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Samsung vs Apple, Day Nine: Billions or merely millions?

updated 04:25 am EDT, Tue April 22, 2014

Samsung rests its defensive case, says it didn't infringe but Apple did

On Monday, Samsung -- which has devoted some 21.5 hours of its 25-hour limit to defending itself against charges that it copied five specific Apple patents -- finally rested its defensive case and began its offensive case late in the day, alleging that Apple is infringing on two patents it owns (but did not create -- they were purchased from others). Several expert witnesses for Samsung had to walk a strange line of saying Samsung had not infringed any of Apple's patents -- but even if it did, they were only worth a total of $38.4 million, not almost $2.2 billion.

Court resumed where it had left off on Friday, with a redirect following Apple's cross examination of Samsung expert Tulin Erdem. Led by lead attorney John Quinn, Erdem restated her view that specific features such as the ones Apple is suing over do not significantly drive demand for a specific phone or tablet. This is part of Samsung's overall strategy to trivialize the patents and make them seem worth far less than Apple is asking for.

Apple's position on the matter is that even if you accept that the patents aren't that valuable, they were distinct Apple inventions that Samsung copied as part of its makeover of its own phones following the iPhone's arrival, and that the copying contributed to Samsung's success. To some observers, Apple has "built-in" a punitive component into its damages request, perhaps based on the fact that Judge Koh does not appear to favor punitive actions in cases like this (or at least, in the last Apple-Samsung patent trial she appeared to let Samsung off with only actual damages).

Samsung
Samsung's version of 'swipe to unlock'


Following Erdem, Professor Judith Chevalier, who teaches economics and finance at the Yale School of Management was put on the stand. Her duty is to act as Samsung's version of Christopher Vellturo, the Apple expert who came up with the $2.2 billion figure when calculating the harm Samsung's copying has caused. Unsurprisingly, she contradicted Vellturo's figures and said that she used reviews of the infringed Apple products from some 22 top media websites (including Amazon) to evaluate the market impact of the five specific features covered in the trial.

In doing so, she operated under the assumption that all the patents were valid and that Samsung had in fact infringed all of them. However, she found that major selling features, such as the camera and screen quality, dominated the reviews, with the disputed patents barely getting a mention -- though she did note some attention paid to the "universal search" feature (mentioned in 0.55 percent of the reviews she read), "slide-to-unlock" feature (0.36 percent) and the "background sync" '414 patent (0.01 percent).

Her rationale was that at the time these smartphones came out, potential buyers would have read many of the same reviews to help them decide what to buy. If the patents Apple is suing over were as important as it claims, she said, this would have been picked up on more than it was in reviews. Vellturo, who was also in court, was seen scribbling furiously on notepads while Chevalier testified.

The jury was taken out of the room for an hour while the lawyers argued over a forthcoming aspect of Chevalier's testimony -- her guesstimate of Apple's "off the market" lost profits. After hearing objections from both sides and taking a short break, Judge Lucy Koh ruled that Chevalier could not discuss those findings as they were too speculative.

Upon the return of the jury, Chevalier's testimony resumed, pointing out that a fundamental flaw in Apple's damages calculation was that Samsung, in a hypothetical negotiation, would just accept Apple's judgement on the value of the patents (she neglects to add that Apple was never under any obligation to ever license the patents -- they are not standards-essential and thus not governed by the "FRAND" standards). Chevalier then said that she believed that as much as $1.6 billion of Apple's $2.2 billion request is based on Apple's survey of consumer demand for the features in question.

In her opinion, Apple should get $1.75 cents per unit sold from Samsung -- roughly 35 cents per patent -- assuming all five patents infringed on all 37 million accused Samsung units sold. In justifying her figures, Chevalier looked at the amount of revenue Apple deferred for iOS updates, about $10 million for each of the versions (iOS 4, 5 and 6). With hundreds of features in each update, the value of each individual patent would therefore be about five to 10 cents on average, she reasoned.

She said she also looked at how much Android customers tend to pay for typical Android apps as part of her calculations, even though Android owners are notorious for not paying up front for apps. Her total for what Apple would have received in a lump sum "reasonable royalty" payment, following hypothetical negotiations with Samsung: $38.4 million.



Bill Lee handled the cross-examination for Apple, and quickly got Chevalier to admit that she did not account for any lost profits in her calculations at all. She also admitted she had not seen any documents in her research that suggested Apple's patented features were worthless, minor or trivial. He noted a number of times that Samsung had infringed these patents 37 million times over for each patent, and appeared to lecture her that copying a competitor's patents should not be rewarded by only having to pay what the royalty might have been.

