Samsung shifts strategy in second Apple trial, now claims all patents are worth very little

Posted:
in iPhone edited April 2014
Apple's second patent infringement trial against Samsung begins today, outlining a battle that the two sides are waging in very different ways. Apple will be expanding upon its legal strategy outlined in the first trial, while Samsung is starting over with an entirely new tactic aimed at devaluating Apple's inventions so it can continue using them for virtually nothing.

iPhone Patents

Why Apple won the first trial

In the initial lawsuit it filed in April 2011, Apple argued three utility (technology) patents and four design patents. It sought to prove to the jury that Apple's expensive, risky, years-long investment in developing iPhone and iPad as products was simply copied by its component supply partner Samsung, infringing upon its legal rights obtained after it filed for protection of hundreds of patents related to the unique iOS experience Apple had invented.

Samsung brought five patents of its own to the first trial. However, rather than representing unique technologies that Samsung had been using to differentiate its own products in the market, Samsung's asserted patents pertained to technical ideas within Standards Essential Patents previously committed to FRAND ("fair, reasonable and nondiscriminatory") licensing.

Apple vs Samsung


Apple prevailed in convincing the jury that Samsung had infringed both its uniquely distinctive technologies and its trademarked overall appearance, largely using evidence generated by Samsung itself, including the 132 page "Copy Cat" internal document that detailed Samsung's efforts to copy the unique features of Apple's iPhone over just a period of a few months in order to deliver its own Galaxy line of devices that looked and worked so similarly to Apple's that customers could be expected confuse the two.

Why Samsung lost in the first trial

Samsung's efforts to leverage its own FRAND SEPs in the trial failed across the board, in part because of evidence that the SEP patents weren't even Samsung's inventions, but simply technical concepts the company had patented during the public negotiation of open standards.

It was as if Samsung had sat in on the community development of standardized, international freeway designs, filed to patent ideas as they were being openly discussed, then turned around and tried to claim ownership of ideas like onramps and lane striping after those ideas had been written into standard specifications of how the roads would need to be designed.

As a report by the Wall Street Journal observed in late 2011 regarding the company's use of FRAND SEPs in lawsuits, "it appears that Samsung is trying to sow confusion among courts world-wide over different types of patents.""It appears that Samsung is trying to sow confusion among courts world-wide over different types of patents" -Wall Street Journal

Samsung's abuse of FRAND SEPs in this and other trials worldwide was outrageous enough to spark government investigations in the U.S., E.U. and even South Korea, all aimed at curbing the weaponized use of SEPs, which are intended to create interoperability among competitors, rather than protect inventions that uniquely differentiate a single company's products.

As an example, Samsung's U.S. Patent 7,362,867 from the first trial describes an idea required to build the baseband chips that allow smartphones to connect to carriers' mobile wireless towers. Apple's baseband component suppliers had already paid Samsung to license these "Standard Essential" ideas, but Samsung sought to allege that Apple's iPhone was still infringing.

Essentially, Samsung tried to accuse Apple of shoplifting a product that Samsung's own customers had already paid for before walking out of the store and selling it to Apple for resale. The jury didn't buy this tactic, but that argument did manage to make its way through a parallel U.S. International Trade Commission court, resulting in the threat of a sales ban of certain iOS products despite the fact that Samsung's patent in question had already been deemed invalid the previous year.

It took a Presidential veto to stop Samsung from obstructing Apple's sales with a known-to-be-invalid patent leveraged in an ownership claim so specious and easily torn apart that Samsung has subsequently appeared to have abandoned attempts to repeat the same sort of arguments in the second trial.

Apple's second trial doubles down on differentiating tech patents

For its second trial, Apple has scaled back the hundreds of iPhone patents it could leverage in court down to five key patents (down from around eleven in the original filing) that are relatively easy to present to a jury. There are no Apple design patents in this case, only utility patents with clear relevance to Apple's allegations that Samsung willingly copied differentiating features of Apple's products to confuse the market and avoid having to invest years of its own efforts into crafting an original mobile experience.

In summary, the five patents Apple is wielding in the second trial pertain to iOS slide to unlock; auto word correction and suggestion used in spellcheck; Spotlight universal search of local phone and internet content using heuristics to suggest relevant results; iTunes/iCloud-style background device sync with a PC or the cloud while being used; and automatic quick links, also known as Apple Data Detectors (depicted below).

Apple Data Detectors


Apple is focusing its case on these five patents to prove two points. First, that Apple's engineers over a series of years developed unique, differentiating features that are now well known and closely associated with the iOS experience, setting Apple's products apart from other maker's mobile devices.

