Welcome back to our course on Protecting Business Innovations via Patents. Today we're going to be talking about smartphone wars. When we say smartphone wars, what I'm talking about here is a series of litigations with over 100 lawsuits between major companies involved in the smartphone business starting in 2009. In addition to a lot of lawsuits, there are also many patent sales between companies with Google buying more than 2,000 patents from IBM for example and Nortel having a large portfolio of patents sold to a consortium led by Apple. Google bid against Apple and that and at one point Google was entering some random bid numbers. Interesting article about that if you want to read something amusing is, Google bids pi. Google bid 3.14159 billion. They also bid the distance between the Earth and the sun and a couple of physics constants. It looks like Google people were a little bored by the bidding process. So, they were entertaining themselves by bidding odd numbers. But you can read more about Wikipedia's smartphone wars or read more about the smartphone wars on Wikipedia if you search. One of the most interesting cases in the smartphone wars, is the case of Apple suing Samsung and vice versa. More than 20 lawsuits in 10 or more countries between Apple and Samsung with over 5 billion dollars in total claims. Samsung won some cases, Apple won some cases. The largest judgment was for one billion U.S. dollars for Apple by a U.S. jury against Samsung. In this billion dollar case which was the largest court win between Samsung and Apple, there was a combination of both design patent violations and utility patent violations. The design patent violations actually ended up giving justification for the largest awards in this case; where the jury said when you overlap design, when your corners are the same shape as Apple's corners or when other aspects of your product appear to be confusing to consumers and make them think they may be the same product, then that justifies awarding patent violations of 100% of Samsung profits for all those infringing products go to Apple. That's how they came up with a billion dollar award. The Supreme Court said, "No. I don't think so." They said that's too much money. So, the Supreme Court overturned in a rare 8 to 0 ruling, unanimous verdict by the Supreme Court that the jury overstepped its bounds, that the basis for calculating that financial award were invalid. And they also found in discussions that there were some other potential problems with the trial and with the jury. One problem was the jury foreman had a conflict of interest due to a prior relationship with Samsung, which involved some sort of litigation or negative interactions that the jury foreman had not disclosed. He'd been asked and he said, "I was asked if I had any prior relationship with the two companies in the past decade and this was 11 or 12 years ago. So I didn't lie." But he intentionally withheld information that would have been nice to know by the Samsung attorney. The jury also said they wanted to send a message. They wanted to make a point with the judgment, with the ruling, that you don't mess with Apple. Well, that's not allowed. Effectively they were giving punitive damages and the judge had told the jury, "No. No punitive damages, just make the companies financially square for what was lost through patent violations." The jury wanted to send a stronger message. In general, the location also was highly favorable to Apple because you're talking about a court in Silicon Valley, an Apple's next door neighborhood. And a lot of these people on the jury are smartphone users, many of them Apple users. And to some extent, some people argued that in today's young people's generation reverence for Apple has replaced in some people's minds the typical devotion and affinity that once was associated with God with Apple's operating system and environment. So, that was too much, too far, too dangerous and not appropriate to send that kind of message. So, the Supreme Court in their ruling sent the case back to trial. They told the trial court to start over, take it to trial number two. Meanwhile, as that case is going to trial number two the next big case starts; Apple versus Samsung again on a new set of patent violations, where Apple claimed $2.5 billion this time in claims of damages. Samsung counter sues, Apple wins $112 million. Apple feels vindicated there's no design patent issues this time, it's simpler utility patents. It's pretty clear solid win, not challenged. But some people say that this is kind of an illusory victory for Apple, because their legal fees were almost as much as their win in the amount of money that they've spent on court cases inviting a variety of cases up to the Supreme Court. They've won $112 million. They've spent about $100 million on lawyers. So, yeah they've won, but it's not going to really help their stock price shoot up because it's similar to what they've spent to do the win. In addition the fight continues, the case that went to round two, gets appealed after judgment. Judgment of about $400 million goes back down, that appeal is sent back to the trial court to try again. Trial court tries again, goes up gets appealed, now it's back down again. The Supreme Court rejected the first ruling. Appeals courts have rejected later rulings. It's now in trial court in the same trial court for the fourth time. So, over almost 10 years they're back where they started. Round four of the fight. The bell has rung, they've put on their gloves and they've come out boxing. But the third appeals court said when they rejected the third verdict, "Why don't you guys go settle this and stop fighting it out in court." This is too complex. This is too hard. We can't figure it out in court. Now we're not getting good judgments. And there's real issues of validity of patents, there's issues on the basis for damage, there's issues of trying to prevent bias in these court cases. So, the appellate court said, "Could you just go settle this yourselves and work it out." Well, that's not working very well. But they have reached some settlements. For example; Samsung had won most of their battles in Europe and Asia. They won a big battle in Germany, where they said, "Apple is licensing from Samsung the 4G technology that they're using. And Samsung wants to raise the price a lot. And Apple won't pay. So, Apple has no basis for selling phones in Germany anymore." And they've got a temporary ban on sales in Germany. But the EU court said, "Samsung, you can't have one fee with one company for your 4G technology and then charge Apple a lot more because you're mad at them for lawsuits in the U.S. or for other reasons. You have to have license fees that are fair and reasonable." And so they said, "Yes. Apple has a license from Samsung. Yes, Samsung has a right to their patents, but they don't have the right to enforce unreasonable conditions on Apple." And so Samsung kind of won, Apple kind of one. In the end, they've agreed to settle every other lawsuit in the world except this one in the U.S. They've reached a settlement agreement on the $112 million in the U.S that Samsung is going to pay. They've reached agreements on every other country. They're going to be cross licensing and they've agreed to some financial remuneration which hasn't been disclosed. So, Samsung and Apple have reached deals and every place except for that one case. This case has been reduced to $400 million then appealed, then appeals court sent it back down to do a new trial, came up with a new number and suggested that they settle. Samsung offered Apple $50 million. And Apple said, "No. Thank you. That was very funny. But, we'll see you in court." And so, they haven't reached the number. We know it's more than $50 million. We know that it's less than $400 million. We probably know its less than $400 million, it was appealed on that number and reversed. And so, it's somewhere in that range most likely. But we don't know where the new case is going to come out. We also know though that there's a new big battleground coming up, where Samsung and Apple are on the same side, and they're going to be suing Qualcomm. And so, this is the next big case. And so to some people's argument Apple and Samsung should just get together, reach a number, settle it, get out of court and be done with it and go on and sue Qualcomm. But lots of lawsuits happening over patents. Summary; Design patents can matter, potential for big sub-judgments. Damages for design patents are unclear. The rules are still being developed. The courts don't know exactly how much, how far should your damages go. Patents are valuable and expensive. They're paid over seven billion dollars just to buy some patents from other countries or other companies. And lots of big lawsuits over patents. U.S.and other courts have differed on their opinions on patents validity and patents applicability, as well as patents violation. There's some interesting articles, stories, cases, written about why U.S. courts are flawed or should change to be more like European courts in patent cases. If you want to read more on that, there'll be a couple of links in the summary reading materials for this session, on the Coursera website. Thank you.
