As posted by me on SpicyIP.
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" For us this lawsuit has always been about something much more important than patents or money. It’s about values. We value originality and innovation and pour our lives into making the best products on earth."
- Tim Cook, in his memo to Apple's corporate employees after the $1.049 billion dollar verdict that went Apple's way in it's smartphone patent battle with Samsung, in US District Court, Northern District of California.
"Good artists copy. Great artists steal"
- Steve Jobs, 1994
This post was meant to review the implications that this decision would have on innovative activity, however I came across some very interesting bits while I was looking deeper into the decision. As far as my take goes on it, the short version is that while Apple is no saint, Samsung did willingly copy certain features and designs. And Samsungs 141 pages of internal documents pretty much admitting the same certainly helped their decision. However, the jury did a very suspect job in deciding the verdict here and there are certainly shoddy aspects that went into the decision. In any case, this is not over yet and this will almost certainly go into appeal. Having said that, at least on first look, it appears that this is good for innovative activity. For the long version and the implications and explanations, read on.
Apple started off by claiming almost everything they could think of - a huge list of trademarks, trade dress registrations (including on the packaging boxes!), design patents and utility patents. Frankly, some of their claims just seem ridiculous to me - take a look at the analysis of the claims in this link here. Judge Koh got the list trimmed down substantially and the trial started with one registered trade dress claim, limited unregistered trade dress claims, 4 design patents and 3 utility patents - by Apple. The 3 utility patents were the 'pinch to zoom', the 'bounceback to signify no more scrolling space' and the 'tapping to zoom' patents. These claims were to be examined against about 25 Samsung products each. And 5 counter patent claims by Samsung including the 2 FRAND patents regarding 3g technology. These 2 patents cover industry standard technologies so it should've been a given that Apple was using them. There were settlement talks which failed which could only mean that Apple and Samsung could not agree on settlement terms. Apparently Apple had asked Samsung for $30 per phone. If this is true, I think I can understand why Samsung refused to settle this and may have even come out better with the $1 billion in damages.
A 9 member jury decided the verdict after being given a 100 page jury instruction document and a 20 page verdict form with about 700 questions and came back in less than 22 hours of deliberation! That is to say, 9 ordinary members of society unanimously decided a complicated and nuanced suit, which also happens to set precedence for this issue, in 22 hours. I frankly think a panel of well read IP scholars would've had trouble deciding and agreeing on all these issues in such a short period. That is, not to say that the jury was malicious, but it does seem quite likely that with a weekend ahead of them and with their mindset already favouring Apple after Samsung clearly infringed upon some of the patents at least, the jury went ahead and hurried through the process. And unsurprisingly, there is proof that the jury was not as thorough as it could've been.
Inconsistencies:
In one instance, the jury said that Samsung did not infringe, but then assigned about $2million in damages for inducement. When there is no infringement, proving inducement to infringe seems a bit of a stretch. In another instance, they ruled no infringement at all but still had damages for a few hundred thousand dollars. It makes one wonder then, one what basis they handed out any of their damages. Judge Koh sent these inconsistencies back to the jury and the jury asked the judge what the inconsistencies were. These were then sorted out and Samsung had ~$2million removed to bring the total damages down to $1.049 billion.
There are some other aspects which I haven't quite understood about the verdict yet. Apple went into the case with an injunction against the Galaxy Tab for infringement of design patent, yet amongst the devices that the jury decided on, the iPad was the only clear loss for Apple with the jury stating there had been no infringement.
More confusingly, with respect to some of the software patents, some devices were found to be not infringing. Given that Samsung's phones all run the same Touchwiz interface on Android 2.2 or 2.3, how is it that most Galaxy devices were found to infringe upon the 'bounceback' patent for instance, but not the Ace or the Intercept. I'm really curious as to what was different about the few devices they found non-infringing when all the others were found to be infringing.
To be perfectly honest, it almost seems like the jury was randomly throwing in a few questions in Samsung's favour so as to not appear like they've gone all out in Apple's favour.
Added to this: Samsung's 2 FRAND patents (patents which are required to be licensed on Fair, Reasonable and Non-Discriminatory terms as they are necessary to comply with standard setting bodies) were being used by Apple. What's important here is that Samsung offered Apple these licenses at a 2.4% rate or at $14.40 / iPhone or iPad and Apple claimed that this was unreasonable. The infringement seems a given in this case and the question seems to be more surrounding FRAND terms. Instead the jury just found non-infringement in this case. Presumably, they were convinced by Apple's argument in court that Apple bought the parts from Intel, and Intel had valid licenses from Samsung and that patent exhaustion would apply in this case. Personally, I am confused why Apple negotiated (and disagreed with) licensing terms with Samsung if it did not need to at all.
