Tuesday, September 17, 2013

Samsung alleges Apple wants to "smear" it on copying and "inflame the jury" in damages retrial

On November 12, 2013, a limited damages retrial will start in the first Apple v. Samsung litigation in the Northern District of California, with a new jury having to determine a replacement for approximately $400 million in vacated damages. Samsung hopes that the total damages figure will go down (though it can't go below $650 million without an appeal because that's the amount not vacated), while there is upside for Apple if the new jury awards it a higher percentage of its court-approved damages claims than last time and/or the court allows a higher damages claim (Samsung says Apple's claim has increased by hundreds of millions of dollars).

Between two major players, damages are a much less important remedy than injunctive relief. Apple was originally denied the latter but clearly made headway in this regard at an appellate hearing held last month (also, an import ban Apple won from the ITC over different patents will enter into force in a few weeks). This first California litigation is a case in which damages are more substantial than usually because Samsung sold vast quantities of devices found to have infringed Apple's design patents, and design patent infringement can result in a disgorgement of infringer's profits (which U.S. law does not provide for in connection with technical patents).

Samsung would rather have avoided the retrial. If it could choose, it would simply want the California case to be on hold for as long as possible (while the USPTO makes progress with certain reexaminations), and if things go forward at all, Samsung's preference would be for an appeal. But the retrial is now scheduled to take place first. Samsung wanted a retrial -- Apple would have been fine with affirming the original award. But Samsung actually wanted a full retrial including a reevaluation of the underlying liability issues. Now it gets a retrial with a set of parameters that makes it anything but unlikely that Apple may achieve an increase of the total damages award.

In light of Apple's push for greater damages and with a view to its reputation, Samsung is now fighting hard to avoid that Apple tells the retrial jury -- and, by extension, the media and the general public -- too much about "copying". Samsung is afraid that the jury might have somewhat punitive motives when setting the new damages figure. And I'm sure it's also concerned about negative publicity. There's even a company that has no involvement whatsoever with smartphones and tablet computers but portrays Samsung as a copycat in a patent infringement lawsuit: Dyson, which accuses Samsung of a "cynical rip-off" in connection with vacuum cleaner technology.

Late on Monday Apple and Samsung filed various motions to strike and exclude, trying to limit each other's arguments and evidence at the upcoming damages retrial. Two different Samsung motions place the emphasis on Apple's plans to put "copying" allegations front and center in November. In one of these motions, Samsung alleges that "Apple wants a sweeping retrial in which it can inflame the jury with irrelevant testimony relating to infringement, validity, 'copying,' and IP rights that are not at issue in the retrial, such as trade dress and the industrial design of tablet computers". In the other motion, Samsung says "Apple's 'copying' exhibits make up 40% of its list" and "are included to smear Samsung on irrelevant 'copying' topics unrelated to damages".

There's no question that "copying" allegations are prejudicial to Samsung, but that is not the whole legal standard. It's about whether the probative value of testimony and evidence outweighs the downside in terms of likely jury confusion with prejudicial effects.

Samsung argues the "copying" exhibits "contain no financial data, make no reference to the asserted patents, and offer no help to the jury in correcting for Apple's erroneous notice dates" (the last item is the primary reason for which this retrial has to be held; the court later found that Samsung had notice of infringement at a later date than the period for which the first jury awarded damages, which is of limited economic relevance but made a retrial necessary since the jury verdict form was not granular enough to calculate a corrected damages figure).

Obviously, since Samsung was denied a full retrial including a retrial on the merits, it doesn't want Apple to be allowed to raise broader issues in November than what the jury needs to know to make a damages determination. While I doubt that Samsung can preclude Apple from raising the copying issue and keep the discussion in November limited to sales figures, it may very well be able to get certain material excluded.

Samsung argues that "even a finding of willfulness should not affect the jury's award because damages 'are meant to compensate the patent holder and not to punish the infringer'". I don't think this is just about the alternative choice between compensation and punishment. Even without a punitive agenda, it's perfectly consistent with the notion of intellectual property to ensure that infringement isn't profitable. Thwarting infringement-based business strategies is legitimate policy and not the same as punishment. The difference is easily explained: all convicted murderers are punished regardless of whether they had a financial benefit from what they did; and even where they were paid by someone or had some other financial gain, punishment is not limited to a mere disgorgement.

Where Samsung may have a point (and I haven't been able to check on the details, especially since I don't have access to the proposed trial exhibits) is where it alleges that certain copying-related evidence is irrelevant to the retrial. Samsung argues that some of it relates to smartphones not at issue in the retrial, or to intellectual property rights (some trade dress and a tablet design patents) that weren't found infringed at the first trial. Also, if Samsung is right that some of what Apple wishes to present now was excluded from the first trial due to untimely disclosure, then that would run counter to Judge Koh's idea of a "Groundhog Day" kind of retrial. So I wouldn't be surprised if Samsung's motion was granted in part. But Apple is still going to have a powerful narrative in place at the November retrial.

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