When asked why Samsung didn't simply come up with other designs rather than copying Apple, Chevalier appeared to break the facade that Samsung didn't infringe by replying that the company "didn't want their competitor to dictate their functionality" -- which appears to be an admission that Samsung consciously chose to copy patented features rather than design their own versions. Lee also read aloud from some of the customer reviews that Chevalier relied on as a factor in her assessment, noting a large amount of what could politely be called inaccurate information in many of the reviews.

One particularly memorable Amazon claim from one customer was the claim that "Seerei" had picked up a gun and shot him. Samsung paid Chevalier $850 per hour, and Lee noted that she was part of the Analysis Group that Samsung has used elsewhere in the trial, bringing her total earnings to $460,000 on this case.

With that, Samsung rested its defensive case and began its offensive case, claiming that Apple had infringed on two Samsung-owned patents: one relating to video compression used for video conferencing over cellular, the other related to "video albums" and their organization. Both patents date from the 1990s, and were purchased after Samsung had been sued by Apple specifically as legal leverage.

Samsung's first witness in the offensive case was Michael Freeman, the inventor of the '239 patent for video conferencing (Samsung claims that FaceTime infringes on this patent). Freeman, who was very proud of his invention, said he and his family invented it and sold it and another patent to Samsung in 2011 for $2.3 million (which, it must be said, seemed tiny to many in the room after hearing how much the various experts have been paid over the course of the trial).

On cross, Lee asked Freeman if he had ever sued anyone over the patent before selling it to Samsung, as video-conferencing technology has been in wide use by nearly every technology company for the last 20 years. Freeman admitted he hadn't, but said that it was because "we couldn't afford this kind of legal team." Lee also noted that Freeman had offered his patents to well-known "patent troll" firms such as Intellectual Ventures and Acacia before Samsung bought it.

Freeman was followed by a University of Illinois at Chicago professor, Dan Schonfeld. Schonfeld, who was paid $500 for 200-300 hours of work on the case, denied Apple's contention that the patent dates back to the "VCR" days and says it comes from the 1990s, when DVDs were the norm. In fact, Schonberg is in error on this point -- the DVD format was only invented in 1995 and introduced in the US in 1997, requiring several years for prices and popularity to catch up to VCR as a mainstream format. The patent from Freeman is actually dated from November of 1996, about a year before the DVD format was introduced in the US.

During cross-examination, Apple's Bill Lee asked Schonfeld if the patent in question mentions smartphones or tablets. It doesn't, said Schonfeld, because it preceded them. Lee went on to read sections of the patent to demonstrate that it did not foresee or cover the idea of mobile devices, built-in cameras, or modern operating systems and so on, reinforcing his point that Samsung simply bought the patent to use as a legal weapon rather than a legitimate claim.

Next up was digital photography expert Ken Parulski, who is present to testify about Apple's alleged infringement of the "album organizing" patent. Parulski told the court he worked on the case for 500 hours at $500 per hour, but gets $650 per hour for court appearances. He told the jury that the '449 patent for "video albums" isn't obsolete, but still in use. Before finishing his questioning by Samsung attorneys, the trial broke for the day.

Samsung has, as of the end of the day on Monday, used 23 hours and 58 minutes of its 25-hour limit, while Apple has used only 19 hours and 54 minutes of its time. Judge Koh reiterated that she expects evidence to be wrapped up on Friday, with closing arguments and jury instructions coming on next Monday.



By Electronista Staff
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Comments

  1. prl99

    Dedicated MacNNer

    Joined: 03-24-09

    What Samsung's cost analysis really shows is how worthless they feel their own phones are. They spend more money on marketing than they do on manufacturing. Even then, they aren't making very much profit on each phone and only make any profit by dumping tons of them on the market knowing people will have to purchase new ones when the original Samsung phones break.

  1. Flying Meat

    Dedicated MacNNer

    Joined: 01-25-07

    Yipes. Half of that stuff doesn't make any difference in the case against them, and should be thrown out of the testimony. "They're infringing our patents too." makes no difference in this case. If Samsung believes they have a case that Apple is infringing Samsung patents, that is an entirely different case. Literally. This is not a case brought by Samsung on Apple, and it does nothing to disprove the allegations brought against Samsung.
    What people pay for apps on Android phones makes no difference regarding what Apple claims are Apple's losses. There is no basis to even bring that up.

    Having spent all this time and money attempting to defend what they now appear to admit to having done, I can't see how this can possibly go their way. It's now a lose/lose scenario.

    Disclaimer: I'm not a lawyer. (whew! ;)

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