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Apple v Samsung: how do juries calculate damages in complex patent cases?

Author: IPKat

28 Aug 2012 | 13:46

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At an event hosted by UCL's Institute of Brand and Innovation Law earlier this summer, Randall Ray Rader, Chief Judge of the US Court of Appeals for the Federal Circuit, valiantly attempted to defend the jury system in patent cases in the face of some trade mark provocation.

Judge Rader, who has tried "as many patent jury trials as anyone", argued that juries "do as well as judges" and, when interviewed afterwards, explained that the juries showed that "they do understand complex technology". But do they understand complex technology and damages calculations?

The judge's statement and the question with which the previous paragraph concludes are both worth holding up to scrutiny in light of the jury ruling in the Apple v Samsung dispute in the US. Even readers of the red-top press and children's comics will probably be well apprised of this case by now, although they might be forgiven for confusing this case with the seeming millions of other Apple v Samsung, Apple v The World, The World v Apple-type disputes that have been plaguing courts across the globe.

In summary, in this latest US installment of the saga, Apple brought a patent infringement case against Samsung for infringement of three patents - US Patent No. 7,469,381 relating to "list scrolling and document translation, scaling and rotation on a touch-screen display", US Patent No. 7,844,915 relating to an "application for programming interfaces for scrolling operations" and US Patent No. 7,864,163 relating to a "method for displaying at least a portion of a structured electronic document", as well as four design patents: US Patent Nos. D504,889, D593,087, D618,677 and D604,305.

The main design patent at issue was the '889 design patent which claimed the "the ornamental design for an electronic device" with depictions of the rounded cornered tablet. Samsung counterclaimed for infringement of six of its own patents.

After a three-week trial, the jury gave its verdict. Seven Californian men and two women found that Samsung had infringed all Apple's patents and design patents, except the famous '889 design patent. They also found that Apple had not infringed any of Samsung's patents.

And how did the jury calculate damages? Well, armed with these jury instructions, they did what most people seem to do when faced with the dark art of calculating patent infringement damages: they stuck their nine figures in the air, filled out a form, and came up with a number. Apple sought damages based on lost profits for some of Samsung's sales and a reasonable royalty on the rest of Samsung's allegedly infringing sales. To prove lost profits, Apple had to show that, but for Samsung's infringement, there was a reasonable probability that it would have made the sales that Samsung made if the infringing products had not been on the market. Importantly, presiding District Judge Lucy Koh, who charmed the world when, after a receiving a 75-page briefing from Apple with 22 listed rebuttal witnesses, asked Apple's lawyers if they were "smoking crack", instructed the jury that:

"You must allocate the lost profits based upon the customer demand for the patented feature of the infringing products. That is, you must determine which profits derive from the patented invention that Samsung sells, and not from other features of the infringing products."

With that in mind (or not) the jury, who found that Samsung's infringement of the patents was wilful (see question 10 on page 9) in that Samsung knew or should have known that its actions constituted infringement of Apple's three patents, returned a verdict that Samsung should pay Apple a total of $1.05bn (£665m) in damages (see page 16 of the jury verdict form). Although less than the original $2.75bn (£1.74bn) Apple requested, the $1.05bn damages award represents the fourth largest jury award in a patent case ever.

Judge Koh of the Ninth Circuit has since scheduled a 20 September hearing date for Apple's request for an injunction against Samsung's ongoing infringement of the patents. The products in questions, as set out in Apple's filing, are likely to include the Galaxy S 4G, Galaxy S2 (AT&T, Skyrocket, T-Mobile and Epic 4G models), Galaxy S Show case, Droid Charge and Galaxy Prevail.

It is expected that Samsung - who said that this verdict "is not the final word in this case" - is likely to appeal the verdict either by filing a motion for judgment against the verdict (whereby the presiding judge may reverse or amend a jury verdict, otherwise known as "judgment notwithstanding the verdict": this is unlikely) or an appeal to the Court of Appeals for the Federal Circuit (otherwise known as the CAFC, where the wonderful Judge Rader presides: more likely). If Samsung (or Apple) appeal, payment of the £1.05bn damages figure will be stayed pending the appeal, though interest will accrue.

But how were the jury, after only two and half days of deliberations, able to calculate that the lost profits attributable to customer demand for the patented features of the in the Galaxy S II (Epic 4G Touch)(JX 1034), for example, was $100,326,988? Can we see your workings, please?

Perhaps, as with damages awards generally, this has very little to do with actual calculations based on convincing economic evidence of market demand of the patent features, but more to do with "what feels right" in the case. For nine Californian jurors from the state which launched Apple and who, like the rest of the US populace, have most likely been indoctrinated into coveting American Apple products in preference to those of the South Korean Samsung, perhaps a finding of rampant infringement with a $1.05bn damages price-tag just "felt right" - but it doesn't mean that it is just or correct. Contrary to the position taken by our American cousins as to their right for jury trials, does this jury verdict strongly argue against the case for jury trials?

So with the news that Samsung's shares took their biggest one-day hit in four years today, and while the appeal briefs likely start their 20th draft, this blogger wonders if any UK or EU patent judge or reader would anonymously like to have a go at completing the jury verdict form in Apple v Samsung to see what number they come up with (email your efforts here).

The IPKat blog covers copyright, patent, trade mark, info-tech and privacy/confidentiality issues from a mainly UK and European perspective. Click here to follow IPKat on Twitter.

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