26 August 2012

Billion-Dollar Jury Verdict a Blow to Samsung – But How Bad Is It?

Android ka-chingWe presume that everyone reading this blog is by now aware that the jury considering the patent dispute between Apple and Samsung in California reached its verdict on Friday, finding strongly in favour of Apple on numerous counts, and awarding total damages of just over $1 billion against Samsung.

Right now it is harder to avoid coverage of the decision than to find it.  But for posterity, and since it is de rigueur to provide a link, this article at ZDNet provides the basic facts of the jury’s findings.

Clearly this is – for now at least – a big win for Apple.  Equally clearly, however, the dispute is far from over.  The court (i.e. Judge Lucy Koh) now has to review the jury’s decision, and it is certain that Samsung (at least) will request that she overrule many of its findings.  Apple, for its part, may push for Judge Koh to overrule one of more of the points on which it did not prevail, and will also then be pressing for injunctions preventing the continued sale of infringing Samsung products in the US.  Any such injunctions that may be granted will be preliminary in nature, however, because an appeal to the Court of Appeals for the Federal Circuit – at least by Samsung, and possible also by Apple – is also a certainty.

There is not much we could add to the plentiful general reporting of the verdict, however there are four aspects that we find interesting, and worthy of closer scrutiny:
  1. firstly, it seems notable that the jury found that Samsung’s Galaxy Tab 10.1 does not infringe Apple’s US design patent no. D504,889, i.e. the Galaxy Tab is not substantially similar in appearance to Apple’s iPad;
  2. secondly, for at least two of the three utility patents asserted by Apple, workarounds are either relatively straightforward, or are already in place in the current versions of Samsung’s software;
  3. thirdly, the damages awarded by the jury – while substantially less that the $2.5 billion dollars Apple was seeking – are nonetheless strikingly high in some cases, relative to the apparent significance of the infringed Apple IP; and
  4. finally, the jury found that Apple’s 3G devices do not infringe the patents asserted by Samsung, even though these are said to be essential to the 3G telecommunications standards.

GALAXY TAB NOT AN iPAD!

The jury was asked, in Question 8 of the verdict form, to assess whether or not the Samsung Galaxy Tab 10.1 (in its WiFi and 4G/LTE forms) infringes Apple’s US design patent no. D504,889 (the D’889 patent), which essentially covers features of the physical appearance of the iPad.

The jury question and answers are reproduced below:
Question 8
D889The front and rear perspective views from the design patent itself are shown to the right.

This same design right has been asserted by Apple in a number of other jurisdictions.  Last August a German court issued an injunction restricting sales of the Galaxy Tab 10.1 across Europe, based on the corresponding European Community design registration (although in practice the ban was only effective in Germany).  Samsung quickly worked around the injunction by developing and releasing the slightly redesigned Galaxy Tab 10.1N, featuring a slightly different frame design, and with speakers moved around towards the the front, instead of being located out-of-view on the side.  The German court has recently affirmed that the revised design does not infringe, and allowed it to remain on sale.
However, when a judge in the England and Wales High Court recently considered exactly the same European Community design, he found that the Galaxy Tab 10.1 did not infringe, giving as one reason the fact that it is ‘not as cool’ as an iPad – see Samsung Electronics (UK) Ltd v Apple Inc [2012] EWHC 1882 (Pat), paragraphs [182] and [190].

So far, then, Samsung has the upper hand when it comes to the design of the Galaxy Tab 10.1.  It is a pity, then, that it is not selling in numbers that would be of any great concern to Apple’s dominance of the tablet market.  No doubt its lack of ‘cool’ is a factor!

Fortunate, also, for Samsung is that it therefore does not need to establish that Apple’s design patent is invalid.  It caused a minor stir last year with the proposal that the iPad design was either anticipated by, or obvious in view of, devices depicted in science fiction film and TV, namely 2001: A Space Odyssey and Star Trek: the Next Generation (see, e.g., Did Stanley Kubrick Invent the iPad2?)  However, Judge Koh denied Smasung’s efforts to introduce this material as evidence in her courtroom.

