For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Monday, 27 August 2012

Apple v Samsung: Galaxy hit by astronomical damages as jurors show they "understand"

In the hope that she too may be a juror in
 a US patent trial, Merpel shows that she too
is capable of understanding complex technology
A few months ago Merpel's colleague the AmeriKat informed her of an interesting discussion that took place between US Chief Judge Randall Ray Rader and Sir Robin Jacob at IBIL's Young IP Lawyers event this summer.  After chastising the poor AmeriKat for the fact that she is yet to post on that talk -- or the subsequent Annual Sir Hugh Laddie lecture --with the same distinguished speaker, Merpel listened as the AmeriKat recounted the valiant attempt of Judge Rader to defend the jury system in patent cases in the face of some trade mark provocation by Sir Robin.  Judge Rader, who has tried "as many patent jury trials as anyone", argued that juries "do as well as judges" and, when interviewed afterwards, explained that the juries showed that "they do understand complex technology".  But, asked the AmeriKat, do they understand complex technology and damages calculations?
Samsung's latest and non-
infringing challenge
to Apple: the William
Tell-aphone ...
The judge's statement and the question with which the previous paragraph concluded are both worth holding up to particular scrutiny in light of the recent jury ruling in the Apple v Samsung dispute in the US.  Even readers of the red-top press and children's comics will probably be well apprised of this case by now, although they might be forgiven for getting this case confused with the seeming millions of other Apple v Samsung, Apple v The World, The World v Apple-type disputes that have been plaguing courts across the globe.  In summary, in this latest US installment of the saga, Apple brought a patent infringement case against Samsung for infringement of three patents – US Patent No. 7,469,381 relating to "list scrolling and document translation, scaling and rotation on a touch-screen display", US Patent No. 7,844,915 relating to an "application for programming interfaces for scrolling operations" (zooming, bounce-back on scrolling, etc) and US Patent No. 7,864,163 relating to a "method for displaying at least a portion of a structured electronic document", as well as four design patents: US Patent Nos. D504,889, D593,087, D618,677 and D604,305.   The main design patent at issue was the '889 design patent which claimed the "the ornamental design for an electronic device" with depictions of the rounded cornered tablet.  Samsung counterclaimed for infringement of six of its own patents.   
After a three week trial, a jury of the AmeriKat's peers, Merpel hastens to add, and not her own, gave its verdict.  Seven Californian men and two women found that Samsung had infringed all Apple's patents and design patents, except the famous '889 design patent.  They also found that Apple had not infringed any of Samsung's patents.
Smoking crack
And how did the jury calculate damages?  Well, armed with these jury instructions, they did what most people seem to do when faced with the dark art of calculating patent infringement damages: they stuck their nine figures in the air,  filled out a form, and came up with a number.  Apple sought damages based on lost profits for some of Samsung's sales and a reasonable royalty on the rest of Samsung's allegedly infringing sales.  To prove lost profits, Apple had to show that, but for Samsung's infringement, there was a reasonable probability that it would have made the sales that Samsung made if the infringing products had not been on the market.  Importantly, presiding District Judge Lucy Koh, who charmed the world when, after a receiving a 75-page briefing from Apple with 22 listed rebuttal witnesses, asked Apple's lawyers if they were "smoking crack", instructed the jury that: 
"You must allocate the lost profits based upon the customer demand for the patented feature of the infringing products. That is, you must determine which profits derive from the patented invention that Samsung sells, and not from other features of the infringing products."
With that in mind (or not) the jury, who found that Samsung's infringement of the patents was wilful (see question 10 on page 9) in that Samsung knew or should have known that its actions constituted infringement of Apple's three patents, returned a verdict that Samsung should pay Apple a total of $1.05 billion in damages (see page 16 of the jury verdict form).  Although less than the original $2.75 billion Apple requested, the $1.05 billion damages award represents the fourth largest jury award in a patent case ever.     
Judge Koh of the Ninth Circuit has since scheduled a 20 September 2012 hearing date for Apple's request for an injunction against Samsung's ongoing infringement of the patents.  The products in questions, as set out in Apple's filing, are likely to include the Galaxy S 4G, Galaxy S2 (AT&T, Skyrocket, T-Mobile and Epic 4G models), Galaxy S Show case, Droid Charge and Galaxy Prevail. 
It is expected that Samsung -- who said that this verdict "is not the final word in this case" -- is likely to appeal the verdict either by filing a motion for judgement against the verdict (whereby the presiding judge may reverse or amend a jury verdict, otherwise known as "judgment notwithstanding the verdict": this is unlikely) or an appeal to the Court of Appeals for the Federal Circuit (otherwise known as the CAFC, where the wonderful Judge Rader presides: more likely).  If Samsung (or Apple) appeal, payment of the £1.05 billion damages figure will be stayed pending the appeal, though interest will accrue.  
Merpel is sceptical of the jury verdict.  How were the jury, after only two and half days of deliberations,  able to calculate that the lost profits attributable to customer demand for the patented features of the in the Galaxy S II (Epic 4G Touch)(JX 1034), for example, was $100,326,988?   Can we see your workings, please? 
Perhaps, as with damages awards generally, this has very little to do with actual calculations based on convincing economic evidence of market demand of the patent features, but more to do with "what feels right" in the case.  For nine Californian jurors from the state which launched Apple and who, like the rest of the American populus, have most likely been indoctrinated into coveting American Apple products in preference to those of the South Korean Samsung, perhaps a finding of rampant infringement with a $1.05 billion damages price-tag just "felt right" – but it doesn't mean that it is just or correct.  Contrary to the position taken by our American cousins as to their right for jury trials, does this jury verdict strongly argue against the case for jury trials? 
So with the news that Samsung's shares took their biggest one-day hit in four years today, and while the appeal briefs likely start their 20th draft, Merpel wonders if any UK or EU patent judge or reader would anonymously like to have a go at completing the jury verdict form in Apple v Samsung to see what number they come up with (email your efforts to Merpel at merpelmckitten@gmail.com). 

