updated 08:12 am EDT, Sat May 3, 2014
Mixed verdict sends mixed signals; punitive awards possible?
Today's verdict in the Apple-Samsung patent trial -- which was marked by a self-declared "non-technical" jury, complex and mind-numbing patent and software code minutia and flanks of overpaid experts -- sent few clear signals either in the ongoing patent battle between the two tech giants, or the larger issue of IP theft ... or even who exactly won. One thing seems obvious: yet again, a jury found that Samsung stole more from Apple than they were stolen from. Beyond that, the waters get terribly murky -- on a number of levels.
The jury saw fit to award Apple $120 million over three patents that they said Samsung knew or should have known infringed Apple's intellectual property. Putting aside, for the moment, the meta-question of whether software should even be patentable -- a concept Federal Court Judge Richard Posner threw out an unrelated Apple-Motorola lawsuit over -- the amount the jury awarded in Friday's verdict would appear to represent what they thought a fair royalty for the copied technology was worth. It amounts to about $3 per infringing device sold, less than ten percent of what Apple had proposed.
On the other hand, Apple (understandably, but arguably unfairly) had arrived at its figures (about $40 per infringing device) with a built-in component of punishment. In its closing, the company argued that without a mind-bogglingly large award, Samsung -- which makes hundreds of millions of dollars in profit each year -- would consider infringement simply a necessary "cost of doing business" to keep its "fast follower" reputation, and continue to abuse the slow-moving, technologically-inept justice system for financial gain. The jury, clearly, punted the responsibility for punishment to Judge Lucy Koh and focused on what amounts to a "forced royalty" to compensate Apple only for what it (probably) would have gotten if it had licensed the IP to Samsung.
Likewise, the jury apparently treated Samsung the same way: once it determined that Apple had (unintentionally) infringed on the former Hitachi patent Samsung bought, it worked to determine what a fair royalty for the patent would be, and arrived at a figure that amounts to the change trapped in an Apple Store sofa. If you ignored what each company had asked for in damages, Apple clearly won the case: three out of five patents declared copied by Samsung, and the Galaxy Maker must pay Apple several dollars per infringing device compared to fractions of a penny per infringing Apple device.
But it's not that simple.
Samsung also won on a number of key points: it was not (or at least, not yet) hit with a staggering monetary award, it convinced the jury that patents aren't worth much and thus it is financially viable to just take what you want and pay any small penalty out of the huge profits gained (one could say that Samsung has taken a page out of Google's playbook on that point). Most importantly, it has gained something it has long coveted: a validation of its long-held and frequently-expressed view that infringing on patents is okay because others do it. While the patent was bought for the purpose (rather than invented by Samsung) and the infringement was ruled unintentional, Samsung will undoubtedly claim "but Apple copies too!" in future cases (and trust us, there will be more cases).
Samsung's attorneys have argued numerous times that "Apple doesn't own everything," but after numerous convictions worldwide of appropriating Apple's technology for its own products, it's now clear that what the company actually means is that in its view, Apple doesn't have the exclusive right to profit from its inventions. It was pretty obvious from the get-go that Samsung wasn't actually fussed about Apple possibly using its patent, never made the case that Apple had stolen the technology from anyone, and never said that Apple has profited by its infringement. The patents it cried foul on were merely defensive weapons: Samsung spent very little time in its presentations talking about them, and thus Apple didn't have to spend much time defending itself.
The question, though, is did the jury intend to give Samsung a slap on the wrist for its crimes, or did it just pass the punitive buck? Or was it trying to send a message that these minor features -- while admittedly adding and enriching the overall user experience -- aren't worth the trouble of suing each other over? Apple tried in its case to portray the inventions as the result of hard work and innovation, and that the effort and care put into them made them valuable. Samsung dismissed the patents as obvious and overrated and invaluable, asking only $6 million for its own damages (and getting only 3.8 percent of that in something of an ironic twist).
In a complex and technical case, juries tend to look for a clear "bad guy." In the first Apple-Samsung patent trial, which involved the design of Samsung's copycat products rather than software, Apple was able to portray itself as the clear victim, and the jury responded to that. In this trial, the jury had a less clear-cut picture -- and likely saw two giant corporations squabbling like children over intangibles of uncertain value.
Overall, in our opinion, the jury of "laymen" with little experience in patents or software acted with a sense of duty and fairness, worked diligently through piles of jargon and obfuscation (and the occasional eye-rolling whopper from both sides), and likely arrived at reasonably fair values for non-punitive damages and guilt of each party. The bigger issue -- and the real problem at the heart of these endless tech lawsuits -- isn't with the jury but with the judges, the International Trade Commission, the patent system itself and with the overall inability of these aspects to keep up with the changing landscape of modern life.
Judge Koh declined to either assess punitive damages to Samsung (in the first patent trial) even after having been found willfully guilty, and also refused to ban the infringing products from sale on the grounds that they were no longer on the market. She may choose to act differently this time around, but her track record and that of the court system in general suggests that ultimately Samsung will never pay a heavy toll for its infringement, which will both embolden it to continue, and add to the malaise and frustration of companies trying to protect intellectual property generally.
We've seen what happens when Samsung tries to make things that don't copy from others. Clearly, Apple's strategy of trying to protect its IP through the courts isn't working: anyone want to take bets as to what Samsung does after Apple brings out its next major product line? There's no practical disincentive for Samsung not to ape others' successful products -- it is also being sued by Dyson over charges it copied from the UK manufacturer's vacuum cleaners -- and the public's general acknowledgement of Samsung as a "copycat company" hasn't hurt its bottom line, so long as it continues to maker cheaper versions of Apple's premium products that are "good enough" to do what budget-minded buyers want.
Even the ITC, which has as its only enforcement action the power to issue sales injunctions, rarely uses it -- and often confounds observers by contradicting its own rulings when applying product bans, routinely reversing itself after preliminary judgements (or having the US court system -- or the President -- reverse a flawed final ruling for them). Add to this the multiple years it takes for a single case to wind itself through the various hearings, trials and appeals, and it begins to look to some as though the entire patent system is purposefully designed -- or at least has evolved into -- to be a briar patch, inhibiting inventors from having any exclusivity on their inventions, and encouraging "fast followers" like Samsung and opportunistic "patent troll" holding companies -- along with their attorneys -- to profit from the system's failings.