By now this is old news, but I was away when this news broke and my hotel unbelievably didn’t provide free wi-fi, despite our $40 per night resort fee. But Since I’ve been following this case so closely I think it deserves a post, and better late than never.

As you may recall, a California jury found that many Samsung phones and tablets infringed on Apple’s patents and trade dress and awarded Apple $1.05 billion in damages. Notably, the jury deliberated for less than three days. There has been lengthy post-trial motions by both parties, including a motion by Samsung to vacate the jury verdict and damages award based on alleged misconduct by the jury foreperson, which was denied.

On Friday, March 1, Judge Koh ruled on another series of motions relating to damages.  With regard to supplemental damages, which are damages from continued infringement after trial, Judge Koh:

(1) Sided with Samsung and determined that the computing of damages should begin on the date of the verdict rather than the June 30 date that evidence submitted at trial specifically covered.

(2) Sided with Samsung that the appropriate way to calculate supplemental damages relating to post-verdict sales is to take the jury damages award per device, divide each amount by the number of units those devices sold prior to the verdict to reach a per-unit damages amount.  Then calculate the number of units of each particular device sold post-verdict and multiply it by the per-unit damages amount.  Apple had argued for a broader calculation that didn’t differentiate between devices.

(3) Concluded that supplemental damages are appropriate in this case, and that the court will look at post-verdict sales figures after the appeals process.

With regard to pre-judgment interest on the amount owed by Samsung, Judge Koh also decided that the 52-week Treasury bill rate, as argued by Samsung, should be used in calculating prejudgment interest, rather than the higher prime rate as advocated by Apple.

Finally, in evaluating the jury damages award, Judge Koh determined it was appropriate to evaluate the jury award, and while Judge Koh upheld much of the jury’s award, she found the following issues that warranted vacating parts of the award:

(1) The jury improperly calculated damages relating to the Galaxy Prevail, which only infringed utility patents, based on lost profits.  The Court vacated $58 million from the damages award and ordered a new trial on damages.

(2) The jury incorrectly awarded Samsung’s profits for infringement of utility patents in eight devices - Gem, Indulge, Infuse 4G, Galaxy SII AT&T, Captivate, Continuum, Droid Charge, and Epic 4G – while the correct remedy for infringement of utility patents is either a reasonable royalty or Apple’s lost profits.  The Court was unable to determine the proper amount of damages with regard to these eight devices from the jury award, and accordingly vacated $383 million from the award and ordered a retrial on damages.

(3) The jury used a notice date that was too early in calculating damages with regard to five devices - Exhibit 4G, Galaxy Tab, Nexus S 4G, Replenish, and Transform – and Judge Koh vacated $9 million from the damages award and ordered a new trial on damages.

All in all, Judge Koh vacated $450.5 million in damages relating to 14 devices - Galaxy Prevail, Gem, Indulge, Infuse 4G, Galaxy SII AT&T, Captivate, Continuum, Droid Charge, Epic 4G, Exhibit 4G, Galaxy Tab, Nexus S 4G, Replenish, and Transform.  The damages awarded in the new trial could be higher, the same, or lower.

I think it was a pretty good day for Samsung’s lawyers, as they got half the jury verdict vacated (though an even higher damages award could be returned by the jury in the re-trial), Judge Koh sided with them on the interest rate issue, and they delayed the calculation of supplemental damages (based on my experience, any delay is good for a defendant). Still, Samsung took a big hit in this trial and is on the hook for at least $599 million pending appeal, though I doubt it will hurt their bottom line in light of how dominant they have became in the smartphone market.  And another thing to keep in mind is that this case is just one of many being litigated worldwide between these parties.

For more reading on this, check out FOSS Patents, The Verge, and Judge Koh’s Order.

Today is a big day for the United States edition of Apple v. Samsung, as the parties will go before Judge Koh and argue various motions to uphold/overturn and increase/decrease the value of the $1 billion jury verdict rendered back in August.  Regardless of what happens, I would say it’s a safe bet that the decision will be appealed.  Still, the lower court’s decision is very important because it will frame the appeal.  The hearing is scheduled for 4:30 EST.

I am very busy with a project this week into next and am going away this weekend so I unfortunately will be unable to write the post that the hearing and decision (which most likely won’t be rendered today) deserve, or at least not in a timely fashion, but I will keep the Twitter feed updated and drop a few links that are worth reading below as the day goes on.

