December 4, 2021

Bits Blog: Judge Slashes Jury Award in Apple-Samsung Case

Apple’s iPad, left, and Samsung’s Galaxy tablet.Jo Yong-Hak/Reuters Apple’s iPad, left, and Samsung’s Galaxy tablet.

8:45 p.m. | Updated

A federal judge on Friday weakened the blow from Apple’s legal victory in a patent case against Samsung, lopping more than 40 percent off the damages a jury awarded Apple last year.

The ruling did not shift the case — one of the most closely watched in the high-tech industry — in Samsung’s favor. While Apple has lost other skirmishes against Samsung in courts around the world, the jury award in this case has been the biggest victory for either side so far.

Even at a reduced level, these would be among the highest damages in a patent dispute.

The judge ordered a new trial to recalculate a portion of those damages, leaving open the possibility that some of them could be restored.

She also indicated that Apple was entitled to additional damages for sales of Samsung products that have occurred since the jury’s decision last summer, which could further swell the amount Apple is owed by Samsung.

Tech companies around the world are waging legal battles over patents as they compete for supremacy in the lucrative smartphone market. Apple and Samsung are the most prominent combatants in that war; the two companies divide most of the profits in the surging mobile phone market.

Samsung has soared to the No. 1 spot in the smartphone business in recent years, but Apple says that it is, in part, because the company has swiped many of Apple’s ideas.

In her review of the jury’s decisions, which originally awarded Apple more than $1 billion for patent violations by Samsung in its mobile products, Judge Lucy H. Koh of the United States District Court in San Jose, Calif., knocked those damages down by $450 million, to $599 million. The new trial will determine how much of the $450 million, if any, should be restored.

“It will be years before the parties exhaust all of their litigation avenues and options,” said Alan M. Fisch, an intellectual property lawyer with Fisch Hoffman Sigler in Washington, who is not involved in the case. “Still, some form of patent cross-license between the two would not be an unsurprising final result.”

None of Judge Koh’s opinion changed the jury’s finding that Samsung violated a series of Apple patents in its smartphone and tablet products. But the judge took issue with how the jury calculated the damages Apple was entitled to from the Samsung devices named in the case, more than two dozen of them in all.

In her 27-page opinion, Judge Koh said that the jury failed to follow her instructions in calculating damages for a certain class of patents, known as utility patents.

She also decided in Samsung’s favor in a dispute between the two parties over when Apple notified Samsung that it was infringing Apple’s intellectual property. Evidence of such notice dates are important because they help determine how hefty the damages are in a court case, once the party being notified is found guilty of infringement.

Judge Koh chided Apple for using an expert in the case who used an “aggressive notice date” — meaning, an early one — to calculate damages.

“The need for a new trial could have been avoided had Apple chosen a more circumspect strategy or provided more evidence to allow the jury or the court to determine the appropriate award for a shorter notice period,” she said in her ruling.

Steve Dowling, a spokesman for Apple, declined to comment.

In a statement, Adam Yates, a Samsung spokesman, said that the company was pleased with the judge’s decision and that it intended to seek further review of the remaining award.

Apple and Samsung, meanwhile, continue to fight ferociously in the smartphone market, where Samsung has steadily worked its way to the No. 1 position over the last few years. In the fourth quarter, Samsung accounted for 29 percent of global smartphone shipments, while Apple accounted for 21.8 percent, according to IDC.

Mark A. Lemley, a professor at Stanford Law School, called the judge’s decision “an extremely careful and thorough opinion on a very difficult and interrelated set of issues.”

Mr. Lemley predicted that Samsung would eventually win some reduction in the original $1 billion award, but “almost certainly” less than the $450 million that Judge Koh reduced it by on Friday.

“We’ll need a new trial to figure that out,” said Mr. Lemley, who has done legal work in the past for Google, maker of the Android operating system involved in the Samsung case and others. “Judge Koh has encouraged both sides to appeal first. That may clarify some questions, but it is unlikely to prevent a new trial, just delay it some.”

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Supreme Court Rules for Drug Firm in a Patent Dispute

WASHINGTON — The Supreme Court on Monday sided with a drug company over Stanford University in a patent dispute concerning a test to measure the amount of H.I.V. in a patient’s blood.

