Judge reduces damages in Apple v. Samsung, setting the floor at $598M, and offers some guidance to expert witnesses

On March 1, US District Court Judge Lucy Koh ruled that Samsung Electronics should pay Apple adjusted damages of $598 million, down from the jury’s award of just over $1 billion. (A jury found that 14 Samsung products had violated Apple patents.) The restating of the damages was due to two factors: 1) the jury relied heavily on Apple’s expert witness (see analysis below) who used the wrong start date for calculating damages, and 2) as argued by Samsung, some of the awards rested on impermissible legal theories. The judge also ordered a new trial to determine damages for those infringements that do not legally lend themselves to a simple, mathematical recalculation.

"There are eight phones for which the jury awarded 40 percent of Samsung's profits for the entire period, but, for which, during some of the damages period, infringer's profits was not an authorized remedy…for utility patent infringement" the ruling states. "The only remaining possibility is to conduct a new trial on damages for these eight products."

Prior to Apple v. Samsung, Apple’s expert witness, Terry Musika, was best known for co-founding Invotex and for his testimony in support of NTP, Inc, in the $612.5M win over Research in Motion, Ltd. (Mr. Musika passed away in December of 2012.) Apple reportedly paid Musika's 20-person team around $1.75 million in fees and expenses.

At trial, in calculating what was referred to as Samsung's alleged "unjust enrichment" — i.e., its profits for selling the accused devices — Musika estimated that Apple lost around 2 million mobile device sales, at a cost of $488.8 million, and put Samsung’s related profits at $2.241B.

The issues, according to Judge Koh, are 1) the Apple estimates pertained to a longer time period that that prescribed by law (“under 35 U.S.C. § 287(a), there can be no damages award where a defendant did not have actual or constructive notice of the patent or registered trade dress at issue”), and (2) more specifically, as the Galaxy Prevail was found to infringe only utility patents, and infringer's profits are not a legally permissible remedy for utility patent infringement, the jury awarded damages based on a legally impermissible theory.

Musika’s approach to the case (aside from the when-do-damages-start issue) is instructive to others as Judge Koh specifically states in her ruling that the expert’s presentation “constitutes exactly the type of economic evidence of causation that the Federal Circuit requires in sustaining an award of lost profits.”

Musika provided detailed evidence regarding how the market would likely have behaved absent Samsung’s infringement, including: (1) the market share of various smartphone manufacturers, based on data collected and analyzed by independent research firm IDC (including Apple, Samsung, and other manufacturers, to whom he assigned the largest market share); (2) Apple’s capacity to manufacture additional phones and tablets; and (3) consumer demand, based on both expert survey evidence and fact witness testimony. Musika’s opinion answers the question, “how many additional sales Apple would likely have made, but for Samsung’s infringement?”