Pre-hearing stories: Huffington Post (AP), BBC News.

UPDATE:  The parties are in the courtroom and the proceedings have begun.  The Verge is live-blogging it.

UPDATE:  It looks like the majority of the hearing was spent arguing over the damages amounts and whether the jury’s damages calculations can be questioned.  The parties didn’t spend much time discussing the alleged misconduct by the jury foreperson, though that and all other issues in this case were briefed to the judge before the hearing so decisions will be issued on all issues regardless of whether they were addressed at the hearing.  Judge Koh said she “will try to get these orders out as quickly as [she] can.”  For more, check out The New York Times and The Verge.

A few weeks ago Samsung filed a motion to enter judgment for Samsung despite the jury verdict awarding Apple $1 billion. Samsung presented several arguments, including that Velvin Hogan, the jury foreman, failed to tell the court about a lawsuit brought by his former employer – of which Samsung is now the largest shareholder, and which led him to file for bankruptcy – in voir dire and that Mr. Hogan, in describing his and the jury’s deliberations, showed bias and the application of incorrect legal principles.

As expected, Apple disagreed in its opposition. Apple’s arguments relating to Mr. Hogan are:

(1) Samsung waived any objections it could have made based on the Seagate lawsuit by not asking Mr. Hogan about his relationship with Seagate or following-up on Mr. Hogan’s bankruptcy case, which he did mention in voire dire;
(2) Samsung cannot establish that Mr. Hogan has a bias against Samsung based on his “decades-old” dispute with a non-party former employer of which Samsung is now a shareholder;
(3) Samsung cannot establish an implied bias based on Mr. Hogan’s inaccurate answer in voir dire;
(4) Mr. Hogan was honest in answering the court’s question of whether he was a party to any lawsuits because he did tell the court that about a lawsuit he was a party to and was never asked if there were any other lawsuits;
(5) Mr. Hogan’s comments to the media about the jury’s deliberations involve “legal standards” which cannot be second-guessed by a judge rather than “extraneous evidence” which could warrant a new trial, and even if Mr. Hogan did bring in extraneous evidence from his personal experience, Samsung cannot establish that the outcome would have been different.

The first four arguments involve Mr. Hogan’s inclusion in the jury in the first place, which I think will be more problematic for Apple as compared to the jury’s deliberations. Apple is correct that Samsung should have done a better job of investigating Mr. Hogan, and how they could not ask about his relationship with Seagate is beyond me. But the point of voir dire is to learn about the prospective jurors and their biases and had Mr. Hogan answered questions truthfully then Samsung would have learned about Mr. Hogan’s dispute with Seagate. I don’t think that the fact that Samsung could have learned about the dispute in other ways, such as by asking other questions or requesting the bankruptcy file, is enough to negate Mr. Hogan’s dishonesty. If Apple can show that Samsung did know of the Seagate dispute during trial and waited till a verdict so that it could have a good argument on appeal if the verdict was for Apple, then I would agree that Samsung waived its objection. I suspect that Samsung didn’t approach Mr. Hogan’s former Seagate employment with enough caution before and during the trial and then looked into his background more after he started giving so many interviews.

As for whether Mr. Hogan is biased against Samsung, lawyers learn about jurors and often make educated guesses about whether their background and experiences have made them biased or impartial, and there is often no hard evidence of bias. I understand that we are at a different stage now than when we were in jury selection, but had Samsung learned of the “decades-old” dispute with Seagate, I have to think it would have challenged him even if there was a chance that he held no grudge against Samsung.

I also disagree with Apple’s argument that Mr. Hogan was not “dishonest” because his lie was by omission rather than an affirmative lie. He was asked if he’s been a party to a lawsuit and described one such lawsuit. In being truthful with the court which just asked a question designed to learn about any and all lawsuits he has been a party to, his answer should not end there. The court should have asked whether there are any other lawsuits, but that does not change the fact that Mr. Hogan did not meet his obligation of telling the court what lawsuits he has been a party to, and therefore the court should consider his answer dishonest. While Apple’s argument that it was an honest mistake rather than dishonesty could be convincing in some cases, I think Mr. Hogan loses the benefit of the doubt in my mind since he must have known that Samsung would at least find it interesting that a company in which it has invested over $1 billion sued him. This gives Samsung a better argument that Mr. Hogan was “dishonest” and that his dishonest answer demonstrates an implied bias.