PATENTED FUNCTIONS AND WORKAROUNDS

The jury found that a majority of the accused Samsung products infringe the particular utility patent claims asserted by Apple, namely:
  1. claim 19 of US Patent No. 7,469,381 (the ‘381 patent);
  2. claim 8 of US Patent No. 7,844,915 (the ‘915 patent); and
  3. claim 50 of US Patent No. 7,864,163 (the ‘163 patent).
The ‘381 patent relates to the ‘bounce scroll’ feature, whereby scrolling beyond the edge of a page on a touch-display results in the document continuing for a distance, before bouncing back as if attached by an elastic band.  This is a pretty neat feature.  It feels fairly ‘natural’, and it is fun to play with… for a while.  But it is hardly mission-critical, and it has already been replaced in recent versions of Samsung’s Android-based user interface by a blue ‘glow’ feature, which is also fun to play with until the novelty wears off!

No doubt some users will have a preference for the Apple bounce scroll, but this is clearly not a show-stopper for Samsung.

The ‘915 patent is potentially more problematic for Samsung.  This patent covers a feature whereby a single-point touch initiates a scrolling function, while a multi-point touch initiates a scaling function (e.g. ‘pinch-to-zoom’).  This is a useful feature which, to our knowledge, is still present in Samsung’s Android-based user interface.  In fact, it is now an almost universal feature of multi-touch display devices, including those based on other operating systems, such as Windows Phone. 

The absence of ‘pinch-to-zoom’ – should its removal prove necessary – is likely to be considered a substantial inconvenience by many users.

Finally, the ‘163 patent relates to a mechanism for navigating a ‘structured document’, such as a web page, whereby ‘tapping’ on an element of the document – such as a sub-frame, or region, or image – causes the element automatically to be centred and zoomed.  Samsung has claimed to have implemented a workaround for this feature in recent versions of its Android-based user interface.  In any event, it seems like a function that some users might consider a ‘nice to have’, but hardly a game-changer!

QUANTUM OF DAMAGES

The breakdown of the jury’s damages award is shown below:
Damages
These can be compared with Samsung’s sales of the accused products, as tendered to the court and reported in this article from ZDNet.

To take one example, the Fascinate smartphone sold 1,434,000 units, meaning that the jury has awarded Apple an effective ‘royalty’ of just slightly in excess of $100 per unit.  Samsung’s figures suggest that each unit sold for an average price of only around $430, corresponding with a 23% royalty.

The Fascinate represents something of a high water mark, since the jury found that it infringed in just about every way possible – all three utility patents, two design patents, and Apple’s iPhone trade dress.

Much of the damage assessed is likely to be due to the design and trade dress infringement, the theory being that consumers might buy Samsung devices which have been ‘slavishly copied’ from Apple products, either because they are perceived to carry a similar cachet, or because they are actually fooled into thinking they have purchased the ‘original’ product.  A few copied functions, on the other hand, a less likely to have a major influence on development and marketing costs, or specific sales outcomes.

This is borne out by looking at some of the other specific awards.  The Galaxy Tab 10.1 WiFi, for example, which was found to infringe all three utility patents, but no design or trade dress rights, attracted an award of only $1.42 per unit, equivalent to just 0.4% royalty.

We would have to say, based on our own experience, that the damages awarded at both ends of the scale do not seem particularly consistent with technical or market realities.  Apple would no doubt like to think that it’s patents are worth more than a few cents each, while we do not know of anyone who would believe that they could gain all the cachet of iPhone ownership by buying a Samsung Fascinate (and there are many who would not want to).

Judge Koh may yet overrule the specific amounts awarded.  Additionally, the jury found wilful infringement in a number of instances, and so some of these amounts are potentially subject to multiplication by up to a factor of three.

NON-INFRINGEMENT OF STANDARD-ESSENTIAL PATENTS

The jury’s verdict in relation to Apple’s alleged infringement of five Samsung patents is shown below:
Samsung patents
The five patents at issue were:
  1. US Patent No. 7,447,516, relating to 3G communications technology;
  2. US Patent No. 7,675,941, also relating to 3G communications technology;
  3. US Patent No. 7,698,711, relating to MP3 playback on a mobile device;
  4. US Patent No. 7,577,460, relating to a ‘communication terminal’ that functions as both a portable phone and a camera, and which can send, receive and display images; and
  5. US Patent No. 7,456,893, relating to maintaining a user’s place in a gallery of images while taking a photograph.
With regard to the ‘711, ‘460 and ‘893 patents, Apple no doubt had reasonable scope to argue that their devices implemented similar functionality in a different manner, so as to avoid infringement.

However, the ‘516 and ‘941 patents relate to technology which forms part of the 3G telecommunications standards.  Devices which are not compliant with these standards either will not function correctly in a standard mobile data/telephony network or – worse yet – may interfere with the correct operation and performance of other devices.

