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

We 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:

The 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:

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:

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.

Tags: Apple-v-Samsung, Designs, Infringement, Patent litigation, US