Déjà-vu. Today is Groundhog Day. Apple and Samsung square off in the United States District Court for the Northern District of California again, almost 15 months after their previous trial in the same court resulted in a finding of a multiplicity of infringements of more than half a dozen of Apple's intellectual property rights and awarding Apple more than a billion dollars in damages and more than eight months after Judge Lucy Koh, the federal judge presiding over two Apple-Samsung lawsuits in that district, vacated a significant chunk of the total damages figure.
Among the pre-retrial reports I saw, I'd like to recommend the ones by Fortune's (CNN.com's) Philip Elmer-DeWitt (Apple v. Samsung: The patent retrial of the century starts Tuesday") and the BBC ("Apple and Samsung back in court over patent damages"). In addition to the reports that have already been published and to my numerous posts on the nitty-gritty detail of the proceedings between the two trials (I can say without fear of contradiction that this blog covered them in far more detail than any other medium), I'm now going to highlight some of the real issues from a strategic perspective in a Q&A format. Read it and you'll be equipped for the whole process and the assessment of whatever verdict. You can click on any of the Q&A bullet points below to jump to a detailed version.
Q: Is this a patent trial?
A: Sort of. Liability is already law of the case. Now it's only about damages for established patent infringement.
For both parties, liability (findings of infringement of valid intellectual property rights) is the more important issue than damages. No remedy without liability. Damages are only one particular remedy -- and, between two deep-pocketed rivals, a less impactful one than injunctions anyway.
The retrial jury will be instructed by Judge Koh that "[d]uring a prior proceeding, a jury found the '381, '915, '163, D'677, and D'305 patents valid and that each of these patents is infringed by a product marked [in a list of products] with an x". In legal terms, these findings are now "law of the case". The new jury's job is to take it from there, not to second-guess the first jury. Samsung won't be allowed to reargue liability in this retrial (just later on appeal), though some designaround arguments will come up because they are relevant to certain damages calculations.
Q: What types of intellectual property rights is this retrial about?
A: Utility patents and design patents. No trade dress this time.
This first Apple v. Samsung case (unlike the subsequent one filed in the same district) is not just a patent case but actually about a diversity of intellectual property rights. In its original complaint as well as the amended one, Apple asserted two types of patents (utility and design patents), trade dress, and trade marks (trademarked icons). It didn't take its trademark assertions to trial. Last year's jury found design patents, utility patents, and trade dress (a special type of right relating to the visual appearance of products, including their boxes) infringed. Different products infringed different sets of IPRs. The products at issue in this retrial (next item) do not include any of those found to infringe any Apple trade dress.
The distinction between design patents and utility (i.e., technical) patents is key. Under U.S. patent damages law, design patent infringement entitles a right holder to a disgorgement of the infringer's profits. This makes design patents more lucrative from a damages point of view, even though technical patents are usually of greater strategic importance in connection with injunctions.
Q: Which Samsung products are at issue in this retrial?
A: Captivate, Continuum, Droid Charge, Epic 4G, Exhibit 4G, Galaxy Prevail, Galaxy Tab, Gem, Indulge, Infuse 4G, Nexus S 4G, Replenish, and Transform.
As you can see on the jury verdict form, the retrial jury will have to determine damages on a per-product basis for the following Samsung devices: Captivate, Continuum, Droid Charge, Epic 4G, Exhibit 4G, Galaxy Prevail, Galaxy Tab, Gem, Indulge, Infuse 4G, Nexus S 4G, Replenish, and Transform.
Those are 13 of the 28 accused products in this case.
These are the other 15 products (the ones not at issue in this retrial, but in the case): Galaxy Ace, Galaxy S (i9000), Galaxy S II (AT&T), Galaxy S II i9100, Galaxy Tab 10.1 WiFi, Galaxy Tab 10.1 4G LTE, Intercept, Fascinate, Galaxy S 4G, Galaxy S II Showcase, Mesmerize, Vibrant, Galaxy S II Skyrocket, Galaxy S II Epic 4G Touch, and Galaxy S II T-Mobile.
These are old products, but Apple could at some point bring damages claims against subsequently-released products over one or more of the patents-in-suit from this case. Those claims would have to be put before another jury.
Q: How much money is this retrial about?
A: It's about a replacement amount for a $410 million portion of the August 2012 $1.049 billion verdict. The replacement amount could be more or less than the original one. Apple will be awarded (subject to an appeal) $639 million plus the replacement amount.
