Samsung Asks Judge to Reject Apple Call on Smartphone Ban

Samsung Electronics Co. (005930) urged a judge to reject Apple Inc. (AAPL)’s escalation of “thermonuclear war” by denying the iPhone maker’s request for a permanent U.S. sales ban on more than 25 Samsung products.

U.S. District Judge Lucy H. Koh in San Jose, California, yesterday heard arguments on the proposed ban that Apple seeks after a jury found in August that Samsung infringed six of its patents and awarded $1.05 billion in damages.

Koh, who said she will rule quickly, ended the hearing with the same entreaty she invoked before trial: “global peace” in a settlement resolving the litigation.

“We see an intentional engagement of thermonuclear war throughout the world,” Samsung’s lawyer, Charles Verhoeven, said in a reference to a statement by Steve Jobs, the late co- founder of Apple, that he would spend $40 billion if necessary on a “thermonuclear war” to prove that phones running on Google Inc.’s Android operating system copy the iPhone. Samsung devices use Android.

Apple prefers to “compete in the court instead of the marketplace,” Verhoeven told Koh. “Are the parties going to talk? When? What do they need? We are willing to talk. The ball is in their court.”

Damages Award

The companies sparred at the hearing over the jury’s damages award. Koh said that while the jury was precise and consistent in calculating infringement damages for 28 different Samsung products, the method used by the nine-member panel may have been mistaken.

“If there is enough evidence in the record to justify that damage award then that verdict should be upheld,” said Harold McElhinny, a lawyer for Cupertino, California-based Apple.

Kathleen Sullivan, a lawyer for Samsung, argued that the damages should be reduced by more than $600 million. Sullivan agreed the jury was precise, though she said it 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.

“You should reverse engineer” to make sure the damages are “causally connected to the evidence,” Sullivan told the judge.

Sullivan said that of the 26 Samsung products Apple wants covered by a U.S. sales ban, only three are still being sold. Samsung has “designed-around” the patents it was found to infringe for those products still on the market, she said.

$536 Million More

Apple argues that its Suwon, South Korean-based rival bet that the benefits of using intellectual property from the iPhone and iPad would outweigh the money damages the jury awarded. Koh should increase the damages by $536 million because Samsung “intended to take Apple’s market share by deliberately copying the iPhone design,” according to a court filing.

Apple also has said that if Koh approves a sales ban, it will ask her to extend the order to cover newer Samsung products.

The judge yesterday also heard Samsung’s argument that the verdict should be thrown out because of alleged misconduct by the jury’s foreman.

Samsung alleges that the jury foreman, Velvin Hogan, 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.

Foreman’s Interviews

One example cited by Samsung, based on Hogan’s post-verdict interviews with the media, is that the foreman erroneously told his fellow jurors that infringement of a design patent is based on “look and feel,” according to a court filing.

Samsung is asking Koh 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 also argues there’s no proof it willfully infringed Apple’s patents, the grounds for Apple’s request for increased damages.

The South Korean company renewed its claims, which failed at trial, that Apple infringes two Samsung patents covering mobile-technology standards and three utility patents.

Apple, in its arguments supporting a sales ban, claims that Samsung flooded the U.S. market with infringing smartphones that have done permanent damage to Apple’s “ecosystem.” Samsung deployed its strategy at the critical juncture when customers are moving to smartphones and developing “platform loyalty” that has diminished the base of iPhone users, Apple said in a court filing.

Google, Android

A Dec. 4 report by Framingham, Massachusetts-based researcher IDC said Google Inc. (GOOG)’s Android operating system that runs on Samsung smartphones has a worldwide market share of 68.3 percent compared to 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.

In the U.S., Samsung’s market share gain has “come at Apple’s expense, eroding Apple’s position as the market leader over the past two years,” Apple said in a filing. “Samsung’s successful strategy has been to ‘blunt’ and ‘undercut’ Apple using the Galaxy products to take the leading position in the U.S. smartphone market.”

Apple, the world’s most valuable company, can regain market share by adding more recent Samsung products to any sales ban Koh issues, said Carl Howe, an analyst at Yankee Group in Boston. Howe noted that the two companies have added newer products, including Samsung’s Galaxy S III and the iPhone 5, to a related infringement suit, also before Koh, that is scheduled for trial in 2014.

Slow System

“Samsung may be betting on the fact that the the legal system works slowly,” Howe said. “However, judges are not dumb. If they see that is in fact their strategy, they will take that into account in damage awards or in their decisions on remedies.”

Howe said that while Koh’s decision will be important, the companies are battling in courts worldwide to dominate the smartphone market, estimated by Bloomberg Industries at $219 billion last year, and not all decisions so far have been in Apple’s favor. Since the August verdict in San Jose, Apple has lost infringement rulings against Samsung in the U.K., Germany and Japan.

Mark Lemley, a professor at Stanford Law School, said Apple and Samsung have deep patent portfolios and can do too much harm to each other to continue litigating. A significant ruling favoring Samsung or Google’s Motorola Mobility unit against Apple may finally produce a settlement, Lemley said.

“We are waiting for Samsung or Motorola to gain sufficient leverage against Apple with a threat to shut down their products,” Lemley wrote in an e-mail. “Once that happens, and it will, I think you’ll see talks progress rapidly.”

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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