Saturday, February 8, 2014

Judge denies Samsung retrial of retrial but disapproves Apple's appeal to jurors' national bias

The trial in the second Apple v. Samsung case in the Northern District of California will start in less than eight weeks. Meanwhile, the first dispute between these parties in the same district is approaching the point of final (i.e., appealable) judgment. In an order entered late on Friday, Judge Lucy Koh, the federal judge presiding over these two Apple-Samsung cases, denied both parties' motions for judgment as a matter of law (JMOL) with respect to the November 2013 limited damages retrial, in which a federal jury awarded Apple a $290 million replacement of a $410 million portion of the August 2012 billion-dollar verdict, resulting in a total damages figure (in the sum of both trials) of $929 million.

In the JMOL motions, either party argued that the jury could have come down on only one side, and it was obvious that Judge Koh would deny those motions. In addition, Samsung requested a retrial of the retrial, which would have caused further delay and was also a long shot from the beginning. Samsung based its request for a re-retrial on several theories, one of which was centered around the allegation that Apple's lead counsel in the retrial appealed to racial, ethnic or national prejudice. The part about bias had more than one component as well. To the extent that Apple's counsel, in an attempt to challenge the credibility of a Samsung expert witness, referred to the possibility of information being lost in translation, Samsung's allegations were more than far-fetched and didn't impress Judge Koh. However, there was a portion in Apple's closing argument that the judge does consider disappointing and troubling -- in my view, that portion was not about racial or ethnic bias, but certainly an appeal to patriotism, basically suggesting to Silicon Valley jurors that the prosperity of their home region was at stake because of foreign companies copying U.S. innovators without legal consequences:

"We are extremely fortunate to live in what I'll call the Greater Bay Area. Not only is it beautiful, but we live in the center of one of the most vibrant economies in the world. Intel, Yahoo, Oracle, Facebook, eBay, and hundreds and hundreds of other companies, including Google, and including Apple, and these companies attract talented employees at every level. Even, we heard, Samsung has opened a research center here so that they can take advantage of the talent in this area.

The companies provide jobs. They create technology that improves the way people work. And the company -- and this economy supports an education system that is second to none in the world, Berkeley, Stanford, San Jose State, U.S. [sic] Santa Cruz, even Santa Clara where I went to school.

These educational institutions interact with this economy, interact with these companies and create a place that the whole world knows as Silicon Valley.

But let's be equally clear about one thing. Our vibrant economy absolutely depends on fair competition. It depends on a patent system that encourages inventors to invent, it encourages investors to invest, and it encourages employers to hire.

If we allow that system of law to decay, investors will not invest, people will not take risks, and our economy will disappear.

When I was young, I used to watch television on televisions that were manufactured in the United States. Magnavox, Motorola, RCA. These were real companies. They were well known and they were famous. They were creators. They were inventors. They were like the Apple and Google today.

But they didn't protect their intellectual property. They couldn't protect their ideas. And you all know the result. There are no American television manufacturers today."

Judge Koh's order states that this was "troubling". Also, "the Court expresses its disapproval and disappointment in the comments that led to the instant motion [for a retrial of the retrial]". With a view to the trial starting next month, "[c]ounsel are encouraged to be mindful of the important role that lawyers play in the actual and perceived fairness of [the U.S.] legal system as they prepare for and litigate the next round of this patent dispute".

But a retrial is not warranted in Judge Koh's opinion (and I agree). This was an isolated statement (as opposed to a pervasive tactic), the court instructed the jury more than once to put prejudice aside, the damages award was not excessive (which would have been a sign of prejudice affecting the decision), and the jury's request for office supplies indicated that they were focused on number-crunching rather than national bias.

Judge Koh's concern is nevertheless appropriate in light of a study she cites in her order, Xenophobia in American Courts, written by now-Federal Circuit Judge Kimberly A. Moore (before she joined the Fed. Cir.):

"Judge Moore's study found that 'foreign patent holder win rates in jury trials against domestic infringers (38%) are significantly lower than domestic patent holder win rates against foreign infringers (82%). In contrast, in cases decided by judges, the patentee win rate is almost identical, with domestic patentees winning 35% of the time against foreign infringers, and foreign patentees winning 31% of the time against domestic infringers.' [...] Moreover, Judge Moore found that while foreign inventors acquire 45% of patent rights annually, they seek to enforce their patent rights in only 13% of litigated cases, notwithstanding the fact that litigated foreign patents are, according to Judge Moore, likely to be stronger than their domestic counterparts. [...] As Judge Moore states, '[t]he disparity is important in part because it may reflect foreigners' cynicism about their prospects of enforcing patents in U.S. courts.' [...] Judge Moore concluded that '[t]he perceptions, and verifiable accuracy of the perceptions, of xenophobic bias in the U.S. patent litigation process likely have substantial impact on international trade and foreign relations and undermine confidence in the U.S. legal process for foreign and domestic parties alike.'"

So there is empirical evidence that U.S. juries have national bias against foreign companies. And that's not the only problem with having juries decide patent infringement cases. They also often don't understand that workarounds (provided that they are workarounds in a legal sense) are a good thing (because they actually advance innovation), which is one of the points Judge Posner, who generally believes juries struggle to understand the technical issues in these cases, makes when he talks about the problem of having juries decide the factual parts of patent cases.

It's not Apple's (or its counsel's) fault that juries decide patent cases often on a non-technical basis. If a jury can't figure out technical detail, it may just be led by emotions, regardless of how often the court instructs it not to be influenced by prejudice. Was Apple's counsel trying to take advantage of patriotism? Having read the related passage of the closing argument a few times, I think so. Judge Koh apparently thinks so, too. But it's preposterous to say that Apple appealed to "racial" or "ethnic" prejudice. It was just about regional (Silicon Valley) and national economic interests. It wasn't particularly bad. And that's why a retrial would have been disproportionate.

I'm sure Apple will proceed with greater caution in this regard at next month's trial.

The question of whether Samsung gets treated fairly in the U.S. has been influencing Judge Koh's decisions all along. Whenever Samsung raised a "me too" kind of argument, the court tried hard to avoid any impression of favoritism, even if Apple had a stronger basis for a certain type of motion than its counterpart. What made things worse were the allegations of protectionism that came up last fall when a U.S. import ban won by Apple entered into effect while another one won by Samsung had been vetoed by the Obama Adminstration. I believe that this is a large part of the reason for the decision by the United States Department of Justice (DoJ) to close the investigation of Samsung's assertions of standard-essential patents against Apple (despite the fact that Samsung is still seeking injunctive relief over such patents). I'll comment on various FRAND antitrust matters including this one on Monday.

Here's the full text of Judge Koh's order:

14-02-07 Order Denying Apple and Samsung's Motions for JMOL by Florian Mueller

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