"Brand new," "vague," "untimely." These phrases were used by the district court presiding over the retrial on damages in Apple v. Samsung to characterize, and dismiss, Apple's recent attempt to increase the number of patents eligible for lost profits.
In March 2013, the court found that a good portion of the $1 billion damages award to Apple was based on an “impermissible legal theory" and slashed it by $450 million. It also ordered a retrial on damages, which is now in its early stages. Apple told jurors in its opening that it was seeking a total of $379 million in additional damages, including $113 million in profits on lost iPhones sales.
Apple's former damages expert, the late Terry Musika (Invotex Group), and its present damages expert, Julie L. Davis, a Chicago-based CPA, both built their lost profits damages model on the four-part Panduit test and, most critically here, on Factor 2, which requires the plaintiff to show that no acceptable noninfringing substitute was on the market. In calculating damages, the experts relied on the assumption that, for three patents related to mobile devices, Samsung would have returned to the market with a noninfringing product that appealed to consumers as much as the infringing smartphones and tablets before Apple was eligible for lost profits on those patents. In other words, Apple could not claim any lost profits for these patents. The experts offered no other model.
In an about-face, 48 hours before the retrial, Apple claimed that it could prove lost profits through an assortment of other evidence of Samsung's infringing sales. Samsung swiftly filed an emergency motion to preclude Apple from doing so, claiming the alternative theory was untimely and, in any event, unable to meet the evidentiary burden.
The court agreed. "[T]he nature of Apple's new, non-expert lost profits theory is not wholly clear," it said. Apple failed to articulate how it intended for the jury to construct its lost profits award, arguing only that it could prove an entitlement to lost profits without relying on its experts. "The Court is not convinced." The lost profits calculation for one patent survived.
Find a discussion of Apple, Inc. v. Samsung Electronics Co., Ltd., 2013 U.S. Dist. LEXIS 162863 (Nov. 12, 2013), in the January issue of Business Valuation Update. The court opinion will be available soon at BVLaw. Readers can find digests of prior decisions in the case and the corresponding opinions at BVLaw. Subscriptions are required for these products.