Apple vs. Samsung: The Sequel. As the two giants headed into a second trial, a damages issue that they litigated only a few months ago concerning Apple’s off-the-market lost profits took the spotlight in pretrial proceedings. In a surprise move, Samsung did a complete reversal on the question of when to consider potential design-arounds.

Prior case: In November 2013, Apple and Samsung retried damages related to Samsung’s infringement of critical components of Apple’s iPhone and iPad. A source of contention between the parties was the timing for calculating Apple’s “off-the-market” lost profits—damages for times when Samsung infringed but should not have been able to sell the infringing products because there was no noninfringing alternative. The issue was whether the damages calculation must consider potential design-around products from the point of first infringement or the date of notice of the infringement. Samsung vigorously argued for the date of first infringement and prevailed in court. The ruling reduced Apple’s damages demand by $305 million. Ultimately, Apple was awarded $930 million.

Contradiction: In this second case, Apple seeks $2 billion, alleging Samsung violated five of its mobile software patents. For its part, Samsung claims Apple infringed two of its patents. Initially, Apple’s damages expert analyzed off-the-market lost profits based on the notice dates. For four of Apple’s five patents in suit, the infringement date preceded the notice date. In terms of the fifth patent, since the notice date preceded the infringement date, he did not calculate damages.

In a Daubert motion, Samsung successfully used the court’s prior ruling to force a revaluation for damages—a decrease in lost profits—related to the four patents. But the earlier ruling cut both ways because Apple’s expert determined that Apple now could claim additional damages in off-the-market lost profits for the fifth patent. Samsung tried to preclude the expert’s calculation as to the fifth patent by arguing that the court’s prior order did not apply to where the notice date was earlier than the first infringement date. Apple pushed back saying Samsung “contradicts itself to reduce potential damages exposure for [the patent in suit].” Even though it had notice of the patent a year before infringement, it decided to infringe rather than design around it.

The court agreed with Apple and refused to strike the expert’s calculation. Samsung’s position “would require analysis of potential design-arounds before the infringement period—in this case the notice date.” Samsung failed to cite any authority for assessing noninfringing alternatives for a period “when no lost profits could have been available.”

Find a discussion of Apple, Inc. v. Samsung Electronics Co., Ltd. (Apple II), 2014 U.S. Dist. LEXIS 43907 (March 28, 2014), in the May issue of Business Valuation Update; the case will be available soon at BVLaw.