Apple Loses Bid for U.S. Ban on Infringing Samsung Phones
By Joel Rosenblatt & Karen Gullo – Dec 18, 2012 2:31 AM ET.
Apple Inc. (AAPL)’s request for a U.S. sales ban on 26 Samsung Electronics Co. devices was rejected by a federal judge following a jury verdict in August finding infringement of six of the iPhone maker’s patents.
Apple failed to establish that consumer demand for Samsung products was driven by technology it stole, U.S. District Judge Lucy H. Koh in San Jose, California, said in her ruling yesterday. She said it wasn’t in the public interest to bar Samsung’s devices because the infringing elements constituted a limited part of Samsung’s phones.
“Samsung may have cut into Apple’s customer base somewhat, but there is no suggestion that Samsung will wipe out Apple’s customer base, or force Apple out of the business of making smartphones,” Koh said. Photographer: SeongJoon Cho/Bloomberg
“Samsung may have cut into Apple’s customer base somewhat, but there is no suggestion that Samsung will wipe out Apple’s customer base, or force Apple out of the business of making smartphones,” Koh said. “The present case involves lost sales — not a lost ability to be a viable market participant.”
Only three of the 26 products that Apple sought to block are still being sold according to Samsung: the Galaxy S II by T- Mobile, Galaxy S II Epic and Galaxy S II Skyrocket. Newer smartphones made by both companies, including Samsung’s Galaxy S III and the iPhone 5, already have been added to a related lawsuit in which Apple and Samsung accuse each other of copying products. That case is also before Koh and is scheduled for trial in 2014.
In a second order yesterday, Koh denied Samsung’s motion for a new trial because of allegations regarding the jury’s foreman. Koh is still considering Samsung’s request to reduce the $1.05 billion verdict awarded by the jury.
Apple, the world’s most valuable company, argued Samsung bet that the benefits of using intellectual property from the iPhone and iPad would outweigh the money damages the jury awarded.
Kristin Huguet, a spokeswoman for Cupertino, California- based Apple, said in an e-mail the company declined to comment on the ruling.
Samsung said in an e-mailed statement that the company would review the court’s orders before deciding whether to take “further measures.”
Apple shares rose 1.7 percent to the equivalent of $520.85 at 8:16 a.m. in Frankfurt. The stock closed at $518.83 yesterday in New York. Samsung shares rose 0.8 percent in Seoul today after two days of losses, extending its gain for the year to 43.2 percent.
The companies are engaged in court battles worldwide to dominate a smartphone market estimated last year by Bloomberg Industries to be $219 billion. Further appeals in the case are expected.
Apple co-founder Steve Jobs vowed before his death last year to wage “thermonuclear war” to prove that phones running on Google Inc. (GOOG)’s Android operating system copy the iPhone. Samsung devices use Android.
Samsung, based in Suwon, South Korea, argued that Koh should order a new trial based on claims the jury foreman lied about lawsuits he was involved in, and that he introduced “incorrect and extraneous legal standards” in the jury deliberations that may have produced a faulty verdict.
It said it was pleased the judge denied “Apple’s move to limit consumer choice” in denying the sales ban.
Samsung asked the judge to overrule the jury’s findings on infringement of Apple’s design patents, arguing that patent law protects only designs that are new, original and ornamental, not “general design concepts” at issue in the trial. Samsung told Koh there’s no proof it willfully infringed Apple’s patents, the grounds for Apple’s request for increased damages.
Kathleen Sullivan, a lawyer for Samsung, contended at a Dec. 6 hearing that the damages should be reduced by more than $600 million. Sullivan said that while the jury’s calculations were precise, the nine-member panel was hampered by a verdict form that, against Samsung’s wishes, wasn’t “particularized” enough to permit jurors to properly arrive at damages on a product-by-product basis.
One test that Koh considered was whether Apple has been harmed by the infringement, and whether customers buy Samsung devices specifically because they have features patented by Apple. Apple’s evidence doesn’t establish that its three design patents cover a feature that drives customer demand, Koh said. Apple doesn’t have patents for certain iPhone features, such as the general concept of a two-finger pinch or flick.
“Though evidence that Samsung attempted to copy certain Apple features may offer some limited support for Apple’s theory, it does not establish that those features actually drove consumer demand,” she said.
An injunction would prevent consumers from gaining features on Samsung phones because a few such features infringed Apple’s patents, Koh said.
“The potential for future disruption to consumers would be significantly greater if this court were to issue an injunction, and such disruption cannot be justified,” she said.
Samsung became the world’s 15th biggest company by market value on Dec. 6 and the first in South Korea to surpass the $200 billion mark.
The latest decision implies that the total damages award isn’t likely to go higher and may even be reduced, according to Lee Sun-Tae, an analyst at Seoul-based NH Investment & Securities. “The final ruling on the penalty isn’t likely to be overturned,” Lee said.
The patent disputes began when Samsung released its Galaxy smartphones in 2010. Apple’s Jobs, who died Oct. 5, 2011, initiated contact with Samsung over his concerns that the Galaxy phones copied the iPhone, according to testimony from the trial in August.
Apple, in court filings supporting a sales ban, claimed that Samsung started flooding the U.S. market with infringing products at the critical juncture when customers were moving to smartphones and developing “platform loyalty.” That diminished the base of iPhone users, Apple said.
A Dec. 4 report by Framingham, Massachusetts-based researcher IDC said Google’s Android operating system that runs on Samsung smartphones has a worldwide market share of 68.3 percent compared with 18.8 percent for Apple’s. The firm estimates Apple will remain the “clear number two platform behind Android” through 2016, gaining 0.3 percent of the worldwide market share in that time.
Apple’s suit claimed Samsung products infringe four design patents and three utility, or software, patents. The jury found that Samsung didn’t infringe one patent covering the design of Apple’s iPad tablet computer.
Apple’s claims over that patent had been the basis for a June court order by Koh temporarily blocking U.S. sales of Samsung’s Galaxy Tab 10.1 tablet computer. After the trial, Koh lifted the injunction, saying the ban was no longer justified in light of the jury’s finding that the patent wasn’t infringed.
The companies have also sued each other in the U.K., Australia and South Korea. Some of those courts have also issued or overturned injunctions on both companies’ products.
The case is Apple Inc. v. Samsung Electronics Co. (005930) Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).
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