And, secondly, that Samsung owes Apple significant damages, both for using Apple's technology to earn billions of dollars worth of its own mobile profits (as Samsung's attorneys have admitted, and to cover the lost profits Apple suffered after being forced to compete against stolen copies of its own work, which were offered by Samsung at a lower price.

Samsung: patents aren't worth much, not even ours

Already, the significant damages that Apple is seeking in the second trial have received criticism for being "too high," even before Apple has argued its case. Of course, it's in Samsung's best interests to argue that patents aren't really worth very much at all. That appears to be the core of Samsung's new strategy in the second trial.Samsung's patents for the second trial were acquired from third parties simply to have something to present at trial

Despite having been in the smartphone business for many years before Apple, Samsung has not successfully brought its own utility patents to trial against Apple.

After losing across the board on its FRAND SEP strategy, Samsung is back with a countersuit alleging Apple infringement of two patents. It started the second trial with four, but dropped two of its own SEP patents earlier this month: U.S. Patent No. 7,756,087 and U.S. Patent No. 7,551,596 both of which related to technical details of transferring data over a mobile link.

Samsung has represented in various cases that, just like Apple, it too has a heritage of invention and technical innovation encapsulated in a broad patent portfolio, but none of the patents Samsung is bringing to the second trial involve concepts that smartphone or tablet customers would recognize as being unique inventions of Samsung.

In fact, Samsung's entire patent response to Apple's claims in this second case are made up of two patents the South Korean conglomerate acquired from third parties, simply to have something to present at trial.

One of those patents, U.S. Patent No. 5,579,239 was acquired by Samsung in October 2011, six months after Apple filed its second lawsuit. Samsung bought the patent, which claims ownership of the overall concept of sending video over a network (depicted below), from a patent application group living in Oklahoma when the patent was originally filed back in 1996.

Samsung patent 5579239


The other patent Samsung is using, U.S. Patent No. 6,226,449, was similarly acquired from Hitachi in August 2011. It claims ownership of the idea of "recording and reproducing digital image and speech," and was originally filed by Hitachi in 1997.

So while Samsung is making a case to the public that both it and Apple have lots of patented technologies in the mobile arena that differentiate their respective products, the reality is that for its second trial, Samsung had to go out and buy a defense using patents others had filed nearly twenty years ago. At no point over the last twenty years has either of those patents ever differentiated Samsung's products.

Samsung is also highlighting that it doesn't expect much in the way of damages from its pair of acquired patents. It's only asking for total damages of around $7 million from Apple, in stark contrast to Apple's demands of around $2 billion. Samsung's new legal strategy therefore seems to be aimed at attacking the entire notion that patents have any real value at all.

That's a tactic that, if successful, could enable Samsung to continue to appropriate Apple's patented, differentiated features at very low cost, even if Apple keeps initiating new lawsuits and keeps winning awards from juries, a process that takes years to wind its way through the courts.

The tech media seems to be buying into Samsung's new strategy. In a CNET article entitled "Apple v. Samsung: All you need to know about latest patent trial," Shara Tibken wrote, "Apple wants about $2 billion from Samsung. Samsung, meanwhile, is asking for much less because it believes royalties shouldn't be so high."

Samsung now believes royalties shouldn't be so high

Samsung's role reversal in demanding billions in patent royalties

Samsung's new strategy of attempting to devalue everyone else's patents by assigning a very low valuation to some of its own is a notable reversal of the company's previous "beliefs" reflected in its demand for roughly $3 billion in royalties from Apple over that baseband patent from last fall, noted above.

Samsung was demanding around $16 per iPhone in SEP royalties from Apple on a baseband chip that cost only $11.72, a component that had already bundled in the manufacturer's cost of paying Samsung to license its patent portfolio. Contrast that with the roughly $40 royalty Apple is now asking for Samsung's infringement of five different patents that each define key elements of the iOS experience.

Unlike the "Standard Essential" aspect of patents involved in those baseband chips, Samsung can build phones that don't infringe upon Apple's five patents. Samsung can even modify its own products to simply stop presenting Apple's patented features as its own.

After years of Apple building unique, patented features like Spotlight and Apple Data Detectors to differentiate its products in the market place, it's not hard to fathom why Apple now sees itself in a position of strength to argue that Samsung owes it significant damages for having failed to either negotiate the licensed use of Apple's technologies, or agree to build its own parallel solutions that work around Apple's patents in non-infringing ways.