Statements from the jury:
A few statements from the jurors with added emphasis by me:
Most tellingly, the statement from the jury foreman Velvin Hogan, that the jury had reached the decision without needing the instructions.
In an interview after the trial, he also then said "We wanted to make sure the message we sent was not just a slap on the wrist," We wanted to make sure it was sufficiently high to be painful, but not unreasonable."
Unfortunately, not just one but two of the rules that the jury didn't read (as mentioned above), specifically say that the damages were not to penalize but merely to compensate. 'Jury'-activism much?
After the trial, CNET spoke to a another juror.
"It didn't dawn on us [that we agreed that Samsung had infringed] on the first day," Ilagan said. "We were debating heavily, especially about the patents on bounce-back and pinch-to-zoom. Apple said they owned patents, but we were debating about the prior art [about similar technology that Samsung said existed before the iPhone debuted]. [Velvin] Hogan was jury foreman. He had experience. He owned patents himself...so he took us through his experience. After that it was easier. After we debated that first patent -- what was prior art --because we had a hard time believing there was no prior art."
"In fact we skipped that one," Ilagan continued, "so we could go on faster. It was bogging us down."
He continued on to state that they were not impatient through the process though.
It may be too late for Apple to start hoping that the jurors stop speaking out about their jury duty as these statements are probably already cause enough for Samsung to take up with the court.
Conclusions and Implications:
As for this case, the only conclusion seems to be that this is far from concluded. There seem to be enough grounds for Samsung to appeal and in the meanwhile Apple is sure to go in for stronger claims as well. This is a battle that will probably go on to the Supreme Court.
The big question is what the implications to innovation are and what the effect this will have on consumers - and I agree largely with what the team at Verge seems to think about this. The implications to Samsung beyond the money in damages will not be much. Apple does not have any injunctions against Samsung. It certainly is a possibility that Apple will now ask for these injunctions, but it is too early to tell which way that will go and if it'll matter at all. Most of these phones are being phased out and the new line have either worked around Apple's patents already or are not endangered by them. The Android OS development will no doubt have a huge role to play in this but one can rest assured that Google is observing and making notes from all these developments. The software developments here have been proven against Samsung's Touchwiz interface and claiming them against HTC or Motorola or any other company would probably not be bolstered too much by this decision. I could be wrong however and I think Rajiv will be following up on with a post on the impact this will have on the Android ecosystem.
Given that Samsung already has such a large section of the smartphone market, this decision will certainly not throw them off completely, if at all. But they will be more wary of their competitors' patents. Microsoft with their new Windows phones will probably be very happy with this decision as this might help boost their products.
However, given that patents are here, whether they like them or not, companies will be more likely to (a) be more wary of them and (b) cross-license and settle. Apple was able to wield such power this time because they had a huge advantage coming in strong with patents. This is not likely to happen again since eyes are always following patent filings nowadays. One can also hope that weak patents (such as 'rectangle with rounded edges') will be challenged before they can be used as offensive patents. Software workarounds will probably become the norm - so there will be plenty of duplicative work but given the three factors which somehow combine here - (a) that companies will be more wary of patents and (b) at the same time want to increase their market share, while (c) software workarounds are relatively easy to do, I would guess that innovative activity is likely to increase. Unfortuntely, more immediately, all the litigation expenses that companies are all going through with these patent wars, will probably translate into higher costs for the consumer.
I'm less sure what this means for Apple though. Apple has been very trigger happy in these patent wars so far and I'm really not sure what they're so worried about to be filing suits all over the world at the rate they are. Apple makes beautiful, easy to use products and frankly, Apple consumers generally already know what they're buying when they buy Apple products.
But these court cases represent huge litigation costs for them and one that they are apparently willing to make. It does also seem to appear that their product improvements have not been as large in the past year or so and Steve Jobs' demise is probably a factor in this. Are they worried that they can't keep up with product development and hence are trying to stop their competitors? Because if this is the reason, they may have unknowingly triggered faster improvements from their competitors by being so over-zealous with their patent rights. But then again, Apple has given surprises to the market before - perhaps they can still continue to surprise. In any case, these patent wars certainly do represent a huge waste in resources and it is very very unfortunate that it seems to be leading to companies wasting resources duplicating efforts with workarounds rather than forging straight on. The only clear winners here seem to be the patent lawyers and it is certainly a good time to be one.
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For this post I collated data from several websites and news sources across the internet. However much of my information came from several pages within the very informative Groklaw and The Verge.
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