updated 01:54 am EDT, Sat April 12, 2014
Tweet: 'Both sides relying on stories to sell jury, Samsung borrowing Google's'
At the end of the twelth day of the Apple-Samsung trial, and fifth day of testimony, Apple rested its case against Samsung following a detailed presentation from "microeconomist" and PhD Chris Vellturo in which he explained for the jury exactly how he calculated the $2.191 billion in damages Samsung should owe Apple for its infringement. Samsung, which has admitted in an earlier damages retrial that it copied from Apple, began presenting its defense -- by borrowing a Google software executive.
As reported earlier, Vellturo spent his remaining time on the stand explaining to the jury why Apple deserves so much money from Samsung -- part of it is lost profits, part of it is lost sales, and about half is down to what Samsung should have paid Apple in "reasonable royalties" had Apple licensed to Samsung the patents they copied. He also spent some time on the "data tapping" patent, one of five Apple is suing over. After Apple notified Samsung of its violation, the Galaxy maker dropped the feature -- but restored it when customers complained that the work-around search (authored by Google) wasn't as good.
Jurors were shown confidential charts and reports about the damages and a step-by-step analysis of Apple's lost sales, while Vellturo told them that Apple lost profits of just over half a billion dollars during the time that Samsung and Google worked around the patent infringement, even though he noted that his studies showed that fewer than 10 percent of Samsung phone buyers would have bought an iPhone instead -- presumably because of cost rather than features (or lack thereof). A big factor in Vellturo's calculations was a reliance on an earlier Apple expert's "conjoint" study on customers' willingness to buy certain features -- a point Samsung attorneys later attacked.
He also cited 15 tests for determining reasonable royalties drawn from a precedent-setting Georgia Pacific case, and simulated how a hypothetical negotiation with Samsung might have gone using an "Edgeworth-Bowley Box," a standard economics chart that draws axis of goals and places players in their positions along the axis to illustrate graphically how close or far away they are. Vellturo told the jury that Apple would have -- if it had licensed the patent to Samsung at all (it were under no obligation to do so) -- asked for a royalty of around $12.50 per phone for the "data tapping" patent alone. The patent, known as '647, enabled phone numbers, dates and email addresses to become "hot links" that triggered the phone feature, calendar or mail client in the same way that tapping a URL triggers a web browser.
Overall, Apple is asking for about $40 per infringing Samsung device sold in the US overall -- a figure that has drawn some criticism as unreasonable (though it is less than 10 percent of the total retail cost of a typical flagship Samsung phone). The actual exact amounts range from $15.03 to $1.61 depending on the patent. Samsung, in its opening argument, tried to make the straw-man comparison that an average smartphone has well over 1,000 patentable items in it, and that $40 for five patents was unreasonable. Apple has shown the jury documentation that alleges Samsung sold (to retailers) 37.25 million of the accused devices in the US during the three-year time period in question.
Under cross-examination, Samsung's John Quinn repeatedly attacked the conjoint study by Professor John Hauser of MIT as a faulty methodology for determining consumer desire for certain features. If the jury buys that argument, Vellturo's damages assessment is also suspect, since it relied in a substantive way on Hauser's study.
A light moment occurred during the cross-examination when Quinn referred to one of Samsung's accused phones as the "Ammonia." Vellturo suggested that the company may want to re-think the marketing if that was the phone's name, and corrected Quinn that it was called the "Omnia." Quinn also spent time attacking the Samsung document that closely compared its existing (at the time) phones to the iPhone, trying to downplay it as a source of the need to copy Apple.
He did get Vellturo to admit that Apple has paid him (across a number of trials for which Vellturo has testified on Apple's behalf) $2.3 million. However, Quinn's victory in raising the issue was short-lived; he asked Vellturo if he was a "professional witness" for Apple, and Vellturo pointed out that he also worked (currently) for Amazon and Microsoft, two other Apple rivals. Quinn quickly switched back to asking Vellturo about the Jobs email that outlined the "holy war" against Google.