Samsung has reason to think its policy of infringement is winning

At the same time, Samsung also appears to believe it is in a position of strength, because despite having lost a nearly $1 billion verdict in the first case, it managed to not only earn multiple billions of dollars from appropriating Apple's design patents (Samsung Mobile reports earnings of roughly $5 billion per quarter) but also managed to avoid any sales injunctions that would force it to stop infringing those original patents. Compared to a more favorable judgement that could have resulted in damages of $3 billion or more, on top of a punitive injunction sales on Galaxy shipments, Samsung might likely believe that it won the first trial

Recall too that Apple originally sued for around $2.5 billion in damages in the first trial and ended up with an award closer to $1 billion. After that, Apple asked for a damages multiple that would have resulted in $3 billion in damages. That request was denied, along with Apple's requests for an injunction against sales of Samsung's infringing products.

Compared to a more favorable judgement that could have resulted in damages of $3 billion or more, on top of a punitive injunction sales on Galaxy shipments, Samsung might likely believe that it won the first trial.

If it can whittle down two more years of Apple's legal efforts into another slim fraction of its quarterly profits from Galaxy sales, Samsung may just shrug off a billion dollar biennial payoff to Apple as a cost of doing business going forward, in line with the "tax evasion, bribery and price-fixing" that The Independent recently profiled as defining Samsung as a company that sees itself as above the law.

Samsung's big risky bet against patents

Back in August 2011, months after Apple had filed its first lawsuits against Samsung in both U.S. Court and with the ITC, Samsung had an opportunity to avoid a second lawsuit by negotiating patent royalties with Apple, the same way HTC agreed to settle with Apple in late 2012.

However, even back then Apple would have had the upper hand in negotiating a deal: it had patents in hand that were known throughout the industry to be valuable in practice, as Apple's unique, premium iPhone and iPad products were garnering disproportional interest from consumers, and therefore disproportional profits in the industry.

Samsung's delay tactics have resulted in strengthening Apple's bargaining position, because in the years since, Apple won its first U.S. patent case and Samsung has lost every significant case in trials spanning the globe.

The only way Samsung can improve its position in trying to retroactively strike a deal with Apple is to convince the world's courts that patents are not worth the very valuations that Samsung itself sought to collect from Apple right up into the end of last year.
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Comments

  • Reply 2 of 49
    If you transpose some of these comments to touchscreens you might observe that strategic Apple patents are surreptitiously owning the screen manufacturers.

    Handcuffing those that makes the hardware is a dangerous tactic unless long term you are happy to use only bottom rung suppliers.
  • Reply 3 of 49
    lkrupplkrupp Posts: 10,557member

    So this is all just some game that lawyers play. Like Samsung’s product strategy, they just throw stuff at the wall and see if anything sticks. 

  • Reply 4 of 49
    irelandireland Posts: 17,798member
    Don't link to CNet, seriously.
  • Reply 5 of 49
    thepixeldocthepixeldoc Posts: 2,257member
    What I personally don't understand about this whole thing, is that AFAIK... Apple didn't even want to license their patents at all. There were some talks, but they went nowhere... again AFAIK.

    So with a "well then screw 'em if they think they can just steal or stuff" type of attitude, why didn't Apple just go into 10's of Billions, rather than just 4B?

    What does "not for sale at any cost" mean going forward, if a judge can determine at a later date what that "priceless" object, technology or design "should be" sold at after the fact that a company stole and used it to make money.

    Why should Apple even be forced to guess what they lost in sales, as opposed to taking every cent from the selling price of a device that was based on copying their design unlawfully. I don't even think it is the burden of Apple or a jury to determine how many Samsung devices "theoretically would be sold" regardless of Samsung's thievery.

    Show numbers shipped, sold or any exchange of currency... and that is the price to be paid after losing the trial. Period. That would put an end to "blatant" theft immediately, which this is considering the undeniable evidence.

    Also you have to wonder what the other Android OEMs point of view is on this, after they stuck to the rules and lost valuable brand and market share to Samsung. I would've expected them to be a little more vocal backing Apple up on this. They're the ones that have suffered the most financial damage.
  • Reply 6 of 49
    SpamSandwichSpamSandwich Posts: 33,407member
    Ugh. Guess I'll have to find another source for this trial if Dilger is given free reign with his pseudo-reportage.
  • Reply 7 of 49

    So after you steal something, then claim that it was not worth much anyway?  Yeah, that is going to go well with the judge.

  • Reply 8 of 49
    thepixeldocthepixeldoc Posts: 2,257member
    Oh... and as for televisions... give me a Sony or Panasonic any day before I put up with the nasty GUI, consumer-color, and over-sharpening of Samsung!