15 comments:

Gentoo said...

So who is benefiting here?

This has been litigated in South Korea, (to their credit, a great result: whatever is Korean legalese for why don't you both drop dead?) the UK and California.

That's a lot of lawyers, a lot of lawyers fees, a lot of Court costs, a lot of expert witness fees and so on and so forth.

The eventual winner will attempt to take monopoly rent from the market, the eventual loser will do a combination of attempt to recover costs from its customers and sack a few workers.

And what's in the mix? rounded corners, software that emulates a ball rebounding off a wall, the metaphor for a toilet door lock?

Whatever. Is this innovation? Is this what the legal system is supposed to be all about?


Nothing comes of nothing, neatly illustrated here:

http://www.ted.com/talks/lang/en/kirby_ferguson_embrace_the_remix.html

Meanwhile, having failed to get software patents through the front door in Europe, lobbyists are now trying to do it through the administrative tidying exercise "unitary patents"

The quality of the political debate is best described by analogy: the LibDem representative arguing that because something was in all three manifestos everyone voted for it...

Never mind democracy, what actually happens is described here:

http://www.iea.org.uk/publications/research/public-choice-a-primer

Hans Sachs said...

When the case is eventually decided in Apple’s favour by the CAFC (would anyone seriously bet otherwise, given that it’s the CAFC?) and Chief Justice Rader writes the unanimous decision focusing on the design patent, trademark and trade dress claims regarding rectangles with rounded corners, perhaps he will try to outdo the legendary literary leaps of his brethren Judges Posner and Kozinski on those “other” appellate courts and, with a great flourish, call his judgment:

“Raider of the Last Arc”

Just an idea…

Hans

Gentoo said...

My rant, more elegantly expressed: https://www.eff.org/deeplinks/2012/08/apple-v-samsung-what-does-1-billion-verdict-really-mean

Ben said...

Well the 'market' came to a different figure - shares in Samsung Electronics fell by more than 7 percent Monday morning, wiping nearly $12 billion off Samsung’s market value.at

Anonymous said...

