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Judge Cuts $400m from Apple-Samsung Jury Award


By
Smith & Hopen PA

SAN JOSE, March 1, 2013: U.S. District Court Judge Lucy Koh slashed Apple’s $1 billion award against Samsung to $600 million.  Apple did attempt to increase the $1 billion award through a number of theories. 

Additur

One such argument was additur wherein the jury awarded Apple less than the amount calculated by Samsung’s own damages expert.  However, the judge noted she was constrained by the 7th Amendment from increasing a damages award made by a jury.

Supplemental Damages

Apple next sought additional supplemental damages for infringing sales not considered by the jury.  Here, Judge Koh agreed that Section 284 of the patent statute requires compensation for every infringing sale.  If the jury does not make an award for an infringing sale, the judge must step in and do so.  The sales at issue are not disputed by Samsung as they occurred after the trial had concluded.  Judge Koh will calculate sales made after August 25, 2012 (the day after the jury verdict) but due to the complexities in calculating supplemental damages she will hold off in awarding supplemental damages until after all appeals have been exhausted.

Prejudgment Interest

Prejudgment interest is awarded to compensate the patent owner for the use of its money between the date of injury and the date of judgment.  Judge Koh noted that several of the products involved not just patent infringement, but also trademarks (Lanham Act) claims.  The law is not clear on whether prejudgment interest is available for Lanham Act claims that do not involve counterfeiting.   Judge Koh found this is moot point because she clearly found Apple entitled to prejudgment interest based solely on the patent claims alone.  Apple proposed the prime rate while Samsung suggests that the lower 52-week Treasury bill rate is more appropriate.   Judge Koh noted Apple maintains substantial cash reserves and there is no evidence it had to borrow money.  Thus, she found the lower 52-week Treasure Bill Rate sufficient but did side with Apple that the interest be compounded on an annual basis.

Jury Award

Samsung argued the jury awarded damages based on impermissible legal theories.  Apple countered that the court simply look at the totals and determine whether they are supportable. 

Design Patent / Trade dress apportionment

Samsung unsuccessfully argued Apple failed to prove which features in its products were attributable to its loss profits.  Judge Koh noted this argument has no merit as Congress specifically drafted the design patent remedy to remove an apportionment requirement that the Supreme Court had previously imposed.

Samsung also unsuccessfully argued that the trial evidence did not support trade dress dilution.  Judge Koh found this a moot argument as the jury found design patent infringement which was supportable with or without trade dress dilution.

The Galaxy Prevail – Design versus Utility Profits

Judge Koh did agree with Samsung that the $60 million awarded for Samsung’s profits for the Galaxy Prevail device was not permitted because the jury only found utility patent infringement.  Judge Koh ordered a new trial on damages for the Galaxy Prevail infringement.

Notice Dates

Under the patent statute, 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.  Samsung argued the notice date used in Apple’s calculations was not supported by evidence.    Furthermore, damage awards for different intellectual property infringement are calculated differently:

  1. Utility Patents:  lost profits or a reasonable royalty (35 USC 284);
  2. Trade Dress Dilution: lost profits and/or infringer’s profits (15 USC 1125); and
  3. Design Patents: lost profits, reasonable royalty, or infringer’s profits (35 USC 289).

Section 287 (notice provisions) provide that marking the patent product with the patent number provides constructive notice.  Alternatively a notice can be delivered directly to the accused infringer (“actual notice”).  Apple contends Samsung received actual notice for all its asserted acts of infringement at an August 4, 2010 meeting between the two parties.  However, only evidence of one patent subject to that meeting was identified at trial. 

Judge Koh drew up a chart in her order showing the notice dates for various products and thus reduced the damages award accordingly.  Specifically, she noted:

  1. Trade Dress:  Notice is not required for damage awards so the jury award stands.
  2. Impermissible Damages and Vague Dates: Intermixing design and utility patent remedies with supported dates resulted in Judge Koh striking nearly $400 million from the jury’s award.
  3. Permissible Damages but Improper Notice Period: No excess found….jury award stands.
  4. Reasonable Royalty, but Excessive Damage Period: $9 million struck from award.

Conclusion

Although $400 million was struck by the court the story is not over.  Additional damage awards to Apple are almost a certainty including prejudgment interest and supplemental damages.   With both sides well-funded and some unsettled legal questions, expect a precedential Federal Circuit Decision on damages and possibly a Supreme Court take-up.

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