    Yes, all can be adjusted... except the "nasty GUI" for that bit of extra work.

    All the more reason for Apple to come up with a smart connection hub using HDMI 2.0 that takes control of anything that plugs into it. I might add that even goes for the Sony and Pano's mentioned above as well.
  • Reply 9 of 49
    iaeeniaeen Posts: 588member
    If you transpose some of these comments to touchscreens you might observe that strategic Apple patents are surreptitiously owning the screen manufacturers.

    Handcuffing those that makes the hardware is a dangerous tactic unless long term you are happy to use only bottom rung suppliers.

    There is nothing surreptitious about it. Apple created the tech, and Apple patented it. There is nothing unusual about OEMs manufacturing something they don't own.
  • Reply 10 of 49
    kibitzerkibitzer Posts: 1,114member
    Pinning patent infringement on Samsung is like spearing a snake. It squirms and writhes wherever you try to impale it.
  • Reply 11 of 49
    dasanman69dasanman69 Posts: 13,002member
    What I personally don't understand about this whole thing, is that AFAIK... Apple didn't even want to license their patents at all. There were some talks, but they went nowhere... again AFAIK.

    So with a "well then screw 'em if they think they can just steal or stuff" type of attitude, why didn't Apple just go into 10's of Billions, rather than just 4B?

    What does "not for sale at any cost" mean going forward, if a judge can determine at a later date what that "priceless" object, technology or design "should be" sold at after the fact that a company stole and used it to make money.

    Why should Apple even be forced to guess what they lost in sales, as opposed to taking every cent from the selling price of a device that was based on copying their design unlawfully. I don't even think it is the burden of Apple or a jury to determine how many Samsung devices "theoretically would be sold" regardless of Samsung's thievery.

    Show numbers shipped, sold or any exchange of currency... and that is the price to be paid after losing the trial. Period. That would put an end to "blatant" theft immediately, which this is considering the undeniable evidence.

    Also you have to wonder what the other Android OEMs point of view is on this, after they stuck to the rules and lost valuable brand and market share to Samsung. I would've expected them to be a little more vocal backing Apple up on this. They're the ones that have suffered the most financial damage.

    It's extremely complicated. There were many countries in which there were no direct sales of iPhones, and in which the offending Samsung devices were. Now you can argue it'll effect future sales of iPhones, but how can that be proven with any degree of certainty?

    Do award the entire price of a sale, or only a percentage since only a small part of the device is in violation? How many sales were a direct result a device looking like a iPhone, and how many weren't? I wouldn't want to be the one to decide what damages to award, because there's way too many variables to consider.
  • Reply 12 of 49
    dysamoriadysamoria Posts: 3,430member
    I'm disgusted with Samsung's behavior, and, prior to iOS 7, I loved iPhone for what it was. But I actually think devaluation of patents is the way to go. Unfortunately, companies like Samsung would reap the greatest benefits from that by continuing to copy the hell out of everything from everyone. Though it might make it unlikely that they'd be as able to sue others for "paten infringements". This whole system has not only fallen over under its own bloated weight, it also caught fire and exploded. Put it out of our misery so small companies can start to create product again. That means start over from scratch. There's not much new under the sun; it's in how the thing is excuted these days, and patent law has gotten to the point where it doesn't serve its original intent whatsoever. It just presents a further way for established entities to create barriers to entry and wastes resources.

    Yes, I know a great idea only seems obvious after the fact, and yes, I think Appe deserves to profit from its own creations. But why are they now burning those same successes with iOS 7? And no non-practicing entity should be able to sue for infringement, nor be allowed to buy and sell patents. If it's not your invention, you shouldn't have the ability to profit from and hoard it. So many of these patents ARE obvious and not at all unique. The patent office itself has said as much. It's corporate lobbying that has forced the patent office into the ridiculous state it's currently in.

    So yeah, go ahead and devalue patents. In the long run, it might save us all a lot of BS and allow new entities to enter into markets currently closed to them.
  • Reply 13 of 49
    formosaformosa Posts: 261member

    The backdrop of these trials should form the perfect (future) case against Samsung after Apple releases its iWatch product.

     

    More "before and after iWatch" pictures, anyone?

  • Reply 14 of 49
    Of course Samsung would argue patents are worth little. Any company that wants to use another's IP would love this - it's basically saying all IP is free to use by anyone (by free I mean next to nothing, or a fee so small it has no monetary impact on your products).

    Then we have Google who think if you invent something that becomes wildly popular that it should become a "standard" and licensed accordingly. Even if the patent owner doesn't want to license their IP, they should be forced to under similar terms to an SEP.