In a March 1, 2013 damages order, Judge Koh vacated $450 million of the $1.049 billion verdict and affirmed a portion of $599 million. The vacated amount related to 14 products with respect to which the court found that the jury had used wrong infringement periods and, in one case, a completely incorrect methodology. Apple then told the court that it may have erroneously vacated damages (totaling $85 million) with respect to two products. Judge Koh disagreed with Apple on one of them, but agreed on the other, the Galaxy S II (AT&T). As a result, the number of products at issue in the retrial decreased from 14 to 13, and the number of products for which the court affirmed the jury award increased from 14 to 15. The affirmed damages increased from $599 million to $639 million, and the vacated damages decreased from $450 million to $410 million.
You may still find articles on the Internet that say or suggest the retrial is about a replacement for $450 million, or that the court "reduced" Apple's damages award to approximately $600 million. Those who say so simply don't follow the case and fail to look up reliable sources like this blog to get their facts right.
[Update] The replacement amount will be whatever the jury determines, provided that the court doesn't overrule it. Apple's damages claim, which became known on the second day of the trial, is $380 million, slightly down from the corresponding portion of last year's award. The jury could even award Apple more, but that's unlikely. [/Update]
Q: Besides damages, does Samsung also have to fear an injunction over any of the patents-in-suit?
A: Yes, that's actually quite likely, but it depends on the Federal Circuit and not in any way on the outcome of this retrial.
After a near-total triumph on liability at last year's trial, Apple moved for a permanent injunction, which Judge Koh denied in December 2012. On August 9, 2013, the Federal Circuit held a hearing on Apple's appeal of that denial of an injunction, and it appeared to go extremely well for Apple. A decision on that appeal could come down anytime now -- maybe even during the retrial (by coincidence). The retrial has no bearing on Apple's entitlement to an injunction because it's only about damages.
Q: Why aren't Samsung's own patent infringement assertions against Apple at issue?
A: Because the jury cleared Apple of infringement of Samsung's asserted patents and the judge declined to reverse that outcome.
Both Apple v. Samsung cases in the Northern District of California are two-way litigations, but this limited damages retrial in the first litigation is only about some of Apple's assertions and not about Samsung's. Samsung also wanted a new trial on its own assertions against Apple, but Judge Koh did not agree that this was warranted. She overruled the jury with respect to one issue relating to Samsung's claims, but that change just meant that Apple prevailed on yet another defense in connection with one patent.
On appeal, Samsung will presumably also try to revive at least one of its offensive claims.
Q: Is this like an appeal?
A: No. It's just a partial do-over in the first instance. But it paves the way for an appeal.
Some retrials take place on remand (i.e., after an appeal succeeded at least in part). But there can also be a retrial before an appeal in the event of a mistrial (such as a hung jury) or, such as in this case, if a post-trial motion requesting a new trial succeeds to some degree.
Samsung would have preferred to appeal the liability findings to the Federal Circuit before this limited damages retrial, and that's also what Judge Koh originally thought possible and preferable. But apart from a few exceptions, U.S. court rulings can only be appealed if they are final. And it turned out here, a a closer look, that there was no final ruling, and it appeared at least rather doubtful whether Judge Koh could have issued a partial final judgment of the kind that the appeals court would have been willing to handle. Therefore, the retrial appeared the fastest safe path toward an appeal.
Not long after the decision to have a retrial before an appeal, the Federal Circuit actually took a position that could be described as an encouragement to "appeal early and often" in a Bosch v. Pylon decision. There were some differences between that one and Apple v. Samsung, but the spirit of that appellate opinion certainly suggested that, if in doubts, district courts should feel free to refer liability questions to the appeals court before holding a damages trial.
Q: Who wanted it?
A: Nobody in the world. At least not in this form.
Obviously, a retrial only takes place if the court considered it absolutely necessary. And the court typically does not take such an initiative itself, unless it becomes aware of facts that necessitate a retrial. Usually, the court would agree on a necessity flagged by a party that considered a retrial an opportunity to get a better, or less bad, outcome. Theoretically, there can even be cases in which both parties want a new trial.
The August 2012 verdict was overwhelmingly a win for Apple. On liability, it scored a near-total win, but (we'll get to that later) the damages award amounted to "only" about 40% of what the court allowed Apple to present to the jury as its claim. As far as only damages are concerned, Apple decided to take the Big Bird in the hand rather than chase the two birds in the bush.
Samsung's number one priority was (and will be on appeal) to overturn the liability findings. But it also wants to minimize the impact of remedies. No responsible company would shell out a billion dollars without a fight. And Samsung's as well as its attorneys' fighting spirit is world-class (the problem is just that it has a weak case).
So Samsung brought post-trial motions asking the court to overrule the jury on every single item on which it had sided with Apple. Likewise, Apple wanted to get a more favorable outcome on the few items on which the jury had disagreed with it.
