Friday, May 2, 2014

Apple wins $119 million in patent damages from Samsung, wanted $2.2 billion: mixed verdict

[Update on May 5 after jury rendered a corrected verdict] On the Monday following the original verdict, the jury appeared to have added another $4 million to the damages award, but it then turned out that it moved some numbers between products, so the total stayed below $120 million. Also, the amount could easily be reduced on appeal if any liability findings (such as for the '172 autocomplete patent, which the USPTO now views more skeptically) are overturned and/or any parts of the damages figure deemed unreasonable (the '647 "quick links" patent accounts for a large portion of the damages award, but Apple demanded much less from Motorola on a per-unit basis -- just 60 cents-- than the jury awarded it against Samsung, though the claim construction from the Motorola case also governs the Samsung case now). [/Update]

The Apple v. Samsung II jury didn't want to go into another week of deliberations and rendered a verdict just minutes before the end of the scheduled deliberation time. On damages, the outcome is a major blow because the jury awarded Apple only about 5.5% of its $2.2 billion claim: $119.6 million. By comparison, another jury had awarded Apple more than $1 billion in 2012, but that award was based mostly on design patents, for which U.S. patent law allows a disgorgement of infringer's profits.

The amount will likely exceed $120 million, but not by much, when the jury returns on Monday to fix a glitch Apple's lawyers identified.

The jury also awarded Samsung damages of $158K for one patent Apple was held to infringe. The biggest problem Apple will have with this part is that its allegations of Samsung being a copyist are less credible when Apple, too, is found to infringe intellectual property belonging to Samsung. Apple had stressed that Samsung had acquired its two patents-in-suit, but Apple had also brought three European lawsuits over a patent it had acquired (and which was later invalidated).

This outcome is a very good one for Samsung, but it was clear even before the verdict that Samsung would be able to work around (to the extent it hasn't happened yet in more recent products) any of Apple's patents-in-suit. So far, the only feature that Google and its Android device makers have not been able to work around without losing the benefit of the invention is rubberbanding -- after more than 50 months of Apple litigation against Android, this fact shows the limits of Apple's intellectual property. Media reports typically don't address the question of workarounds even though it's the strategically most important one in a dispute between two large players.

On a patent-by-patent basis, this is the outcome:

  • Apple's '647 "quick links" patent: all accused Samsung devices found to infringe; the United States Court of Appeals for the Federal Circuit affirmed Judge Posner's claim construction for this patent, which is considerably narrower than Apple's proposed construction and under which a workaround is possible by copying some operating system functionality into apps

  • Apple's '959 "unified search" patent: all Samsung devices cleared

  • Apple's '721 "slide-to-unlock image" patent: some devices found to infringe, others cleared; Apple had not even accused all of the devices in this trial of infringing the patent, so Samsung does not have to worry about this patent in the slightest going forward because it already has workarounds in place

  • Apple's '414 "background synchronization" patent: no infringements found

  • Apple's '172 "autocomplete" patent had already been found by Judge Koh (on summary judgment) to have been infringed

  • Samsung's '239 patent: not infringed

  • Samsung's '449 patent: infringed (this is the first time in the world that Apple is found to have infringed a non-standard-essential Samsung patent; Samsung had won liability findings over some SEPs but not previously over a non-SEP)

The jury did not find any of the patents-in-suit invalid. This is where juries are often wrong. They overestimate what it means that a government agency has issued a patent. The 2012 jury also considered all patents-in-suit valid, but the most valuable software patent in that trial was later rejected by the United States Patent and Trademark Office (a decision Apple is now appealing). In this second case, the USPTO now has doubts about the validity of the '172 "autocomplete" patent, a fact that the jury was not informed of. And all ten European judges who had looked at the European member of the slide-to-unlock patent family had not deemed that claimed invention patentworthy (under European rules).

Last month I outlined the terms based on which I believe Apple and Samsung should settle their worldwide dispute, proposing a $3 per-unit royalty that Apple should receive from Samsung and a $1 per-unit royalty Samsung should get from Apple. The verdict certainly doesn't suggest that Apple has more leverage than I assumed at the time. If this dispute takes much longer without Apple getting serious leverage (i.e., proves its ownership of features as opposed to only particular implementations of features), a zero-zero cross-license becomes a more and more likely ultimate outcome.

Apple has been utterly unsuccessful with its patent assertions against Samsung in several European jurisdictions. The U.S., where juries are often biased in favor of domestic companies against foreign rivals, is the only jurisdiction so far in which Apple has been able to score wins, and even there it simply doesn't have serious leverage. After a couple of California jury verdicts and an ITC import ban that has zero commercial impact because Samsung has worked around the "Steve Jobs patent" in ways that consumers don't even notice, Samsung is doing fine even in the U.S. market. It's unlikely Apple will get much leverage in neutral jurisdictions anytime soon.

This trial was very much about Google, with Google witnesses testifying on all patents-in-suit and Google having agreed to indemnify Samsung with respect to a couple of patents and the GMail app's alleged infringement of the '647 patent. I agree with Re/code's Ina Fried that Google is a winner today and with USA TODAY's first take that this time around, Samsung and Google won.

After the initial version of the verdict ($119.6 million in damages) was read, there was a recess allowing lawyers to check the verdict for potential inconsistencies. Apple came back and found that the jury had not determined damages for the '172 autocomplete patent with respect to the Galaxy S II. Judge Koh asked the jury whether it wanted to fix this issue today or come back on Monday. The jury preferred to resolve this one on Monday.

The parties will likely ask Judge Koh to overrule the jury in some ways, they may seek injunctive relief (Apple certainly will, though this hasn't worked out well for it so far) or -- in the alternative -- postjudgment royalties, and they will appeal the final district court judgment (as they already have in their first California case).

When the 2012 trial was held in the first Apple v. Samsung case, Apple had already filed a second case, and an ITC complaint. This time around it's not clear what Apple will do next. If it decided to bring another complaint in the U.S. (the only jurisdiction in which it can prevail on more than the rubberbanding patent), it would take a couple of years before any decision. There's no endgame in sight. Maybe Apple will conclude that further patent lawsuits won't be worth it (today's damages award won't exceed Apple's costs relating to this trial by too much) and will settle.

As I wrote on Wednesday, I am now going to do much less blogging about patent disputes and related antitrust and policy matters than in recent years in order to focus on app development (with Android being my primary platform).

[Update] Here's the final amended jury verdict:

14-05-05 Final Amended Apple v. Samsung II Jury Verdict by Florian Mueller


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