It is laughably cynical to suggest that the American populace has been "indoctrinated" into buying Apple products over Korean-made ones. It's a market. Remember that vast trade deficit that the US runs with Asia? It arises because Americans overwhelmingly prefer the price-value point of goods made in Asia to that of those made at home. Just as do Britons.

I expected better from the IPKat than a lazy characterisation of American consumers (or jurors) as mindless nationalists.

Anonymous said...

Thank goodness for Merpel. she is only saying what many of are thinking.

Anonymous said...

During a presentation by a US patent attorney last year it was observed that the further West you go, the more likely the jury are to find in favour of a US litigant. It would therefore have been surprising had the verdict gone the other way.

Uncle Wiggily said...

Dear Anon at 6:51

California is a lot further west than the Eastern District of Texas....

Looks like California is competing with the Eastern District for patent tourism litigation...

Bidding now starts at a billion USD.

Plus you get jurors who are so knowledgeable about patents and high tech that they don't even need to read the judge's instructions or review evidence to get to a speedy and just verdict....

Very efficient....

Skeptikal said...

Some of the Jurors were interviewed after the decision. One of them stated that the level of costs awarded was made sufficiently high to "punish" Samsung. Doesn't sound like the jury really grasped the idea that the damages were to compensate for lost profits.

Anonymous said...

As the previous comment states, some, including the head juror, have spoken out. Quoted in The Guardian, he says many were unsure of procedure. They were also swayed in particular by the minutes of meetings where, what has been termed in the UK 'winking at' Apple's technology was discussed by Samsung. Probably a natural jury reaction but it does it equate to infringement ?

Mark Summerfield said...

And then there's this: http://intellectualip.com/2012/08/29/apple-v-samsung-and-awards-of-defendants-profits-the-potentially-for-overcompensatory-damages-in-design-patent-infringement-cases/

It appears to be a strange anomoly of the US system (surprise, surprise) that a plaintiff is not entitled to request an account of profits in respect of utility patent infringement, but is statutorily entitled to an account of the entire profit made in the event of design patent infringement.

This explains the observation I made on my own blog earlier this week, before I read the above article, that the damages awarded for design/trade dress infringement seemed disproportionately high compared with the damages awarded on devices where there was only utility patent infringement found (see http://blog.patentology.com.au/2012/08/billion-dollar-jury-verdict-blow-to.html)

And once you know this, it is easier to find the relevant jury instruction - no. 54 on page 72 - and quite possible to conclude that the jurors did exactly as they were instructed.

Anonymous said...

If the layman jury is so bad at calculating damages, one would expect an expert Kat in this field to provide some evidence that this number is totally unreasonable. So far, there are no indications that the jury awarded damages are unreasonable given the size of the market and the market share of the Samsung products.

Anonymous said...

After reading an interview given by the jury foreman, I am reminded that "a little knowledge is a dangerous thing".

Paul Ellis said...

'Merpel listened as the AmeriKat recounted the valiant attempt of Judge Rader to defend the jury system in patent cases in the face of some trade mark provocation by Sir Robin. Judge Rader, who has tried "as many patent jury trials as anyone", argued that juries "do as well as judges" and, when interviewed afterwards, explained that the juries showed that "they do understand complex technology". But, asked the AmeriKat, do they understand complex technology and damages calculations?'

This to me reads like the old 'appeal to authority' logical fallacy: 'this subject is too complicated for ordinary people, so it is best left to us, the experts'.

The following quote is instructive:

“If anybody ever tells you anything about an aeroplane which is so bloody complicated you can't understand it, take it from me: it's all balls.”

— Spitfire designer R. J. Mitchell, advice given about his engineering staff to test pilot Jeffrey Quill during prototype trials.



He is of course absolutely right. Ultimately, all law is founded upon straightforward philosophical principles, and property is 90% of the law. If an intelligent and educated lay person cannot understand the concept of property, even when it is somewhat occluded as with intellectual property, then the legal argument being presented is probably an ass.

Merpel said...

The arguement is not that these matters are too complex for a lay jury, the question is how did a jury decide on infringement of numerous IP rights and the level of damages as a result in a mere 2 days after 3 weeks of arguement? Not even the quickest legal mind could do that....but anyone's gut, of course, could.

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