In the wider liability context, the most important post-trial ruling by Judge Koh was her determination on willfulness (which is irrelevant to this trial since the jury won't decide on willfulness enhancements). It's worth noting that Apple can appeal that one and may prevail, in which case the total damages amount could increase further down the road, up to a potential tripling.
Technically, she didn't even overrule the first jury on willfulness: the jury had determined one prong of it, and it was always clear that she would decide the other prong.
No outcome-determinative reversal on liability per se occurred. But Judge Koh identified some issues with the damages verdict. For almost all of the products at issue in the retrial, the problem had to do with notice dates. The infringement periods for which Apple can claim damages depend on when Samsung had notice of infringement. Apple presented theories in the notice context that the court later found too ambitious. As a result, the infringement periods were shortened by a few months per product. It was impossible for the court to simply make a linear deduction from the jury award -- these kinds of adjustments require a new jury trial. Also, on one of the products, the Galaxy Prevail, the jury awarded a disgorgement of infringer's profits even though no design patent was infringed, which constituted an undisputable misapplication of the law. This, too, necessitated a new jury trial.
The most important misconception out there is that the decision to vacate damages (i.e., to order their redetermination) was considered a "reduction" or "slashing" despite the fact that the decision to vacate was not based on a fundamental problem concerning Apple's entitlement to damages. In other words, I could agree with someone who considers a decision to vacate pretty much a decision to reduce if there's a reasonable basis for assuming, or even absolute certainty, that the result of a redetermination is going to be less, or even much less, than the amount to be replaced. But that is simply not the case here. For the Galaxy Prevail, that argument could be made, but it's only one of the 13 retrial products. The shorter notice periods adversely affect Apple's case, but they're of limited impact and don't completely undermine it. There is, in fact, still quite some upside for Apple, and I'll explain (again) why:
A simplified way to look at a jury damages award is that the jury applies, as last year's Apple v. Samsung jury did, a quota to a damages claim presented by the right holder. The court has the role of a gatekeeper and won't allow totally baseless damages claims to be communicated to the jury. Theoretically, the jury can award even more than the court allows. Most of the time, it will award something between a small portion and 100% of the right holder's court-approved demand. 100% awards are not unusual; portions far below 50% are unusual except in cases in which a company has a really dubious damages theory (unlike here).
Last year's jury awarded Apple only about 40% of the court-approved claim. Had it agreed with Apple all the way, it would have awarded 2.5 times that amount. And maybe the new jury will give Apple a higher quota -- given that 40% is not high, that's even a good possibility.
The upside with respect to the quota would outweigh the shorter damages periods and the Galaxy Prevail issue even if Apple simply presented a proportionally-adjusted damages claim corresponding to the one it presented to the 2012 jury. I pointed out that fact within about an hour of the March 1 damages ruling. No other commentator talked about it at the time. Instead, even some high-profile experts talked about Apple ultimately getting less money. A few weeks later, my position was vindicated because Samsung itself said in a filing that Apple wanted to seek "even more" money at the trial.
In early July -- four months after the damages ruling - Samsung even said that Apple was seeking "vastly greater damages". This referred to an increase of Apple's damages claim. How come? Sadly, Apple's 2012 damages expert, Terry Musika, died after the first trial. A new expert, Julie Davis, had to be appointed, and while she had to use theories consistent with her predecessor, she was obviously allowed to develop her own set of numbers. You can't force someone to testify to something he or she doesn't believe in.
At the time of writing this post I don't know how high Apple's damages claim is going to be. All of the related filings were redacted. What I do know is that Apple may (or may not) be able to win an "upgrade" of the vacated portion of last year's damages verdict.
[Update] Apple's damages claim became known on the second day of the trial. It's $380 million, slightly down from the corresponding portion of last year's award. The jury could even award Apple more, but that's unlikely. It appears that Judge Koh's pretrial rulings worked out well for Samsung and prevented Apple from seeking a greater amount. [/Update]
After Judge Koh's various post-trial rulings, Apple was far more interested in the limited damages retrial than Samsung, even though Apple originally wanted no retrial on damages. Samsung tried all sorts of things (even earlier this month) to dissuade the court from holding this retrial. It got what it asked for, but didn't want it anymore. How come?
The answer is that Samsung mostly wanted a retrial on liability or, in the alternative, a retrial on damages with a major improvement of the parameters for its purposes. But you can challenge a verdict or choose not to challenge it. You can choose which parts to challenge. What you can't do is request a retrial and then, after your wish has been granted, drop your earlier request. Samsung never wanted a retrial under these circumstances: a set of parameters that has changed in its favor to a rather moderate degree but still comes with significant upside for Apple. It just had to take the risk of such a retrial when it tried to do away with a long list of infringement findings and a billion-dollar verdict.
The court wanted an appeal before a retrial, but felt forced to conclude that a retrial before an appeal was safer. Apple wanted the damages verdict to be affirmed in its entirety. Samsung wanted a retrial with a more favorable set of parameters. But short of a global settlement between these parties, there's nothing they can do to avoid the retrial. They can only focus on getting the best possible outcome. And for Samsung, it's not too comfortable to fend off a damages claim when the jury is told that a multiplicity of infringement findings is law of the case...
Q: Are Apple's asserted patents valid?
A: Looks like it. One of the asserted claims has been confirmed by the patent office. Others are still being challenged, but no reexamination will result in a final, non-appealable rejection for years to come, if ever.
In April, Apple already explained that it will defend its patents-in-suit all the way and, if necessary, exhaust all appeals, in which case these patents won't be invalidated, if ever, before mid-2017 at the earliest. Reexaminations can end earlier, but only if Apple succeeds. And its entitlement to damages for past periods would not be affected anyway.
In June, the United States Patent and Trademark Office confirmed the asserted claim of the rubber-banding ('381) patent, which I called a huge win for Apple. Samsung argued that Apple narrowed it scope, but Judge Koh denied a Samsung motion seeking to delay and derail the retrial.
The pinch-to-zoom API ('915) patent is still undergoing reexamination. Samsung has also repeatedly tried to argue, for the first time in August, that Apple narrowed the scope of that one through arguments it made in reexamination.
Just in August, it became known that the USPTO is reexamining a couple of iPhone-related design patents, including one at issue in this case. No rejection, no matter how tentative, has happened in that regard.
Samsung can still challenge the validity of Apple's patents when this infringement case is appealed to the Federal Circuit, after the retrial. But the legal standard for invalidation in such a proceeding is that of clear and convincing evidence, which I consider far too high a hurdle.
Q: What bearing does the scandal over the leaked Apple-Nokia licensing terms have on this retrial?
Formally, none.
Magistrate Judge Paul S. Grewal indicated on Friday that Samsung and its lawyers will almost certainly be sanctioned for their improper disclosures of certain terms of a highly confidential Apple-Nokia license agreement, an affair that I refer to as the "Patentgate scandal". But a sanctions hearing will be held in December, so there won't be any decision during the retrial.
The Patentgate matter would play a role here if Samsung's own assertions of standard-essential patents (SEPs) against Apple were at issue in the retrial. But they are not. The Apple-Nokia agreement involves (not only, but among other patents) SEPs, and the disclosure of confidential licensing terms, such as license fees, is relevant only to FRAND licensing questions and related antitrust and arbitration proceedings.
Q: When will these parties meet in court again?
A: With litigation in multiple countries, they meet all the time. In Northern California another trial between them is scheduled to begin on March 31, 2014.
Apple and Samsung have litigation pending (some of it is already on appeal) in more than ten countries. For example, a trial (on certain SEP assertions by Samsung against Apple) is ongoing in Australia (there may currently be a hiatus, but it will conclude in December).
In the Northern District of California, the second Apple v. Samsung case is scheduled to go trial starting March 31, 2014.
The next item deals with the theoretical possibility of even more trials in the first Apple-Samsung case.
Q: Could there be yet another retrial in this particular case?
A: There are some procedural possibilities for another retrial or, theoretically, even more than one. But another retrial is not likely.
The trial starting today is not even necessarily the last jury trial in this first Apple-Samsung litigation in California.
There could be a mistrial, in which case the retrial has to be repeated with yet another jury. I don't consider this likely because the jury verdict form is quite straightforward and jurors can probably find some consensus on numbers.
After the trial, a party might argue that the jury got it wrong -- which is what happened last time and brought about this retrial in the first place.
A party could convince the appeals court that it was prejudiced by the jury instructions or by decisions on the admissibility of evidence and argument.
Last year's verdict and the one we're going to get this month involve lists of per-product damages figures. But damages are not broken up by intellectual property right (for example, X amount for rubber-banding, Y for pinch-to-zoom). If any liability finding is reversed on appeal (for example, through a finding of invalidity of the pinch-to-zoom patent), damages have to be redetermined for all products found to infringe that particular IPR as well as at least one other IPR.
Theoretically, some of these issues could come up sequentially or repeatedly.
It's hard to assess the likelihood of the need for a third trial. It's quite unlikely before an appeal (that would have to be a mistrial). The appeal will then take some time. At some point, Apple and Samsung may settle before all appeals have been exhausted and all potential retrials have been held. But if they don't, then the risk of a reversal involving at least one of the rights found infringed is not extremely low, simply because there's so many of them. And then there could be a third trial involving all or some of the 28 accused products.
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