In a second decision, the court ruled that plaintiffs in a securities fraud class action against Halliburton did not have to prove that false statements from the company caused them to lose money in order to band together in a class action.

In the patent case, Stanford v. Roche Molecular Systems, No. 09-1159, the court considered how a 1980 federal law, the Bayh-Dole Act, affected rights to the H.I.V. test. It was invented by Dr. Mark Holodniy, a fellow at Stanford’s department of infectious diseases who had been assigned by the university to conduct research at the Cetus Corporation, a private firm.

Dr. Holodniy had signed a contract saying that “I agree to assign” inventions arising from his employment at Stanford to the university. He later signed a contract saying that “I will assign and do hereby assign” to Cetus inventions arising from his time there.

Roche Molecular Systems bought Cetus’s rights in the H.I.V. test and created a kit that became widely used in hospitals and clinics. Stanford sued for patent infringement; Roche said it was entitled to sell the kits in light of the agreement between Dr. Holodniy and Cetus; and Stanford responded that the doctor had no rights to assign given the Bayh-Dole Act, which specifies how rights in patents are allocated when federal money is involved.

The “general rule,” Chief Justice John G. Roberts Jr. wrote for the majority in a 7-to-2 decision, is that “rights in an invention belong to the inventor,” even if created on an employer’s watch. (Outside the patent context, Chief Justice Roberts said, the basic rule often goes the other way. “No one would claim,” he wrote, “that an autoworker who builds a car while working in a factory owns that car.”)

A lower court ruled that Dr. Holodniy’s agreement with Stanford had been only a promise to assign his rights in the future while the one with Cetus had been an authentic assignment. That interpretation of the two agreements, which was not at issue in the Supreme Court, meant, the chief justice said, that Roche would win unless the Bayh-Dole Act had altered the basic rule that inventors controlled their patent rights.

The act allocates rights between the federal government and federal contractors like Stanford, Chief Justice Roberts wrote. But, he continued, “nowhere in the act are inventors deprived of their interest in federally funded inventions.”

The act, the chief justice wrote, “simply assures contractors that they may keep title to whatever it is they already have.” But, he wrote, “you cannot retain something unless you already have it.”

The decision may not be particularly consequential. With more carefully drafted assignment agreements, Chief Justice Roberts wrote, “the statute as a practical matter works pretty much the way Stanford says it should.”

In a dissent, Justice Stephen G. Breyer said he would have returned the case to the lower courts for further consideration of two questions: the proper interpretation of the interaction of the two assignment agreements and whether the Bayh-Dole Act should be assumed to require assignment of patent rights by employees of government contractors to their employers.

Justice Ruth Bader Ginsburg joined the dissent.

In the securities fraud case, Erica P. John Fund v. Halliburton, No. 09-1403, the court considered what plaintiffs must prove in order to join together in a class action.

The plaintiffs, who bought Halliburton stock from 1999 to 2001, said the company had made false statements designed to inflate its stock price on three topics: its financial exposure to asbestos claims, how much it stood to make from its engineering and construction business, and the expected benefits of a merger with Dresser Industries.

The lower courts ruled that the plaintiffs had met most but not all of the requirements to proceed as a class. The missing element, the federal appeals court in New Orleans said, was that they had failed to prove “loss causation,” that is, “that the corrected truth of the former falsehoods actually caused the stock price to fall and resulted in the losses.”

In a unanimous decision written by Chief Justice Roberts, the court ruled that such proof was not required at the class certification stage.

It was true, Chief Justice Roberts wrote, that finding proof that the investors had relied on the misstatements was part of the class certification basis. But loss causation is a logically different issue, he wrote. It requires proof, he said, that “a misrepresentation that affected the integrity of the market price also caused a subsequent economic loss.”

In presenting its case to the Supreme Court, Halliburton essentially conceded that proof of loss causation was not required at the class certification stage. What the appeals court actually meant in using the phrase, Halliburton contended, was “price impact,” that is, that the false statements affected the stock price in the first place.

“We do not accept Halliburton’s wishful interpretation of the court of appeals’ opinion,” Chief Justice Roberts wrote. “Whatever Halliburton thinks the court of appeals meant to say, what it said was loss causation.”

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