As for Apple’s final argument, what Mr. Hogan told the other jurors could be viewed as “legal standards” (and thus can’t be disturbed) even though they were based on his own prior knowledge of the law rather than on the judge’s instructions. Judges are very reluctant to step into the jury room, and for better or worse (I think worse in the case of something as technical as patents) a jury’s verdict is given a great deal of deference and is rarely disturbed. If Mr. Hogan hadn’t given interviews then the jury’s thought process would never be questioned; but his comments to the media are hard to defend if the goal here is to determine whether there was infringement and, if so, what the damages are. Still, I think the judge is much more likely to find that Mr. Hogan’s failure to disclose the Seagate dispute warrants a new trial than she is to toss the verdict based on what went on in the jury room.

The motion will be argued on December 6.

Just as Judge Koh once said she has more matters to attend to than just the Apple v. Samsung case, the same goes for this blog. Nevertheless, the stories relating to this case are too good to pass up, and especially this one today, so apologies if I’m beating a dead horse.

Velvin Hogan was the foreman in the California Apple v. Samsung case that returned a verdict largely in Apple’s favor in August. Shortly after the verdict was issued, Mr. Hogan began giving interviews (here, here, here, and here are examples). Days later, in my infinite wisdom, I tweeted “The foreman seems nice enough, but Apple would be wise to try to get him to stop giving interviews.” Ok, perhaps it was pretty obvious, but I’m still proud of my foresight, because now Samsung is arguing that the verdict should be thrown out and a new trial ordered, in part because of what Mr. Hogan said in those interviews.

Mr. Hogan’s background:

Mr. Hogan is a 67-year-old electrical engineer and he holds a patent for a “Method and apparatus for recording and storing video information,” which, on my reading, is a DVR that allows programming to be loaded onto removable storage.

Jury selection:

When parties are selecting members to comprise a jury, they go through a voir dire process in which the judge and attorneys can ask the jurors questions to make sure that they are unbiased. One question asked by Judge Koh (on page 148 of the transcript) was “Have you or a family member or someone very close to you ever been involved in a lawsuit, either as a plaintiff, a defendant, or as a witness?” Mr. Hogan answered that he had been in a lawsuit in 2008 with a former employee over the ownership of a program. That was the only lawsuit he mentioned.

Samsung has since discovered a second lawsuit that Mr. Hogan did not disclose. In 1993, his former employer, Seagate Technology, sued him for breach of contract for failing to pay back a loan to Seagate after being terminated. Six months later, Mr. Hogan filed for bankruptcy, presumably so Seagate couldn’t go after his assets. While any lie could be a problem in jury selection, this one is especially problematic because Samsung sold its hard disk drive business to Seagate last year in exchange for $1.375 billion in cash and stock, as well as the right to select a Seagate board member. The deal gave Samsung a 9.6 percent stake in Seagate, and made it Seagate’s largest stockholder. The press release contained statements about how Samsung and Seagate are strengthening their alliance with this deal.

In addition to the Seagate lawsuit establishing possible bias against Samsung, Samsung discovered that the attorney who sued Mr. Hogan on behalf of Seagate is married to a partner in Quinn Emmanuel’s Silicon Valley office – the same firm and office that is representing Samsung in this case with Apple. Samsung is now arguing that the failure to alert the court of the Seagate case establishes possible biases that they did not have the opportunity to explore, and that they thus deserve a new trial.

Mr. Hogan’s post-verdict interviews:

As expected, Samsung found many things to criticize regarding Mr. Hogan’s post-trial interviews (linked to above, and again here, here, here, and here).

Regarding sitting on the jury:

“I expected to be dismissed from the jury because of my experience. More than one time during the questions from the lawyers for both sides they focused on me, but I am very grateful to have been part of this case….Except for my family, it was the high spot of my career. You might even say my life.”

Samsung argues that this establishes that Mr. Hogan wanted to be on the jury, and that he lied to make sure he was not dismissed. If this is the case, then bias would be presumed.

Regarding having a pro-IP agenda:

Mr. Hogan said he wanted to be satisfied that the verdicts “protected copyrights and intellectual property rights” in order “to send a message to the industry at large that patent infringing is not the right thing to do” and “make sure the message we sent was not just a slap on the wrist.”

