Bloomberg News

Apple Retools Samsung Sales Ban Pitch at $2 Billion Trial

April 09, 2014

Apple Inc. (AAPL:US) showed it’s seeking more than money in its $2 billion trial against Samsung Electronics Co. by calling a witness whose studies were previously used to argue for a ban on U.S. sales of the Galaxy maker’s devices.

Jurors heard yesterday from a Massachusetts Institute of Technology professor who presented a revised version of a survey on consumer demand for smartphone technology that Apple relied on in earlier, unsuccessful bids for a court order blocking Samsung sales. If Apple convinces the jury that Samsung has infringed its patents, the iPhone maker can ask again for a judge to impose a sales ban, which the company has said is more important than monetary compensation.

Experts have said it will be difficult for Apple to win a sales ban after losing two requests before U.S. District Judge Lucy Koh in San Jose, California, following the companies’ first trial in 2012. The survey results presented yesterday by MIT professor John R. Hauser are meant to address Koh’s finding in March that Apple failed to show in its earlier requests how its patented smartphone features drive consumer demand for the infringing Samsung products.

Apple and Samsung continue their worldwide legal battles atop a smartphone market that was valued at $338.2 billion last year, according to Bloomberg data. Samsung had 31.3 percent of industry revenue, compared with 15.2 percent for Apple, whose share of the market has shrunk as the touch-screen interface has become commonplace and Samsung, LG Electronics Inc. and Lenovo Group Ltd. have introduced lower-cost alternatives.

In the first trial, jurors awarded $1.05 billion in damages against Samsung after finding it infringed six of seven Apple patents and the jury rejected all of Samsung’s claims against Apple products. Damages were reduced to $930 million after a retrial.

Newer Generation

This time around, Cupertino, California-based Apple is seeking about $2.2 billion over claims that a newer generation of products from Suwon, South Korea-based Samsung infringed five patents covering a range of user-interface designs for the iOS software that powers iPhones and iPads.

Koh first rejected Apple’s request for a Samsung sales ban in December 2012. Acting on orders from an appeals court, she reconsidered her decision and concluded last month that Apple still had not marshaled enough evidence to support its request covering more than 20 devices no longer on the market.

Apple had relied on a Web-based survey by Hauser designed to measure consumers’ willingness to pay for Apple’s patented smartphone features. Koh wasn’t convinced by the results, saying there wasn’t a strong enough connection between Samsung’s infringement and the irreparable harm Apple said it was likely to suffer.

In the case on trial now, Hauser expanded his survey to try to also quantify a decrease in demand for Samsung products that don’t have infringing features. After tentatively ruling in January that Apple couldn’t use Hauser’s refined survey in the second trial, Koh changed her mind in February and permitted it.

Consumer Demand

Hauser testified yesterday that his surveys measured consumer demand for features covered by the Apple patents at issue in the case such as the slide-to-unlock function and automatic spelling corrections.

He testified that he detected a 5 percent drop in a consumer’s willingness to buy a smartphone when the product didn’t offer another feature that allows users to use a single “universal” search to find information from different sources.

On cross-examination, Hauser acknowledged that one of the biggest drivers of consumer demand in the smartphone market in recent years is a product’s brand. Samsung’s lawyer, Bill Price, who got Hauser to agree that “Samsung’s brand is as strong as ever,” was trying to show that Samsung’s products and marketing, and not the alleged infringement of Apple’s patents, drove sales of Galaxy smartphones and caused a slowdown in iPhone sales.

Android System

Price then displayed a survey showing that that only 25 percent of smartphone owners whose devices use Google Inc.’s Android operating system considered buying an iPhone. Samsung’s devices are powered by Android.

“In this case you didn’t design a study to predict the impact of brand on consumers?” Price asked.

“I did not,” Hauser said.

Brian Love, a professor at Santa Clara University Law School, said before the trial started that the struggle for Apple to win a sales ban begs the question of why the company is pursuing the second case. While the products at issue are newer, they will be “relics” by the time, years from now, Apple wins any injunction, he said.

Apple has argued that a sales ban is required to stop Samsung from trying to market products that are “not more than colorably different” from those already found to have copied Apple’s technology.

After Hauser’s testimony concluded, another witness explained the math behind Apple’s damages request.

The $2.19 billion sought by the iPhone maker accounts for lost profits and reasonable royalties the company should have earned on more than 37 million infringing products that Samsung sold from August 2011 to December 2013, Christopher Vellturo, an MIT-trained consultant based in Boston, told the jury.

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 12-630, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in federal court in San Jose, California, at

jrosenblatt@bloomberg.net

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


Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • AAPL
    (Apple Inc)
    • $101.32 USD
    • 0.74
    • 0.73%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus