Lawyers for Apple Inc. and Samsung Electronics Co. kicked off their high-stakes patent infringement trial last week on a day marked by drama and tension. Much is at stake. Apple seeks $2.5 billion from Samsung for allegedly stealing features of the iPad and iPhone.
But even if the jury awards Apple that much money, the company likely would face an uphill battle making the award stick. As recent high-profile patent trials have shown, big awards often evaporate or shrink drastically in post-trial motions and appeals.
“Most of the big verdicts don’t stand. Something always happens to them,” said Paul Janicke, an intellectual property professor at the University of Houston Law Center who is faculty coordinator of Patstats.org, which monitors patent infringement damage awards.
Appearing on July 31 before U.S. District Judge Lucy Koh in San Jose, Calif., Morrison & Foerster’s Harold McElhinny laid out Apple’s central claim that Samsung ripped off the unique design features of its iPad and iPhone.
“Apple had a vision that technology should be about much more than functionality,” McElhinny told jurors. “It should be about experience. How you react to products, the look and feel, would be just as important as what the device was capable of doing.”
McElhinny’s chief opponent for the day was Charles Verhoeven of Quinn Emanuel Urquhart & Sullivan. The two San Francisco veteran intellectual property litigators faced off throughout the day, as McElhinny’s direct examination of an iPhone designer was punctuated by Verhoeven’s objections.
McElhinny told the nine-member jury that Samsung deliberately copied features of Apple’s products, including their rectangular shape, rounded corners and flat black screen, knowing the features were patented. He showed jurors internal Samsung reports comparing Apple’s products to its own and recommending imitating Apple features.
Apple also will try to show that Samsung infringed utility patents, which are related to features such as the ability to zoom in on a document or a “bounceback” feature that tells users when they’re at the end of a list or a page.
“Samsung had two choices: accept the challenge of the iPhone and create its own products so it could beat Apple fairly in the marketplace or it could copy Apple,” McElhinny said. “As we all know, it’s easier to copy than to innovate.”
McElhinny handed things off to co-counsel, William Lee of Wilmer Cutler Pickering Hale & Dorr, who is charged with beating back Samsung’s counterclaims. Lee told jurors that Samsung never made any infringement claims until after Apple lodged its complaints. Moreover, Lee said, Samsung doesn’t even use the patents in its own products.
Lee contended that Samsung hasn’t played by the rules in acquiring what are known as standards-essential patents.
Verhoeven presented Samsung’s case using an often forceful tone. And he made the same point to jurors repeatedly: There’s nothing wrong with being inspired by someone else’s design. Yes, Samsung compared its products to Apple’s, he acknowledged, but that doesn’t prove the company stole Apple’s ideas.
“It’s called competition,” Verhoeven said. “It’s what we do in America.”
Verhoeven said he would show that Apple’s own experts admit Apple has no right to claim a monopoly on features such as rounded corners or flat, black screens.
Samsung also plans to present evidence that Apple’s designs weren’t revolutionary: Apple’s engineers got their inspiration for the iPhone design from another company, Verhoeven claimed. “The evidence is going to show that Samsung hasn’t done anything wrong,” he said.
As for the chance for either party ever collecting damages, Janicke noted that, despite some outsized awards recently, the average jury verdict damage award has hovered around $7 million for the past five years. He added that statistics on the amount of money that ultimately changes hands after these trials is hard to track because so many of these cases settle confidentially. For example:
• In 2009 a federal jury in Tyler, Texas, handed Johnson & Johnson’s Centocor unit a record-setting $1.67 billion patent infringement verdict against Abbott Laboratories. The U.S. Court of Appeals for the Federal Circuit in February 2011 found that the Centocor patent in question was invalid, overturning the $1.67 billion verdict.
• In April 2009, Uniloc USA Inc. won a $388 million jury verdict in its six-year patent infringement case against Microsoft Corp. But a Rhode Island federal judge tossed the verdict five months later, concluding the jury hadn’t grasped the issues and reached a finding without a legally sufficient basis. The Federal Circuit reversed that decision, but deemed the $388 million damages award “fundamentally tainted by the use of a legally inadequate methodology,” and ordered a new trial on damages. The two sides settled for an undisclosed sum in March 2012.
• During two trials, one in 2009 and another in 2011, Alcatel-Lucent succeeded with claims that a component of Microsoft’s Outlook program infringed one of its patents, and juries in each trial awarded damages of $358 million and $70 million, respectively. The Federal Circuit threw out the first award, and a San Diego federal judge reduced the second to $26.3 million. The parties settled confidentially.
NOT ALL ARE REVERSED
But not all big patent verdicts are lost. One of the larger damage awards to survive the test of post-trial motions and appeals was the $290 million verdict entered in i4i L.P.’s favor in its patent infringement suit against Microsoft in the Eastern District of Texas. Microsoft appealed the verdict and its accompanying permanent injunction to the Federal Circuit, which affirmed the trial court’s ruling. Microsoft then appealed to the U.S. Supreme Court, which ruled, 8-0, in favor of i4i .
Janicke said juries have a tendency to inflate damage awards because their calculations are based on the so-called Georgia Pacific standard, a 15-factor method for determining reasonable royalties. “It’s a hodgepodge, a total grab bag of factors, and there’s no law about how much weight each of these factors receives,” he said.
He added that there were proposals to alter the standard as Congress debated reforming patent laws. One suggestion would have required juries to consider only the factors that were raised by evidence at trial, as determined by the district judge, but judges objected to the proposal. When Congress passed patent law reforms in September 2011, it included no changes to the Georgia Pacific standards. “So when juries look at the factors and then a judge does the same, they often make different conclusions,” Janicke said.
Brian Love, a Stanford Law School lecturer who heads the school’s law, science and technology LL.M. program, said judges often find fault with the way that damages evidence is presented at trial.
“Evidence presented to a jury can be misleading and not moored in rational economic thought,” Love said. “Judges seem to be keyed into this and often reduce the awards to something they feel is more reasonable.” He added: “[The evidence] is not always based on science. It’s constructed post-hoc to make it seem like a patent is responsible for something like 3 to 5 percent of a device’s sales.”
And when damage awards hit the high digits, they receive added scrutiny. “It’s like going to the emergency room, if you have a sprained ankle, they’ll take a glance at you eventually, but if you go in with a heart attack, you’re going to get immediate attention,” Janicke said. The same goes for damage awards. “They get more attention when they’re more serious.” And with $2.5 billion on the line, a possible Apple-Samsung verdict will be about as serious as it gets.
Amy Miller is a reporter for NLJ affiliate The Recorder. She can be contacted at email@example.com. Claire Zillman reports for The American Lawyer, also an NLJ affiliate.