An expert hired by Apple had determined the company was due $114 million in lost profits because of Samsung’s use of technology under Apple’s patent No. 7,844,915, also known as “pinch to zoom.” The ‘915 patent covers technology that can distinguish whether a user is scrolling with one finger versus using several touch points at once for a pinch-to-zoom action.
However, Michael Wagner, an accountant and lawyer hired by Samsung, said there’s no evidence from either company that shows consumers bought Samsung devices because they liked that particular touch-screen feature. As a result, he believes Apple should receive no money for lost profits.
“I believe people bought these phones for other features,” Wagner said. That includes bigger, AMOLED screens; faster processors; and 4G LTE.
The comments come on the fourth day of a retrial for damages that Samsung owes Apple for infringing on five of its patents. A judge in March vacated about $450 million of an original award. Samsung is still on the hook for $600 million, no matter what happens in the retrial.
Wagner spent his time on the stand Friday disputing calculations made by Apple’s expert accountant, Julie Davis. In particular, he said that she didn’t correctly determine Samsung’s profits from the infringing devices and she attached too much value to Apple’s lost profits stemming from Samsung’s use of a touch-screen technology patent.
The two companies are battling over how much more Samsung owes Apple for infringing on five of its patents. Apple — using Davis’ calculations — says Samsung owes it $380 million. Samsung says it should pay $52 million.
A big part of the discrepancy comes from differing views on how much Apple lost in profits and how much it should be due for royalties.
One expert, MIT professor John Hauser, estimated three Apple patents, including the ‘915 patent, adds about $100 in value to a $199 smartphone or $90 in value to a $499 tablet. Davis said Apple lost out on $114 million in profits because of the Samsung copycat devices. She also calculated Samsung’s profits to be $231 million, and said reasonable royalties owed to Apple total $35 million. Apple estimates it would have sold 360,000 devices if Samsung hadn’t released infringing rivals.
Samsung, meanwhile, said Apple shouldn’t receive any money for lost profits, $52.7 million for Samsung’s profits, and royalties of only $28,452 because the patents have limitations.
Wagner on Friday said Davis should have deducted operating expenses for marketing, R&D, and other items from her calculation of Samsung’s profit from the infringing devices.
“Davis calculated not a penny of these operating expenses, which I believe are a necessary expense,” Wagner said. “You can’t sell a phone without incurring those types of costs.”
As for lost profits, Judge Lucy Koh on November 7 granted Samsung’s motion to strike the lost profits calculations of Davis because Davis’ calculations relied on an assumption that Samsung would not have started its efforts to design around Apple’s patents until it received actual notice of infringement. That ruling meant that only one patent — ‘915 — could be used to calculate lost profits, Koh said, because it was based on the appropriate design around period start dates.
However, according to a court document, less than two days before the retrial was set to begin, Apple declared that it planned to argue for lost profit damages for three other patents anyway, despite the fact its expert concluded it wasn’t entitled damages for those patents. It planned to use a new, alternative theory to argue for lost profits, the court filing said.
Koh on Tuesday issued another order blocking Apple from making such an argument. That meant only the ‘915 patent could be used to determine lost profits.
“The Court is concerned that Apple’s new lost profits theory will invite the jury to come up with a lost profits award founded on little more than pure speculation,” she said.
Court kicked off Tuesday with jury selection in the United States District Court for the Northern District of California. The companies should wrap up witness testimony Monday and make closing arguments Tuesday. A jury of six women and two men will then deliberate to determine the new damages amount.
Apple originally filed suit against Samsung in April 2011, accusing the Korean company of copying the look and feel of its products. Samsung countersued two months later over patent infringement and said it was at work on touch-screen phones with giant rectangular screens and rounded corners well before Apple showed up. The initial trial, which stretched more than three weeks in August 2012, wrapped both of those cases in one, somehow squeezing together the patent infringement issues, alongside antitrust claims, and even trade dress issues.
In August of last year, a nine-person jury sided with Apple on a majority of its patent infringement claims against Samsung. At that time, the jury awarded Apple $1.05 billion in damages, much less than the $2.75 billion sought by the Cupertino, Calif., electronics giant. Samsung, which asked for $421 million in its countersuit, didn’t get anything.
However, Koh in March ordered a new trial to recalculate some of the damages in the case, striking $450.5 million off the original judgment against Samsung. What that means is Samsung is still on the hook for about $600 million in damages, but a new jury has to decide how much else it owes.
The products in question include the 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 Prevail in particular racked up $57.9 million of the damages tally, which Koh said was a failure on the jury’s part, since the device was found to infringe only on utility patents, and not on design patents.
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