Samsung argues that this statement is contrary to his silence to the question on voir dire of whether he had “strong feelings or strong opinions about either the United States patent system or intellectual property laws.”

Regarding providing the jury with incorrect legal principles:

Mr. Hogan said in interviews that he instructed the jury that “look and feel” is the proper way to determine whether a device infringes a design patent, that a device infringes a utility patent unless it is “entirely different,” that prior art could only invalidate a patent if it was “interchangeable,” and that prior art must be in use to be considered.

Samsung argues that these are incorrect legal concepts that Mr. Hogan brought in from outside against Judge Koh’s instructions, and that introducing these concepts in the jury room warrants a new trial.

Samsung also argued that no reasonable jury would have reached these verdicts and that a new trial should be ordered. The motion will be heard on December 6.

My thoughts:
Personally, if I were Samsung I would not have wanted Mr. Hogan on the jury based on the nature of the patent that he holds and that his experience may make him an overly influential juror. Also, I can’t understand Samsung not doing an internet search for every prospective juror with a case of this magnitude, though I guess it is possible that they did and that the two 20-year-old cases (Seagate and bankruptcy) are not accessible on the internet.

I think Mr. Hogan’s failure to disclose the Seagate case is a strong argument in favor of a retrial, though. It is really unclear whether Mr. Hogan meant to deceive the court and also whether he knew that Seagate and Samsung were now sort of business partners. For what it’s worth, Mr. Hogan still denies any bias and claims that the instruction regarding previous lawsuits was limited to a period of ten years prior. The transcript proves that claim wrong. Regardless of Mr. Hogan’s intentions or whether he knew just how relevant that Seagate lawsuit was, lying to a judge on a fact that would have raised eyebrows at Samsung’s table will not sit well with Judge Koh or an appellate court.

I think the interview statements on their own probably wouldn’t have been enough for a retrial because to me it makes sense to be happy to be on a jury in such a monumental case, and if a judge began questioning how a jury deliberated then it would open the door to all sorts of issues regarding jury trials. But coupled with the Seagate lie, those statements make Mr. Hogan look like a guy who wanted to be able to make a statement about patent rights, helped his chances to get on the jury in order to make that statement, and convinced other jurors to go along with that statement.

Apple is trying to figure out when Samsung found out about the Seagate case in the hope that they can claim that Samsung missed their opportunity to raise the argument. That’s a question mark here, as I have been unable to find out when or how Samsung found out about the Seagate lawsuit.

And finally, a word about Mr. Hogan. I don’t know much about the guy besides what I’ve seen of him in the media relating to this case, but I think what he is doing is very foolish. First of all, don’t lie to a federal judge. Second, bias or not, if he is proud of the verdict (which he says he is) then don’t give interviews discussing the complex legal principles applied in the jury room because if he is wrong on anything he creates an opening for a motion for a new trial, and the verdict that he is proud of will be meaningless. I don’t know whether he was looking for fame, enjoyed that he was the man of the hour, just liked having someone to talk to, or was defensive about all the criticism the verdict was getting, but all the interviews were a mistake as far as protecting the integrity of the verdict. While I think the jury was wrong on many claims here and that at least some of the patents should have been invalidated, a retrial would cost hundreds of thousands of dollars, not to mention it would mean that a lot of people wasted their time in July and August, and I certainly wouldn’t want a retrial because of my own misconduct.

For further reading, Groklaw has a great write-up on this story with many exhibits.

And here’s a video of one of his interviews:

Galaxy Tab 10.1 injunction lifted:

