Bloomberg News

Apple May Seek Expanded Samsung Ban for Future Devices

December 06, 2012

Apple Inc. (AAPL:US), trying to regain lost smartphone market share from Samsung Electronics Co. (005930), may push to add unreleased Samsung mobile products to a permanent U.S. sales ban it’s seeking after winning a $1.05 billion verdict.

U.S. District Judge Lucy H. Koh in San Jose, California, today is hearing Apple’s arguments that a jury’s finding in August that Samsung infringed six patents justifies a ban on U.S. sales of at least 25 of its phones and tablet computers. She will also hear Samsung’s argument that the verdict should be thrown out because of alleged misconduct by the jury’s foreman.

Koh said at the start of the hearing that while the jury was precise and consistent in calculating infringement damages for 28 different Samsung products, the method used by the nine- member panel may have been mistaken. She asked lawyers on both sides to address whether the award should stand.

“If there is enough evidence in the record to justify that damage award then that verdict should be upheld,” said Harold McElhinny, a lawyer for Apple.

Kathleen Sullivan, a lawyer for Samsung, argued that the damages should be reduced by as much as $600 million. Sullivan agreed the jury was precise, though she said it was hampered by a verdict form that, against Samsung’s wishes, wasn’t “particularized” enough to permit jurors to properly arrive at damages on a product-by-product basis.

“You should reverse engineer” to make sure the damages are “causally connected to the evidence,” Sullivan told the judge.

Intellectual Property

Apple argues that its Suwon, South Korean-based rival bet that the benefits of using intellectual property from the iPhone and iPad would outweigh the $1.05 billion award the jury issued. Koh should increase the damages by $536 million because Samsung “intended to take Apple’s market share by deliberately copying the iPhone design,” according to a court filing.

Apple also has said that if Koh approves a sales ban, it will ask her to extend the order to cover newer Samsung products.

“The injunction hearing is important not so much because of the products Apple seeks to ban, which are old technology now, but because the judge might grant a broad injunction that applies to future products with the same features,” Mark Lemley, a Stanford Law School professor not involved in the case, said in an e-mail.

Sullivan said today that of the 26 Samsung products Apple wants covered by a U.S. sales ban, only three are still being sold.

New Trial

Samsung’s bid for a new trial, based on a claim that the jury foreman lied about lawsuits he was involved in, is, among other contentions, a “preview of what they will likely argue on appeal,” Lemley said. “This will be our first chance to see how courts view the jury verdict.”

Foreman Velvin Hogan, himself a patent owner, introduced “incorrect and extraneous legal standards” in the jury deliberations that may have produced a faulty verdict, Samsung said in a filing. One example cited by Samsung, based on Hogan’s post-verdict interviews with the media, is that the foreman erroneously told his fellow jurors that infringement of a design patent is based on “look and feel,” according to a court filing.

Samsung is asking Koh to overrule the jury’s findings on infringement of Apple’s design patents, arguing that patent law protects only designs that are new, original and ornamental, not “general design concepts” at issue in the trial. Samsung also argues there’s no proof it willfully infringed Apple’s patents, the grounds for Apple’s request for increased damages.

Samsung Patents

The South Korean company renewed its claims, which failed at trial, that Apple infringes two Samsung patents covering mobile-technology standards and three utility patents.

Apple, in its arguments supporting a sales ban, claims that Samsung flooded the U.S. market with infringing smartphones that have done permanent damage to Apple’s “ecosystem.” Samsung deployed its strategy at the critical juncture when customers are moving to smartphones and developing “platform loyalty” that has diminished the base of iPhone users, Apple said in a court filing.

Kristin Huguet, an spokeswoman for Cupertino, California- based Apple, and Adam Yates, a spokesman for Samsung, declined to comment on today’s hearing.

Android System

A Dec. 4 report by Framingham, Massachusetts-based researcher IDC said Google Inc. (GOOG:US)’s Android operating system that runs on Samsung smartphones has a worldwide market share of 68.3 percent compared to 18.8 percent for Apple’s. The firm estimates Apple will remain the “clear number two platform behind Android” through 2016, gaining 0.3 percent of the worldwide market share in that time.

In the U.S., Samsung’s market share gain has “come at Apple’s expense, eroding Apple’s position as the market leader over the past two years,” Apple said in a filing. “Samsung’s successful strategy has been to ‘blunt’ and ‘undercut’ Apple using the Galaxy products to take the leading position in the U.S. smartphone market.”

Apple, the world’s most valuable company, can regain market share by adding more recent Samsung products to any sales ban Koh issues, said Carl Howe, an analyst at Yankee Group in Boston. Howe noted that the two companies have added newer products, including Samsung’s Galaxy S III and the iPhone 5, to a related infringement suit, also before Koh, that is scheduled for trial in 2014.

“Samsung may be betting on the fact that the the legal system works slowly,” Howe said. “However, judges are not dumb. If they see that is in fact their strategy, they will take that into account in damage awards or in their decisions on remedies.”

Worldwide Battle

Howe said that while Koh’s decision will be important, the companies are battling in courts worldwide to dominate the smartphone market, estimated by Bloomberg Industries at $219 billion last year, and not all decisions so far have been in Apple’s favor. Since the August verdict in San Jose, Apple has lost infringement rulings against Samsung in the U.K., Germany and Japan.

Lemley said Apple and Samsung have deep patent portfolios and can do too much harm to each other to continue litigating. A significant ruling favoring Samsung or Google’s Motorola Mobility unit against Apple may finally produce a settlement, Lemley said.

“We are waiting for Samsung or Motorola to gain sufficient leverage against Apple with a threat to shut down their products,” Lemley wrote in an e-mail. “Once that happens, and it will, I think you’ll see talks progress rapidly.”

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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