Saturday, October 19, 2013

Samsung to face allegations of copying Apple once again at next month's damages retrial

Starting November 12 (that's in three and a half weeks from today), the Apple v. Samsung limited damages retrial will be held in the Northern District of California. On Thursday (October 17), Judge Lucy Koh held a pretrial conference, and late on Friday she entered a pretrial conference order.

There will be other pretrial orders, and also some further briefing on certain issues in the build-up to another pretrial conference on November 5. For example, the court appears inclined not to allow references to the Apple-HTC license agreement, but Samsung still has the chance to make a case for why such references should be allowed. The incomplete nature of the Friday order and limited access to information on the parties' damages calculations make it hard, and in some respects impossible, to assess who primarily benefits from the order. As far as I can see, it appears pretty balanced. Both parties have prevailed on various items that matter to them. I'm now going to focus on two of Apple's victories for only one reason: the relevance of those victories and the topics they relate to are easily understood from the outside.

I'll show you the order before discussing it further below:

13-10-18 Apple v. Samsung Pretrial Conference Order by Florian Mueller

The very first item, granting Apple's motion to exclude evidence regarding patent reexamination proceedings, is not surprising, but it's definitely useful to Apple. While Samsung will be allowed to present some testimony concerning infringement and validity, it faces an uphill battle because the jury will be instructed that infringements were identified (and that the new jury's job is only to determine damages). References to non-final reexamination decisions and to whatever statements Apple may have made to examiners could have muddied the water considerably in Samsung's favor. I think the court is right to avoid jury confusion.

The other item I wanted to highlight is about an issue I addressed in two previous posts. Samsung alleged that Apple wants to "smear" it on copying and "inflame the jury" in the upcoming damages retrial with allegations of copying. Apple argued that it's key for the jury to learn about anything relevant to demand, such as "whether it is more probable than not that, in the absence of infringing Samsung products, consumers would have purchased more iPhones and iPads". Apple also made the following statement on the distinction between competition and copying:

"Apple thinks competition is great, when each competitor comes up with its own unique ideas and the customer decides what they like better. Copying is not fair competition, because when one company copies the ideas of another company, they are trading off all the good will and investment that the second company built on its own ideas, and taking all that investment for itself. Samsung's actions have had a large impact on the smartphone market, by diminishing the value of Apple's ideas, particularly its unique designs, and negatively impacting Apple's sales, both by initial purchasers and because purchasers enter the Samsung ecosystem rather than Apple's."

Judge Koh has denied Samsung's motion to exclude evidence of "copying" without prejudice (meaning that case-by-case objections at trial are still permitted). It was probably a smart move by Apple to clarify that its damages expert was not going to use the word "copying" anyway, demonstrating a focus on facts and an intent not to "smear" Samsung.

In connection with copying I'd like to point to a MacNewsWorld article quoting analyst Trip Chowdhry on the significance of the USPTO's confirmation of the "Steve Jobs patent" (which is not going to be at issue in the California retrial; Apple asserted it against Samsung at the ITC, and an import ban over two patents including this one is already in force). I often disagree with financial analysts, and I have disagreed on a couple of past occasions with Mr. Chowdhry. But the following statement is worth highlighting:

"There is no substitute for innovation -- it is a key driver for growth," Chowdhry explained, "but relying on imitation is a losing strategy as well, and Samsung has been heavily imitating Apple in many respects."

So far, Samsung's success in the marketplace does not suggest that "imitation is a losing strategy". Samsung's (high-quality and partly creative) imitation of the iPhone has been and continues to be a huge commercial success. Anyway, "strategy" is about sustainable success, not about what used to work.

Only IP enforcement can turn imitation into a losing strategy. Enforcement requires meaningful remedies. The limited damages retrial won't result in a damages award so devastating to Samsung that it will back down, but Apple has the chance to make at least some progress. What's more important is injunctive relief, and I believe we're going to see a Federal Circuit decision soon. An appellate hearing went very well for Apple in early August.

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