In June, Apple was granted a preliminary injunction banning the sales of the Samsung Galaxy Tab 10.1 tablet.  As a refresher, the design patent allegedly infringed relates to the design elements of the iPad, which include rounded corners, a curved bottom, and a display border that is of equal thickness on all sides.  The preliminary injunction – which requires, among other things, a showing of a likelihood of success on the merits – seemed to indicate that Judge Koh was fairly confident that the Galaxy Tab 10.1 will be found to infringe Apple’s patents.  Once this case went to trial, the jury found largely in Apple’s favor, but surprisingly (given the rest of its findings) the jury found no infringement with regard to the Galaxy Tab 10.1.  Both parties will be arguing Rule 50 motions to set aside parts of the jury verdict on December 6, and the jury’s verdict will not be upheld until that date at the earliest.  Samsung initially appealed to the Court of Appeals for the Federal Circuit, which remanded the Galaxy Tab 10.1 issue to Judge Koh, who then granted a motion lifting the injunction yesterday.  Some pundits have said that it is unfair to hear this motion seeking the dissolution of an injunction before Apple’s motion seeking an injunction, but I think it is the right thing to do because it would be very difficult of Judge Koh to say that it is likely that she will throw away the jury’s findings and issue her own finding of infringement before reading briefs and hearing arguments.  While it is still possible for Apple to ultimately be successful in its claim relating to the Galaxy Tab 10.1, I think the jury verdict sufficiently makes that success seem not likely enough to support a preliminary injunction.

Samsung adds the iPhone 5 to its pending patent infringement case against Apple:

Yesterday Samsung added the iPhone 5 to its pending patent infringement case against Apple, which is scheduled for trial in March 2014.  The eight patents were already asserted against other iPhones, iPads, iPod Touches, and Apple computers, and Samsung told the court that adding the iPhone 5 to the pending case is more efficient than starting a new case because the proof is the same for the iPhone 5 as it is for other iPhones.

Samsung provided the following statement explaining why it would rather not litigate (especially after criticizing Apple for being so litigious):

We have always preferred to compete in the marketplace with our innovative products, rather than in courtrooms. However, Apple continues to take aggressive legal measures that will limit market competition. Under these circumstances, we have little choice but to take the steps necessary to protect our innovations and intellectual property rights.

Judge Posner speaks out about software patent reform:

Judge Richard Posner, a highly-respected judge on the Seventh Circuit Court of Appeals, denied Apple’s request for an injunction against Motorola smartphones in June (“[Apple's patent] is not a claim to a monopoly of streaming video!”) and then spoke out on the need for software patent reform in July (“It’s not clear that we really need patents in most industries”).  On Sunday, Judge Posner posted a blog entry entitled “Do patent and copyright law restrict competition and creativity excessively?” In his post, Judge Posner writes that the “optimal patent protection for an invention” occurs when there is a high ratio between the cost of inventing and the cost of copying. As an example, Judge Posner cites the pharmaceutical industry, in which pharmaceutical companies can invest millions of dollars into researching, creating, and testing a drug, and, without patent protection, other companies could copy that drug inexpensively and market it before the pharmaceutical industry can even break even on its costs. Thus, without patent protection there is little incentive for pharmaceutical companies to create new and potentially life-saving drugs. On the other hand, writes Judge Posner, the software industry has a very low ratio of cost of inventing to cost of copying. Here’s what he says:

The problem of excessive patent protection is at present best illustrated by the software industry. This is a progressive, dynamic industry rife with invention. But the conditions that make patent protection essential in the pharmaceutical industry are absent. Nowadays most software innovation is incremental, created by teams of software engineers at modest cost, and also ephemeral—most software inventions are quickly superseded. Software innovation tends to be piecemeal—not entire devices, but components, so that a software device (a cellphone, a tablet, a laptop, etc.) may have tens of thousands, even hundreds of thousands, of separate components (bits of software code or bits of hardware), each one arguably patentable. The result is huge patent thickets, creating rich opportunities for trying to hamstring competitors by suing for infringement—and also for infringing, and then challenging the validity of the patent when the patentee sues you.

Further impediments to effective patent policy in the software industry include a shortage of patent examiners with the requisite technical skills, the limited technical competence of judges and jurors, the difficulty of assessing damages for infringement of a component rather than a complete product, and the instability of the software industry because of its technological dynamism, which creates incentives both to patent and to infringe patents and thus increases legal costs.

As I wrote in August, the patent cases going on in the mobile industry, particularly between Apple and Samsung, are really problematic to me. It is a worldwide battle that is tying up taxpayer-funded court systems, has no end in sight, and is really adding to the cost of producing awesome electronics, and that cost will eventually be passed on to the consumers. I still don’t have a solution, and I’m not advocating that all software become open source, but I think given the magnitude of the Apple v. Samsung cases alone that something isn’t right. I hope more prominent attorneys like Judge Posner continue to speak out on this issue so that it can be improved upon.