Apple and Samsung spar over huge damages claim

Apple outlined for the first time on Friday how it came up with the $2.2 billion in damages that it wants a California jury to award it for Samsung’s alleged “massive infringement” of five Apple patents.

Around a quarter of it, some $507 million, is to compensate Apple for the profits it lost as a result of Samsung’s infringement, said Chris Vellturo, an economist at Quantitative Economic Solutions who is one of Apple’s expert witnesses in the case.

A further $560 million would be compensation for the reduced demand for Apple’s products, and the largest portion—$1.12 billion—is for the royalties Apple says Samsung would have had to pay if it had licensed the patents.

The calculations were disclosed as the trial reached the end of its second week at the federal court in San Jose, California.

“Hypothetical negotiations”

Vellturo arrived at the royalty figure by imagining a “hypothetical negotiation” between the two companies. That doesn’t sound very scientific, but it’s been a common method for estimating patent damages ever since a 1970 lawsuit between Georgia Pacific and U.S. Plywood.

Because no actual negotiation took place, the jury gets to consider what royalties would have been decided if the two sides had actually talked, taking into account factors like the usefulness of the patent and the impact a license would have had on their competitive positions.

Vellturo said his analysis determined a royalty rate of between $1.61 and $15.03 per patent, per device.

There are nine smartphones and one tablet at issue in the case, though not all are accused of infringing all five patents. For those that are, the total royalty bill for each Samsung device sold would be $40.10, according to Vellturo.

Samsung attorney John Quinn quickly went on the attack and questioned many of Vellturo’s assertions.

He started with the figures themselves, which were based on data about lost sales and consumer demand supplied by a previous Apple witness, John Hauser, a professor of marketing from the Massachusetts Institute of Technology.

Numbers game

“If Mr. Hauser’s survey was not correct, your figures would not be reliable?” asked Quinn in one exchange.

“That’s correct,” said Vellturo.

Next Quinn went after Vellturo himself. The expert had disclosed earlier that he was being paid $700 per hour by Apple, and that he had earned $2.3 million from the case so far. Quinn accused him of being “a professional witness for Apple.”

“If I was, I wouldn’t be working for Microsoft, for Amazon,” Vellturo said, keeping his cool. “I work with very direct competitors to Apple.”

Quinn also questioned how many people who bought Samsung phones would have really considered an Apple phone instead, something that cuts to its lost profits claim. Apple’s own market research, revealed earlier in the case, showed that its falling market share was due in part to shifting consumer preference for features such as larger screens.

With Samsung’s cross-examination of Vellturo complete, Apple rested its case. Next, Samsung will begin its defense of the charges.

The case is 12-00630, Apple v. Samsung Electronics et al, at the U.S. District Court for the Northern District of California.