It is therefore difficult to see how Apple could not infringe these standard-essential patents.  We emphasise that a finding of infringement is simply about whether or not Apple’s accused devices implement the standardised technology.  The questions of whether damages should be awarded, whether an injunction should be available, and what would constitute ‘fair, reasonable and non-discriminatory’ (FRAND) terms for a license to the standard-essential patents are separate.  Having found no infringement, the jury did not need to consider a quantum of damages.  Orders for other forms of relief – such as an injunction, or the grant of a licence – would be a matter for the judge.

It will be interesting to see whether any further details emerge as to how and why the jury reached its verdict of non-infringement in relation to Samsung’s 3G patents.

CONCLUSION

While the US decision is a significant setback for Samsung, the dispute is far from over.  There is still some manoeuvring to take place in Judge Koh’s court, and the the verdict will most certainly be appealed.

In the meantime, Samsung has the option of working around Apple’s patents and other IP rights, by redesign of appearance, and changes to functionality.  It has already demonstrated a capacity to perform both types of modification relatively quickly.

9 comments:

Ian7777 said...

"It has already demonstrated a capacity to perform both types of modification relatively quickly." Commentary from the Android community on how that is working out for them with the new Galaxy Note http://www.androidpolice.com/2012/08/21/samsung-galaxy-note-10-1-review-an-embarrassing-lazy-arrogant-money-grab/

Patentology (Mark Summerfield) said...

You have provided a link to a negative review of a new product. The product may really be that bad (although there are some in the comments who seem to have a different view).

But the quality of new Samsung products was not what I had in mind when I wrote that sentence. I was thinking more of examples such as the rapid development of the Galaxy Tab 10.1N to avoid the German injunction based on the European Community design, or the quick replacement of bounce-scroll with the glow effect in Samsung's Android 3.2 update for the Galaxy Tab.

As for new products, Samsung's current strategy seems to be bringing out a range of form factors at a number of price points. Some of these will work (the original Galaxy Note has proven surprisingly popular) while others might not. I assume that in the end, the market will decide what it wants.

It is a completely different approach from Apple's insistence that consumers choose from a very small range of products, but nobody can deny it is providing consumers with choice, even if not all of those choices are so great. I keep reading how choice is a good thing, and how the Apple/Samsung decision is either a great thing for consumers (because avoiding Apple's IP rights will result in greater product differentiation), or a terrible thing for consumers (because they will be able to have whatever product they want, so long as Apple makes it).

Personally, I could do with less choice. Have you been in a mobile phone store lately?! Not that a US verdict is going to have any impact on the Australian market...

Dylan Xavier said...

Hi Mark,
Once again good coverage of the Samsung Apple saga. There are a few things i Found shocking with the judgement. It doesnt matter if the jurors said there was no homeland advantage. Their actions speak otherwise.


How did they find no infringement for the 3G patents when Apple themselves admit to having the technology in their phone without which you can have a functional 3G device (They obviously didnt understand how to judge)


Why did they take apples damage figures which were obviously overstated when factoring damages? When you consider the device in question, which is made up of so many features, the infringed features contribute not very much in both number and value other than the pinch to zoom. Their damage bill was formulated by how to punish Samsung, not by actual sales number or compensating Apple


It was clear that they didnt consider the prior evidence to invalidate patents as they had already made up their mind that Samsung had infringed. By the same method that samsung Infringed on those patents, the patents should have been invalidated based on prior art. IF not, its double standards or a bias.


The Gross 'yes' for Apple and the Gross 'no' for Samsung speaks for itself.


Awarding sums of money for devices that hadnt infringed indicates that they were just filling the sheets with numbers out of their head. Not to mention the fact that they completed over 700 questions in 22 hrs. that 1.88min per question. I have read a resonable amount of patents and can tell you it takes a lot longer than that to even understand a patent. It doesnt matter even if half of the jury is made up of other IP Lawyers the other half will still struggle and still must read the patent before they can pass judgement themselves.


All this leads me to believe that The jurors have made it easy for Samsung to appeal with Valid reasons.

Patentology (Mark Summerfield) said...

Hi Dylan, thanks for your comment.

There are many potential problems with jury trials in patent cases, but that is the way it is in the US -- at least until and unless the constitution is changed!

There is a recognised tendency of juries to mete out punitive, rather than compensatory awards. Some figures I have seen (sorry, I cannot recall the reference) suggest that juries tend to award 10-100 times the damages typically ordered in equivalent judge-decided cases.