Following a lunch break, Quinn pointed out that Samsung's rise in sales following the beginning of its remaking of its smartphone line to be more like the iPhone could also be explained by some of the other non-infringing things it was doing (early adoption of LTE for example). Quinn also returned to the internal Apple report that concluded that "consumers want what we don't have" (mostly in reference to larger screens), which Phil Schiller had earlier downplayed as "one employee's position" rather than a company concern, but showed a different slide that echoed that concern, suggesting the sentiment was more widespread than Schiller indicated.
Quinn showed the jury a Galaxy Note II and pointed out how different it was from an iPhone, and noted an Apple survey that found that 57 percent of people quizzed about their reasons for buying an iPhone 5 picked "Siri" as the leading reason, followed by the improved camera. He again mentioned that Apple doesn't use all the patents it is suing over in the iPhone, thus Samsung couldn't copy it by looking at the iPhone. Finally, he noted that the Galaxy Nexus allegedly infringed all five of the Apple patents, but didn't sell well compared to the Galaxy Note 3, which infringed only three of the patents, making the point that if the patents were the main desirable features, the Nexus should have done better with buyers.
During the lunch break, Judge Lucy Koh berated Samsung for claiming that it had 17 witnesses it wanted to get through, flatly declaring that "it's not going to happen." She said that Samsung would have to narrow its witness list considerably, given the amount of time it had left for its case over the course of the week. It eventually offered to cut down the list to seven witnesses.
Both sides presented the judge with voluminous documents of motions, but the judge was having none of it, disallowing Samsung from reading out a 24-page document and dismissing another 100 pages of documentation from both sides. She later decided that each side could brief five pages of various mid-trial motions, with Samsung's list due at 8pm and Apple's response by 2pm Saturday.
Following Vellturo's appearance, Apple rested its case. Samsung began its presentation not with one of its own employees but with one of Google's -- Vice President of Engineering for Android Hiroshi Lockheimer. Samsung wanted Lockheimer to detail the history of the creation of Android from Google's perspective, but Apple objected and won limitations on his testimony that it only include the period where the contested patents were allegedly being copied. Apple has listed one of the infringing devices, a Galaxy Nexus, that was made by Samsung but has no Samsung-created software on it, bolstering Samsung's argument that Apple's main issue is actually with alleged copying in Google's Android, not with Samsung's modifications.
Lockheimer told the court that his team, which once numbered less than 30, is now up to 600-700 people working on Android. He first came to Google in early 2006 after being given a demo by Andy Rubin of the various things it was working on that "blew me away." By the time that the iPhone came out, Android was already running on "prototype hardware," Lockheimer said. Continued sustained objections from Apple prevented Lockheimer from talking much about Android's pre-iPhone history (during which it looked nothing like it did after the iPhone was introduced).
Under friendly questioning from Quinn, Lockheimer noted that Google doesn't require that manufacturers use Google apps in order to make Android phones, so for example Yahoo could make an Android smartphone if it wanted. While the statement is true, Google has been known to use its services and store as a bargaining chip to assure compliance with its terms -- however, Amazon's Kindle and most Chinese tablets use a forked version of Android that doesn't leverage Google services and are still reasonably successful.
It is even noted by Lockheimer that Android's original 2006 blueprint specifically noted that "touchscreens will not be supported." Quinn used the document to get Lockheimer to say that the architecture didn't rule out future changes that could add such features if Google decided they were needed. Lockheimer claimed that Google was already working on features like the "data tapping" patent before the company ever met with Samsung about Android, though neither Quinn nor Lockheimer offered any documentation of that.
Apple's Rachel Krevins handled the cross-examination of Lockheimer, which mostly focused on the fact that the Google-provided "local search" feature the company gave Samsung during the time Apple embargoed Samsung's copying of the "data tapping" patent was utilized 817 million times during a one-week period, illustrating that the feature was an extremely popular one and that Samsung had taken a decision to resume copying it once a temporary embargo had been lifted.
The cross-examination concluded just as the court session ended. Judge Koh dryly noted that Samsung had promised to get through seven witnesses on Friday, but ended up getting only one on the stand. The trial will resume on Monday, with Apple having used 12 hours and 38 minutes of its 25-hour limit, while Samsung's long cross of Schiller and Vellturo meant it had used 10 hours and one minute already, at the start of its case.