A Samsung Electronics Co. Galaxy S5 smartphone, left, and Apple Inc. iPhone 5c are held for a photograph (Photographer: Brent Lewin/Bloomberg)

Apple Says It Wasn't About Money After Samsung Loses Patent Bet

(Bloomberg) -- Samsung Electronics Co. took a gamble when it appealed a finding it infringed Apple Inc.’s smartphone design patents, and a friendly subsequent ruling from the U.S.’s highest court made it seem like the bet would pay off. Instead, Apple won an additional $140 million.

Seven years after the start of a global patent battle, a jury in a lower court in San Jose, California, delivered a verdict Thursday heavily favoring Apple in a trial that could reshape how companies view the value of patents that protect the shape and design of products.

The verdict was a retrial of damages, with jurors at the outset being told that that the South Korean company infringed three of Apple’s design patents -- covering the rounded corners of its iPhones, the rim that surrounds the front face, and the grid of icons that users view -- and two utility patents, which protect the way something works and is used.

Samsung had appealed the case, and won a 2016 Supreme Court ruling giving it a chance to pare back an earlier award. After that ruling, the basic question for the jury was: Should Samsung have to pay damages based on sales of smartphones in their entirety, or just their components that infringed the iPhone maker’s patents?

‘Huge Loss’

“As the saying goes, be careful what you ask for,” Neel Chatterjee, an intellectual property litigator in Silicon Valley, said of Samsung’s appeal. “The jury saw substantial value tied to the design elements of the iPhone, and actually awarded more than Apple previously won.”

A $1.05 billion jury verdict in 2012 was whittled down by a previous retrial in 2013, along with appeals and adjustments. After Samsung agreed to pay some damages, the case went to the U.S. Supreme Court in 2016 and was returned to U.S. District Judge Lucy Koh with an order to revisit $399 million of that award. Now Samsung has to pay $539 million, an increase of $140 million.

That makes it a “huge loss” for Samsung, said Michael Risch, a law professor at Villanova University School of Law in Pennsylvania, “and shows the risk it took by continuing to fight.”

After the Supreme Court ruling, companies backed away from thinking that suing over design patents could produce a windfall in damages, Risch said.

“Now, they have a road map to winning full damages again,” he said. “But not every design patent will be as strong or iconic as Apple’s.

‘Thermonuclear War’

The patent disputes began when Samsung released its Galaxy smartphones in 2010. Apple founder Steve Jobs initiated contact with Samsung over his concerns that the Galaxy phones copied the iPhone, according to testimony from the original 2012 trial.

Jobs, who died Oct. 5, 2011, later vowed to wage “thermonuclear war” to prove that phones running on Google’s Android operating system copy the iPhone. Samsung devices use Android.

Noreen Krall, Apple’s longtime chief of litigation and omnipresent field marshal in the litigation over smartphone technology, has traveled widely to implement Jobs’s wish. There she was again in San Jose for the trial all week with a team of Apple lawyers. She sat in the front row of Koh’s courtroom Thursday waiting for the verdict, and gave a colleague next to her an elbow jab as it was read, clearly delighted with the outcome. She declined to comment.

Samsung’s not only stung by the verdict, it may be setting up yet another appeal.

“Today’s decision flies in the face of a unanimous Supreme Court ruling in favor of Samsung on the scope of design patent damages,” Samsung said in a statement. “We will consider all options to obtain an outcome that does not hinder creativity and fair competition for all companies and consumers.”

John Quinn, a lawyer for Samsung, told the judge the verdict isn’t “supported by the evidence,” and that the company would raise its objections in court filings.

Samsung previously paid Apple $548 million -- $399 million for products that infringed the design patents plus more for infringing a utility patent not at issue in the retrial. The damages retrial before Koh gave Samsung a chance to argue Apple wasn’t entitled to all of its profit from the infringing phones, and recoup at least some of the money. The jury’s damages total will ultimately be calculated against the $399 million Samsung has paid.

While the verdict isn’t significant for either company’s bottom line, Apple has long maintained there’s a bigger principle at stake. After the 2012 jury sided with Apple, Chief Executive Officer Tim Cook said the lawsuit was about values, and that the company “chose legal action very reluctantly and only after repeatedly asking Samsung to stop copying” its work.

Apple said in a statement after the verdict that the case “has always been about more than money.”

The case is Apple Inc. v. Samsung Electronics Co., 11-cv-01846, U.S. District Court, Northern District of California (San Jose).

©2018 Bloomberg L.P.

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