Is Apple Likely to “Lose” the Samsung Trial?

The jury will begin its deliberations in the Apple vs. Samsung trial on August 21.   Many of the press reports and bloggers covering the trial have focused on evidence and interim rulings adverse to Samsung.  It seems contrarian to suggest that Apple has a great deal of risk both inside and outside the courtroom.  But it does.

Juries are inscrutable and unpredictable.  Yet, more often than not, they get it “right” by punishing what they perceive as bad conduct based on a few key pieces of documentary or testimonial evidence.  Here is a prediction: Apple will “win” a verdict that Samsung infringed upon some patents but the amount awarded will be far less than the $2.5 billion Apple seeks.  Apple seeks damages for infringement of utility and design patents.  As explained well by Christopher Carani, claims of infringement on these two types of patents leads to different damages.   Only the breach of design patents requires infringers to repay all profits from the sales of the infringing devices.  Of Apple’s $2.5 billion claim for damages, $2 billion relates to the design patents claims.

As explained by Ed Black in Forbes, the design patent claims are controversial.  As a policy matter, many lay observers are uncomfortable with the notion that the shape and appearance of an iPhone or iPad deserves protection, or at least that it deserves exponentially more protection (because of the available damages) than utility patents.  Ultimately, Congress may address that. In the meantime,  $2 billion is an astronomical sum to ask a jury to award for breaching design patents.  Thus, the lion’s share of Apple’s damages relate to its claims that have a weaker emotional resonance to a jury.

By suing for infringement of both the design and utility patents in the same lawsuit, Apple has enabled a path that would allow the jury to find that Samsung willfully copied Apple but yet award more modest damages – find Samsung liable only for breaching utility patents.  The jury could reach this conclusion by finding either that the design patents are not valid or that Samsung did not infringe them.  As for proof of infringementl, Apple introduced evidence such as the slideshow  that reflected its analysis of many aspects of Apple products.  Likewise, Apple introduced evidence that Google sent an email  asking Samsung to change its tablet because its features were too similar to Apple’s.  While Samsung offered contrary arguments for these pieces of evidence, they may well persuade a jury that Samsung should be held liable.

Juries often reach decisions on damages by way of compromise.  While Apple seeks approximately $500 million for breach of utility patents, Samsung’s calculation of damages is considerably lower.  Thus, some jurors may favor damages considerably less than $500 million.  Nevertheless, as some jurors may have lingering concerns about the design patents, and therefore may favor damages greater than $500 million, I would not be surprised  to see a verdict on Apple’s claims in the range of $500 million as the jury’s compromise.  This is also supported by the evidence  that Apple had offered to license its patents for about $250 million per year.  Given the swift pace of innovation in the smartphone market, one could view two years of royalties as fair compensation.

Samsung seeks more than $400 million on its counterclaims.  It is not unlikely that that the jury will want to issue an award to Samsung on the counterclaims, particularly for patents relating to standards used in smartphones.  These patents show that Samsung is responsible for innovation.  Sometimes, offering damages to both parties is a way that jurors say “a pox on both your houses.”  Net, net, I predict Samsung will owe Apple in the range of $300 million.

Would a $300 million  verdict in its favor be a “loss” for Apple? Well, for starters, it is a bit more than 10% of what it seeks.  As a practical matter, participants in the smartphone patents wars, including Apple, pay billions of dollars for patent portfolios, so it could cause many to re-think the ROI for these purchases, particularly of design patents.  Taking this case to trial likely cost at least $20 million in legal and expert fees and distracted Apple’s management and witnesses.   But there are other intangible risks:

  •             A company once seen as a rebel committed to innovation may now be seen as a bully who uses litigation to get its way.
  •             The trial forced a zealously secretive Apple into disclosing how it designs new products.  These types of disclosures run the risk of reducing Apple’s mystique.
  •             Apple has elevated Samsung by bringing this lawsuit, which has been portrayed as a clash among tech titans.  Samsung educated observers about how its technologies make smartphones possible.  But for this trial, there are many consumers who may not have realized that Samsung is in Apple’s rarefied league.
  •             Going to trial (as opposed to settling) with Samsung provided more opportunities for Google, Apple’s chief rival in the     patent wars, to improve its own strategy to defend itself from Apple’s patent claims.

Factoring in these intangibles, one could well argue that Apple may end up losing by winning its lawsuit against Samsung.   Time will tell.  Too bad Intrade has not set up a market for predictions on the outcome of this trial.


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© Copyright , Jeffrey Gross