Monday, April 29, 2013

Apple prevailed over Samsung on post-trial procedures: limited retrial in November

Based on current schedules, there will be two Apple v. Samsung trials in the Northern District of Calfornia over the next 12 months: a smaller one in November and another big one starting in March. At a case management conference held Monday afternoon local time, Judge Lucy Koh laid out a roadmap for resolving the post-trial issues in the first Apple v. Samsung case before her in order to enable an appeal from a final ruling, scheduling a limited retrial on damages for certain products (with respect to which the first jury's damages award was vacated) for November, reinstating $40 million in damages for the Galaxy S II AT&T (which won't have to be addressed by the second jury), and denying (for the time being) a stay pending reexaminations. I've seen a couple of media reports on this hearing, and The Recorder has the most detailed account.

In the evening Judge Koh entered a written case management order summarizing all the procedural decisions she made at the hearing (this post continues below the document with a list of the decisions made and links to earlier blog posts in which I commented on the parties' procedural proposals and arguments):

13-04-29 Apple-Samsung Case Management Order (Limited Retrial Etc.)

In mid-March the parties' disagreement over the best way forward became apparent. Apple requested a prompt new damages trial on the 14 products with respect to which the first jury's damages award had been vacated. Samsung cited Seventh Amendment rights and requested that such a retrial also reevaluate the underlying merits, but before any such retrial would take place (no matter the scope), Samsung wanted to be able to appeal the ruling with respect to the other 14 products, arguing that the appeals court's decisions would help get the second trial right and could narrow the issues. One thing the parties agreed on was that Judge Koh's March 1 damages order couldn't be appealed directly. They disagreed on whether a partial final judgment under Rule 54(b) would be appealable: Samsung claimed so, but Apple doubted this and thought the most likely outcome would be an unproductive delay. Also, Samsung asked the judge to stay the case pending the reexaminations of two of the patents-in-suit, the '381 rubber-banding and '915 pinch-to-zoom API patents, the relevant claims of both of which have been found invalid on a non-final basis. Apple argued that these patents wouldn't be invalidated (if ever) until mid-2017 or later (including an appeal to the Federal Circuit).

  • There won't be an appeal before the retrial. The court denied Samsung's motion for a partial final judgment pursuant to Rule 54(b) and the related request for a stay pending appeal.

  • Instead, the new damages trial will take place on November 12, 13, 14, 15, and 18, 2013. Eight jurors will be selected, and for the purposes of their new damages verdict, the first jury's infringement findings will be law of the case, as the court rejected Samsung's argument that a new trial also has to re-evaluate liability issues.

    As I pointed out right after the March 1 damages order and also stressed last month, the limited damages retrial is not just an opportunity for Samsung to bring the damages award down but also an opportunity for Apple to seek even more damages, as Samsung itself confirmed in a brief.

    For the new trial Apple needs to find a new expert, who has to be a certified public accountant just like Terry Musika, the damages expert at the first trial. Mr. Musika died after the trial.

  • While there can always be delays of any kind, or even a settlement (though it wouldn't make sense for Apple to settle as long as some key legal issues are unresolved), the United States Patent and Trademark Office (USPTO) is now in the best position to prevent the second trial from taking place in November. Samsung's request for a stay was denied without prejudice and can be renewed at a time when the USPTO is done with at least one of the challenged patents and if at that stage the respective asserted claim is considered invalid. Apple can then still appeal the USPTO's decision to the PTAB (Patent Trial and Appeals Board) and thereafter to the Federal Circuit, but Judge Koh would be willing to think again about whether the case before her should be stayed. The '381 (rubber-bandig) reexamination is at a more advanced stage than the '915 (pinch-to-zoom API) process:

  • The damages retrial will have to address only 13 -- not 14 -- products, and damages are now final (apart from the possibility of an appeal) with respect to 15 -- not 14 -- products. In late March Apple brought a conditional motion for reconsideration with respect to two accused products, the Samsung Galaxy S II AT&T and the Infuse 4G, claiming that the court had erroneously vacated damages (totaling $85 million) relating to these products. The motion was conditional in the sense that Apple didn't insist on its adjudication in the event of a prompt new damages trial -- it brought this motion only for the event that the Rule 54(b) judgment requested by Samsung would come down. While there won't be a partial final judgment, Judge Koh apparently decided to rule on the motion anyway. I guess that's because she's very committed to accuracy and she recognized her error with respect to the Galaxy S II AT&T; she declined to find an error with respect to the Infuse 4G. In my commentary on Apple's motion I said that the part concerning the S II AT&T "really look[ed] like an oversight on Judge Koh's part", and I later noted that Samsung couldn't even defend the decision to vacate damages with respect to the S II AT&T.

    As a result of this correction of the March 1 order, the damages that have been finalized amount to approximately $650 million and the portion that has to be redetermined amounts to roughly $400 million. The replacement for the $400 million part could, as I stated before, exceed the original award. It could also be less. One parameter (damages periods for the relevant products) has changed in Samsung's favor, but the first jury awarded Apple only about 40% of what it asked for, so a higher award (which could more than make up for the shortened damages period) is a possibility.

  • Apple wants prejudgment interest and supplemental damages (damages covering the period between the jury trial and the final ruling), and it's undoubtedly entitled to both, but the court won't determine the amount (which won't be substantial compared to the overall set of issues in this case) until after the appeal from a final ruling following the second trial.

I guess Apple is reasonably happy with the overall outcome, even though it would have preferred the retrial to take place sooner than November. In my opinion the strategically most important thing here is something that neither the order nor any of the other reports I saw highlighted. If Samsung had obtained a partial final judgment, which it would have appealed immediately, it would have sought consolidation of that appeal with Apple's already-ongoing appeal of the denial of a permanent injunction.

For Apple's strategic purposes, looking even beyond Samsung, it's absolutely key to fight for the right to prevent direct competitors from infringement even if a patented feature cannot be proven (especially if there's an exacting standard of proof in place) to drive consumer demand. For example, Apple may very well infringment by Samsung of several more patents at the 2014 trial, and it will then again pursue an injunction. Apple wants that question resolved at the earliest opportunity. Samsung, as almost always, wants to stall, and consolidation would have come in handy in that regard. After Judge Koh's case management order, regardless of whatever may happen in those reexaminations and possibly affect the damages retrial, the denial-of-injunction appeal will be more or less resolved by the time Samsung can bring its own appeal, and consolidation is out of the question now. I believe the unresolved state of the injunctive-relief issue is actually the single biggest obstacle to a settlement between these parties. Once this is clarified, the parties will have valuable guidance and a settlement will be much more likely at that stage than before. Damages issues have to be addressed, and no one will leave money on the table, but injunctions are really the key issue in a strategic dispute of this nature and stature. Compared to the relevance of injunctions, damages are almost a distraction (especially when less than half of the accused products in a given case are at stake), and only a consolation prize for Apple should the denial be affirmed.

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