Apple Asks Appeals Court to Halt Alleged Samsung Copying

Aug. 9 (Bloomberg) -- Mark Newman, a Hong Kong-based analyst at Sanford C. Bernstein, talks about Samsung Electronics Co., Apple Inc. and the mobile-phone industry. Newman speaks with Tom Keene and Scarlet Fu on Bloomberg Television's "Surveillance." Lawrence Haverty, a portfolio manager at Gamco Investors Inc., also speaks. (Source: Bloomberg)

Apple Inc. (AAPL) asked a U.S. appeals court today to force Samsung Electronics Co. (005930) stop using unique features and designs of the iPhone that were found to be infringed by a federal jury last year.

“Apple spent five years and $5 billion to develop a product and it was a revolutionary product,” said Apple lawyer William Lee of WilmerHale in Boston. “Samsung said, ‘We can copy it easily.’ They spent three months to bring a product to market.”

Apple is asking the U.S. Court of Appeals for the Federal Circuit in Washington, which specializes in patent law, to overturn an order letting Samsung continue selling products that a California federal jury said infringed Apple patents. The jury awarded $1 billion in compensation, although part of the damages must be retried. Samsung, which denies infringing the patents, said there was no link between Apple’s patented ideas and any lost market share.

“Apple had suffered lost sales, but what was missing was a causal nexus to those lost sales,” Samsung lawyer Kathleen Sullivan of Quinn Emanuel in New York told the court. Apple needed to show “the difference between Samsung’s infringement and Samsung’s legitimate competition.”

The appeals court isn’t expected to rule in the case for several months. The hearing, however, came hours before the U.S. International Trade Commission, also in Washington, is scheduled to announce whether it will ban imports of some Samsung products based on allegations they infringe other Apple patents.

Photographer: Eric Risberg/AP Photo

The Apple Worldwide Developers Conference in San Francisco on June 10, 2013. Close

The Apple Worldwide Developers Conference in San Francisco on June 10, 2013.

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Photographer: Eric Risberg/AP Photo

The Apple Worldwide Developers Conference in San Francisco on June 10, 2013.

Samsung Work-Around

In both cases, Samsung has said it designed around the patents, so any loss would have minimal impact on the company’s sales. The Suwon, South Korea-based company and Apple together make almost half of all smartphones sold, with Samsung holding the title of world’s biggest and the two companies vying to be No. 1 in the U.S.

Apple, based in Cupertino, California, is trying to force Samsung to change or stop selling some smartphones and tablet computers. The $1 billion verdict it won at trial last year equals less than two weeks’ worth of iPhone sales and one-seventh of Samsung’s second-quarter profit.

Samsung said 23 of the 26 products that were found to be infringed are no longer sold, and the other three were changed. Sullivan told the court that Apple wants to make it easier to go after future products without filing a new lawsuit.

“If it’s so easy to design around and you’re not selling these, why is it any harm?” asked Circuit Judge Kathleen O’Malley.

‘Slavishly Copy’

Sullivan said it would cause confusion for carriers and retailers who would fear legal threats from Apple. Lee said it’s common to allow patent owners to argue a manufacturer is in contempt of an order by selling a product that’s not “colorably different” from those found to infringe the patent.

Apple filed the lawsuit in April 2011, saying the Korean company “has chosen to slavishly copy Apple’s innovative technology.” Samsung responded a week later with its own patent claims, and the fight has escalated into a legal battle that has spanned four continents.

A ruling from the Federal Circuit could have broad implications for any company that owns patents for features or components of complex products, like a smartphone or computer.

U.S. District Judge Lucy Koh in San Jose, California, ruled in December that Apple had not proven the patented features drove sales of Samsung products. Without such a link, she said, Apple was not irreparably harmed and thus could be made whole with money.

Hour-Long Arguments

The hour-long arguments focused on what a patent owner must prove to obtain an order, called an injunction, to stop selling a multifunction product. Circuit Judge William Bryson likened it to determining whether a cupholder or a hybrid engine would alter consumer choices for a car.

Lee argued a showing that the patent owner was irreparably harmed by the infringement should be enough. A compromise, he said, would be to give time to remove the infringing feature before sales are halted.

Sullivan countered that Apple has put a price on its patents, with licenses to other companies. One was to International Business Machines Corp., which doesn’t make phones, and the other two were to settle patent disputes with Nokia Oyj (NOK1V) and HTC Corp. (2498)

The patents included one covering the front face of the iPhone. Others make the phone easier to use, such as a pinching motion to expand images, a double tap to zoom and a screen that bounced back at a document’s end so you know the image isn’t stuck. These patents, Apple said in a court filing, are the “crown jewels of Apple’s ‘unique user experience.’”

Google, Nokia

Google Inc. (GOOG), which owns the Android operating system that Samsung phones use, urged the appeals court to uphold Koh’s ruling. “The owner of a trivial patent has no reasonable expectation of more than trivial compensation,” Google said in a filing that was joined by Rackspace Hosting Inc. (RAX), HTC, Red Hat Inc. (RHT) and SAP Inc.

Nokia, which was supplanted as the world’s biggest maker of mobile phones by Samsung, said Koh’s ruling “threatens to turn the traditional purpose of patent law on its head” and force patent owners to accept compulsory licenses for differentiating features.

Apple and Samsung are spending millions of dollars in legal fees battling across four continents. Neither has been able to strike a crippling blow. An import ban that could have halted some of Apple’s older iPhone 4 and iPad 2 3G models at the U.S. border was vetoed by President Barack Obama’s administration last week.

The case is Apple Inc. v. Samsung Electronics Co., 13-1129, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court 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: Susan Decker in Washington at sdecker1@bloomberg.net.

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net.

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