate new trial, then Apple wants the Court to simply ignore the “errors” it has purportedly identified so that Apple can seek even more damages on these products in the new trial. Apple should not be heard to argue that there are 'errors' if the Court rules Samsung’s way, but no errors if the Court rules Apple's way."
I would agree with Samsung that Apple's stance on the errors allegedly identified is not principled. It's obvious and legitimate that Samsung tries to leverage that fact for its purposes. And let there be no doubt: if and when a new damages trial is held, Apple will of course try hard to win even more than it did last time. But I'm unconvinced that this is the primary reason for which Apple brought a conditional motion. It could be, but I believe there are other theories that are no less plausible. Above all, Apple wants to avoid delay, and to avoid delay, it needs to dissuade the court from entering a partial final judgment, or as a second-best option -- and I know that this is totally counterintuitive -- it needs to delay the partial final judgment Samsung wants. That's because it can make progress at the Federal Circuit with its appeal of the denial of an injunction (as I said before, that's the number one issue here, far more important than damages), and the later the partial final judgment from California arrives, the more likely Apple will be to dissuade the Federal Circuit from consolidating both appeals (injunction and merits/damages). Apple needed to raise the issue now because raising them later wouldn't affect the scope and schedule of the merits/damages appeal following Samsung's requested partial judgment. I don't think Apple was primarily thinking of how to get more money out of this case, but about how to optimize the schedule with an absolute priority on the denial-of-injunction appeal. It's unclear to me what Apple would do with respect to the alleged errors if the court denied Samsung partial judgment. I believe Apple more likely just wanted to make its proposal of a prompt new trial more palatable and, at the same time, Samsung's proposal of a partial final judgment less attractive. For Judge Koh the error that has apparently occurred (at least with respect to the S II AT&T even Samsung doesn't defend her decision substantively) is somewhat embarrassing -- it's embarrassing if she has to grant a motion for reconsideration, and even more so if she denies reconsideration but the appeals court later finds she made a big mistake and refused to correct it. Apple offers her a face-saving exit strategy: give us that new trial and your error won't ever have to be corrected because a new jury will simply determine a new damages award with respect to those products as well.
By bringing a conditional motion Apple also told Judge Koh between the lines that it really didn't intend to embarrass her, but Samsung's initiative forces it to raise this issue at all.
I feel quite strongly that this is the tactical idea behind the conditional nature of the motion for reconsideration. One might still speculate as to what Apple would do if it could avoid the partial final judgment anyway and got a prompt second trial. In that case I guess Apple's preference would depend on a great unknown: whether the new jury will re-evaluate the merits (infringement, validity etc.). If the new jury had to operate on the basis of the first jury's infringement findings, then Apple would have to ask itself whether the new jury will be likely to grant more or less than the first jury did (i.e., 40% of what Apple asked for, though the new jury would actually have to pick a higher quota just to compensate for the impact of the March 1 order on the parameters of the new trial, particularly the shorter periods of time for damages claims relating to certain products). That would be a tough call, and Apple would have to choose between one bird in the hand and two birds in the bush in a scenario in which it would be more likely to gain than to lose from a new verdict, but in which it might look foolish if the new jury surprisingly goes below the first jury's 40% quota (plus whatever is needed above 40% to make up for shorter periods). But if the second jury reevaluates the underlying merits issues, then I think the choice would be simple for Apple and it would rather preserve what it holds in its hands (otherwise it would never have opposed Samsung's request for a complete new trial in the first place).
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