Apple victory falls far short of amount sought

Last updated 15:40 05/05/2014

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Apple won US$120 million from Samsung in a jury trial over smartphone technology after seeking US$2 billion in damages.

The jury also found that Apple infringed one Samsung patent, awarding it US$158,000 in damages. The verdict sets the stage for each company to seek a judge's order banning US sales of competing devices found to infringe its patents.

"It is hard to view this outcome as much of a victory for Apple," Brian Love, an assistant professor at the Santa Clara University School of Law, said in an email. "This amount is less than 10 per cent of the amount Apple requested and probably doesn't surpass by too much the amount Apple spent litigating this case."

The eight-person jury, which heard almost four weeks of evidence in the companies' second US trial, announced its verdict Friday in federal court in San Jose, California, after three full days of deliberations. Jurors found that Samsung infringed two of the four Apple patents they considered in the case, which revolved around whether the maker of Galaxy phones used features in Google's Android operating system that copied the iPhone maker's technology.

The world's top two smartphone makers have spent hundreds of millions of dollars in legal fees on battles across four continents to dominate a market that was valued at US$338.2 billion last year, according to data compiled by Bloomberg.

"Apple obviously overshot here," Michael Risch, a professor at Villanova University's law school, said in an email. "The most important outcome of the case is the message that small, user interface component patents are not justifying gigantic damage awards."

Samsung had 31 per cent of industry revenue, compared with 15 per cent for Apple, whose share of the market has shrunk as the touch-screen interface has become more commonplace and Samsung, LG Electronics and Lenovo Group have introduced lower-cost alternatives.

Apple claimed 10 Samsung devices, including the Galaxy S3, infringe five of its patents. The patents cover a range of user-interface designs for the iOS software that powers iPhones and iPads.

One patent Samsung was found to infringe covers the ability for a user to make a call by clicking on a phone number within a Web page or email instead of having to dial it separately. The other allows a user to unlock the device through gestures.

The jury rejected Apple's claim on the patent it counted as the most valuable of the group, one that enables updating of applications while other features of the phone are in use. Apple also lost its claim over a patent that allows a user to perform a "universal" search for information with a single click.

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A finding that Samsung infringed an Apple patent that covers a function for automatic spelling corrections was issued by US District Judge Lucy Koh before the trial.

Samsung contended that five Apple devices, including the iPhone 5 and versions of the iPod, infringe two of its patents. Samsung sought US$6.2 million in damages.

The jury agreed with Samsung's claim that Apple infringed a patent for functions related to retrieving, classifying and organizing digital images. Jurors rejected a claim that FaceTime, Apple's video-chatting service, infringes a Samsung patent for compressing video data so it can be sent over a cellular network.

Apple wanted Samsung to pay as much as US$40 for each phone sold that uses infringing technology, for a total of US$2.19 billion. Samsung argued that the jury should award no more than US$38.4 million for any infringement damages. The jury is scheduled to reconvene May 5 to reconsider damages on one product and one patent.

The verdict "doesn't slow down Samsung at all" because the implied royalty rate is so low that Samsung doesn't need to worry about paying it, said Kevin Rivette, a 3LP Advisors partner. "It was absurd for Apple to ask for US$2 billion. That was a case of 'Am I going to laugh now or laugh later.'"

Apple might have considered the trial a win if the verdict amounted to more than US$10 per phone, Rivette said.

"Today's ruling reinforces what courts around the world have already found: that Samsung willfully stole our ideas and copied our products," Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, said in a statement. "We are fighting to defend the hard work that goes into beloved products like the iPhone, which our employees devote their lives to designing and delivering for our customers."

Apple was awarded US$930 million in the first US trial between the two companies two years ago in the same court. In that case, which involved earlier models of smartphones and tablets, Apple failed to win an order barring sales of infringing Samsung phones, which the iPhone maker has said was more important than monetary damages.

Samsung's newest smartphones, the Galaxy S4 and S5, weren't on trial in the second case. Samsung is counting on the Galaxy S5, which went on sale March 27 in South Korea, as its marquee device to maintain its global lead competing with Apple for high-end shoppers, as well as on Chinese producers including Xiaomi that target budget buyers.

During the trial, each side put on technical evidence about what its patents cover and how its technology was allegedly copied. The companies also called on expert witnesses to dispute the value of the other's patents, and presented the jury with internal emails and other documents to show the frustration executives faced as they competed for market share.

From the start, Samsung cast the iPhone maker's case as a bid to displace Google as the leading supplier of smartphone operating systems and limit consumer choice.

Samsung called several Google engineers as witnesses to bolster the point that it didn't need to copy Apple's technology for the software on its phones.

Apple tried to keep the jury's focus on its contention that Samsung, not Google, made the decision to use patent-infringing features to sell more than 37 million smartphones and tablets. Apple's lawyers reminded the jury several times that Google wasn't a defendant.

Samsung argued that the iPhone maker's multibillion-dollar damages demand is inflated, while Apple countered that the Galaxy maker chose to present low-value patents at trial - which were purchased, and not awarded to the company - to low-ball potential damages in the case.

The biggest surprise of the trial came at the end, when Apple put on evidence showing that Google is paying for some of Samsung's legal defense, after revealing that the Galaxy maker in 2012 had denied seeking indemnification from anyone.

Apple argued that Samsung was being dishonest, while a Samsung lawyer told the jury Apple knew about the indemnification all along and chose not to ask witnesses about it.

Matt Kallman, a spokesman for Mountain View, California- based Google, declined to comment on today's verdict.

The verdict is the eighth-largest jury award in the United States this year, according to data compiled by Bloomberg. It's the fourth-largest jury award in a patent case this year. 

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