    Seriously, these two companies are the worst when it comes to IP issues.
  • Reply 15 of 49
    Their legal argument will fail. All Apple needs to do is show the exorbitant pricing Samsung wants for use of patent technology owned by Samsung.

    Juries don't like liars. And, they don't like people that talk out if both sides if their mouths — and Samsung has many mouths.
  • Reply 16 of 49
    malaxmalax Posts: 1,598member
    Quote:

    Originally Posted by dysamoria View Post



    I'm disgusted with Samsung's behavior, and, prior to iOS 7, I loved iPhone for what it was. But I actually think devaluation of patents is the way to go. Unfortunately, companies like Samsung would reap the greatest benefits from that by continuing to copy the hell out of everything from everyone. Though it might make it unlikely that they'd be as able to sue others for "paten infringements". This whole system has not only fallen over under its own bloated weight, it also caught fire and exploded. Put it out of our misery so small companies can start to create product again. That means start over from scratch. There's not much new under the sun; it's in how the thing is excuted these days, and patent law has gotten to the point where it doesn't serve its original intent whatsoever. It just presents a further way for established entities to create barriers to entry and wastes resources.



    Yes, I know a great idea only seems obvious after the fact, and yes, I think Appe deserves to profit from its own creations. But why are they now burning those same successes with iOS 7? And no non-practicing entity should be able to sue for infringement, nor be allowed to buy and sell patents. If it's not your invention, you shouldn't have the ability to profit from and hoard it. So many of these patents ARE obvious and not at all unique. The patent office itself has said as much. It's corporate lobbying that has forced the patent office into the ridiculous state it's currently in.



    So yeah, go ahead and devalue patents. In the long run, it might save us all a lot of BS and allow new entities to enter into markets currently closed to them.

     

    We have to tread very lightly if changing anything about IP law.  I expect "the little guy" gets royally screwed if patents are devalued.  The bigger companies with the resources to exploit the patent can swoop in and bring a copy cat product to markets worldwide before the inventor gets any momentum.  Likewise non-practicing entities are a means for the little guy to monetize his invention without attempting to start a multinational corporation.  The problem with non-practicing entities/patent trolls (from my perspective) is the "gotcha" games they seems to like to play.  They should be required to announce their intention to seek redress as soon as they recognize possible infringement.  Instead, in many cases, they wait 5-10 YEARS until the product is successful before coming out of nowhere to sue.  If someone knowingly lets a company use their patent without any formal complaint, that should be considered a tacit agreement to let them use the patent during that time period.  This "for the past 5 years, you have been using our patent, so you owe us $$$ (and we knew about for 4.5 of those years)" stuff is BS.

     

    And since we're throwing in random OS 7 comments, I'll say that on-whole OS7 is much better than OS6 (even though I like the old icons and I'm a big fan of skeuomorphic design).

  • Reply 17 of 49
    512ke512ke Posts: 782member

    I personally predict that Apple will win this round in the courts.

     

    However, Apple will win only money.  And Apple has already got more money than it needs.

     

    The courts are not going to change the reality that Android has gobbled up the lion's share of the market internationally.  The courts are not going to stop the dominance of Android.

     

    The way to stop this thief isn't through legal means.  

  • Reply 18 of 49
    nagrommenagromme Posts: 2,834member
    Lawyers are expensive%u2014just not as expensive as Apple-style innovation.

    (Yes, Samsung's "throw it all at the wall and see what sticks as an immediate sales booster" method of innovation IS still innovation. Just not the kind I'd prefer to be on the receiving end of.)
  • Reply 19 of 49
    fracfrac Posts: 480member
    Of course Samsung would argue patents are worth little. Any company that wants to use another's IP would love this - it's basically saying all IP is free to use by anyone (by free I mean next to nothing, or a fee so small it has no monetary impact on your products).

    Then we have Google who think if you invent something that becomes wildly popular that it should become a "standard" and licensed accordingly. Even if the patent owner doesn't want to license their IP, they should be forced to under similar terms to an SEP.

    Seriously, these two companies are the worst when it comes to IP issues.

    I too remember that Schmidt comment regarding Standardising Apple's commonly infringed IP
    :no:
    Almost makes the Hypocrisy Top Ten.
  • Reply 20 of 49
    gatorguygatorguy Posts: 24,176member
    frac wrote: »
    I too remember that Schmidt comment regarding Standardising Apple's commonly infringed IP
    :no:
    Almost makes the Hypocrisy Top Ten.

    In what way was Google hypocritical? Their argument on de-facto standards might not be legally supportable but I don't see the hypocrisy.
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