If you have not yet read this article on Groklaw, then you should. It very much supports, and expands upon, some of the issues you raise.

On your last point, I can set your mind at ease. There is no international agreement, either existing or proposed, that will allow US patents to be directly brought into force in Australia. We remain, officially at least, a sovereign regime, with our own patent laws, our own patent office, and our own examination process. Although patent examiners often approve applications in Australia on the basis of a positive outcome in the US, this is no guarantee that the resulting patent is valid, and it is certainly not the result of any formal agreement between the two countries!

Cheers,

Mark

Adanedhil said...

@Patentology:disqus
"It is therefore difficult to see how Apple could not infringe these standard-essential patents. We emphasise that a finding of infringement is simply about whether or not Apple’s accused devices implement the standardised technology"


This patents were licensed by Intel from Samsung.
And Apple bought chips from Intel with non-exclusive license.


Excuse me for possible grammar faults - English isn't my native language.

Patentology (Mark Summerfield) said...

Thanks for your comment. Your English is just fine -- much better than my (nonexistent) Russian!

You may be right, and I am aware that this was Apple's defence. I have not read the 100+ page jury instructions in full, but for them to reach a finding on non-infringement on this basis I expect they would have needed to be given quite detailed instruction.

The questions of whether Apple's products actually incorporate the patented features, whether these features are implemented entirely by Intel chips, and whether Intel has a license, are all factual and can be decided by a jury.

However, I believe that the question of whether there is exhaustion of all relevant patent rights in the particular circumstances is a matter of law, which would need to be decided by the judge. For the jury to make a final finding on this issue, it would need to be given 'rules' to follow, based on its findings of the component facts.

The issues in such cases can be subtle and complex. See, for example, the case of Quanta v LG Electronics, which went all the way to the Supreme Court (reported here by Patently-O). I find it hard to believe the jurors got their heads around all of this in the time they spent.

None of this means that their verdict is not correct, of course. One problem with the jury system, though, is that (other than jurors talking to the media after the event) we never get any formal report on how and why a decision was reached.

Cheers,

Mark

Adanedhil said...

Thanks for reply, Mark!
BTW, the most interesting thing in juror's interview (http://news.cnet.com/8301-13579_3-57500358-37/exclusive-apple-samsung-juror-speaks-out/) is omission of consideration the prior art.
Cite:
"After we debated that first patent -- what was prior art --because we had a hard time believing there was no prior art."


"In fact we skipped that one," Ilagan continued, "so we could go on faster. It was bogging us down.""


My first reaction was WTF?! =)




Our (russian) legal system isn't good, but we haven't software patents; APIs, languages and algorythms can't be object of copyright, and we haven't got these epic legal battles.

Dylan Xavier said...

I did read that article on Grroklaw last night. I think the inconsistancies in damage figures. the figures not adding up and some of the jury members comments makes samsung's case a strong one. Well its would take you a day to just go through the instructions which obviously they didnt need. Clearly displayed by the comment"
"We wanted to make sure the message we sent was not just a slap on the wrist," Hogan said. "We wanted to make sure it was sufficiently high to be painful, but not unreasonable." ". Had they read those instructions they would have realized that damages must be calculated not as a punishment but to compensate the Patent holder. Then there is how much value each patent actually holds. Further they relied on the forman for advice when they should have been askign for expert advice. another reason for samsung to argue. more here.
http://www.groklaw.net/comment.php?mode=display&sid=2012082510525390&title=Jury%20didn%27t%20skip%20deciding%20the%20prior%20art%20issue%21%3F&type=article&order=ASC&hideanonymous=0&pid=998997#c999257



So i guess the question Mark is how strong will Samsung's case be in you opinion?

Patentology (Mark Summerfield) said...

Hi Dylan,

As I understand it, the comments made by the jury outside the courtroom are not relevant to the legal decisions to be made either by Judge Koh if/when she as asked to overrule aspects of the verdict, or if/when the decision goes on appeal.

The only question Judge Koh is allowed to consider is whether a 'reasonably jury' could have reached the conclusions that this jury reached. The exception to this may be if she decides that the jury process was so severely compromised the only way to 'fix' it is to call a re-trial. This seems highly improbable.

On appeal, the Federal Circuit looks at whether the jury was correctly instructed as to the application of the law, and whether their final verdict on each question was consistent with the law. The evidence cannot be changed on appeal.

It is difficult to assess the strength of anybody's case until we see their arguments, so I am afraid I will have to reserve judgement for now!

Cheers,

Mark

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