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Samsung, Apple, FRAND -- What's It All About? -- Samsung's Side~pj Updated (Groklaw)
Groklaw ^ | Thursday, July 26 2012 @ 10:48 PM EDT | PJ

Posted on 07/31/2012 9:18:35 AM PDT by Ernest_at_the_Beach

As Samsung and Apple have been fighting over patents from one end of the earth to the other, most of the coverage, with few exceptions, seems to present Apple's point of view.

[Example A, Example B, Example C, Example D, and Example E.] We know how much money Apple is asking for, we know it's claiming treble damages for willfulness, we know it thinks FRAND patents are not deserving of injunction enforcement, and that Samsung is asking too much money for them.

But now that we have the redacted trial briefs from the parties, I thought you'd like to see Samsung's side. Litigation has two sides, two stories, not just one.

Did you know that Apple wants a royalty rate of $24 per unit from Samsung for its alleged use of Apple's design patent, the notorious tablet shape with rounded corners? $24! But when Samsung asked Apple for a much lower amount per unit that everybody else in the market pays for Samsung's standards patents, Apple refused, offered no counter-offer, and sued instead. To date, it's paid nothing at all for those patents or for the other regular patents Samsung is accusing Apple of infringing. In its trial brief, Apple states in one header:

To The Extent That Samsung Is Entitled To Any Remedy, its FRAND Damages Cannot Exceed $0.0049 Per Unit for Each Infringed Patent

Less than a penny should be Samsung's lot for patents that are essential to even be in the mobile phone business, but Apple wants Samsung to pay $24 for rounded corners, plus from $2.02 and up to $3.10 per unit for its utility patents.

Did you know that Samsung claims to have prior art that knocks Apple's patents out?

Samsung does not infringe any of Apple‘s patents and has located dead-on prior art that invalidates them.
It says it hasn't infringed them anyhow, but that they are, in any case, invalid.

Trial briefs are filed when the trial is ready to get started, setting forth what each side plans to present at trial in the way of evidence and legal arguments, so the judge knows what they will be trying to establish and is prepared to rule on contested issues. What? You thought judges have all this in their heads every minute of every day? No. They have to do research too.

Having the trial briefs means we can know too what the parties see as their case. Here's Apple's [PDF] and here's Samsung's [PDF], and I've done the latter as text for you. That way, in case any one-sided story floats by, your nose will pick up the scent right away, because you will at least have been exposed to both sides.

Did you know that Apple is asking, among other things, for 100% of Samsung's profits from phones and tablets, because of the design of the *cases*? That's what Samsung's brief alleges:

According to Apple, the cases of Samsung‘s phones and tablets are infringing because those cases infringe Apple‘s patented designs. Yet Apple seeks all of Samsung‘s profits from sales of the accused phones and tablets on the grounds that 35 U.S.C. § 289 purportedly grants such a windfall – even if the non-infringing contents of Samsung‘s devices are in fact what creates Samsung‘s profits. Apple‘s request for a non-compensatory windfall overlooks Section 289‘s requirement that profits disgorgement be limited to the "article of manufacture" to which a patented design is applied, and is contrary to law....

Apple‘s attempt to assert its patents to monopolize the shape of an article irrespective of the surface details found in either the patent or the accused devices is contrary to law.

A central debate in the trial is going to be the proper standard for deciding whether a design patent is infringed or not. Samsung argues that the standard is if an ordinary consumer is deceived by the similarity of appearance to the degree that he buys one product thinking he's buying the other. Apple argues that no deception is required, that all it takes for it to get its $24 per unit is if the two products look substantially similar to the ordinary observer. That's a mighty low bar, if you think about how few choices there are in designing a tablet or a phone. They are all substantially similar, because they all do the same things and there aren't that many ways to design a tablet and have it still be one.

[ Update: Here's [PDF] a transcript of the deposition in this litigation of Roger Fidler, who designed and did mockups of tablets for Knight-Ridder Lab back in 1981 onward. Guess what they looked like? -- Thin rectangles with rounded corners and no buttons, just a touch screen and no ornamentation. And yet Apple wants $24 per unit for a rectangle design with rounded corners, no buttons, just a touch screen and no ornamentation? They do, plus 100% of Samsung's profits, and here's the opinion of their expert industrial designer, on page 9 of the document, telling why that Fidler tablet isn't the same, in his opinion, as the iPad or iPod design. And one of Apple's lawyers submitted an exhibit [PDF], a photograph of a Fidler mockup used at his deposition, with Apple arrows showing what they think are different design features. And it persuaded the appeals court, as you can see beginning on page 25 of this ruling [PDF] that Fidler does not render the Apple patent invalid as obvious, at least not at this preliminary stage.]

Yes. Apple also wants infringer's profits up to their eyeballs, and that's the same approach you saw the same law firm, Morrison & Foerster, take in the Oracle v. Google trial, not that it worked there. Same law firm here, with the same astronomical demands. They want, not to put too fine a point on it, to put Samsung out of business, to hear Samsung tell it, and if they get all they are asking for, I'd have to agree.

Now, I haven't been following this case, so I can't take a position on who is right and who is wrong. I don't know who copied whom. I see Samsung claims that Apple actually copied Sony ("Contrary to the image it has cultivated in the popular press, Apple has admitted in internal documents that its strength is not in developing new technologies first, but in successfully commercializing them."), but I have no idea if that or any of this is so. Most litigation happens because both sides are somewhat right and somewhat wrong. So, don't look for predictions or even siding with anybody. I haven't analyzed the litigation with the granularity that would be required to even know who *should* win, let alone who will. I'll just be telling Samsung's side, because it's so hard to find out what Samsung's position is. The media isn't telling much. So let me try to fill in that blank.

The most important information is that we finally get to see what the FRAND issue is all about. It's the first time I actually understand the FRAND dispute. If I had to put it into a single sentence, it'd be this:

Companies who like to get patent royalties from competitors, like Apple and Microsoft, and who use patents aggressively, have noticed that if everyone who was in the mobile phone business before they were sues them over their patents, they won't be able to make a phone anyone can afford, so they want to get the courts to force folks like Samsung and Motorola to accept less than a penny per handset for their standards patents, while still charging the regular price for their own later-issued patents.
In other words, they want to disarm the companies that got there first, built the standards, and created the field, while the come-later types clean up on patents on things like slide to unlock or a tablet shape with rounded corners.

Then the money flows to Apple and Microsoft, and away from Android -- and isn't that really the point of all this, to destroy Android by hook or by crook? The parties who were in the mobile phone business years before Apple or Microsoft even thought about doing it thus get nothing much for their earlier issued patents that have become standards. Apple and Microsoft can't compete on an even field, because the patent system rewards the first to invent (or now, after the recent patent reform, the first to file). Neither Apple nor Microsoft got there first. Samsung *was* there, since the '90s:

That Samsung is able to offer such a wide variety of quality mobile telecommunications devices is no coincidence. Samsung has been researching and developing mobile telecommunications technology since at least as early as 1991 and invented much of the technology for today‘s smartphones. Indeed, Apple, which sold its first iPhone nearly twenty years after Samsung started developing mobile phone technology, could not have sold a single iPhone without the benefit of Samsung‘s patented technology. Even as Apple has carried out a coordinated campaign of dragging Samsung‘s name through the mud in this lawsuit and in the media, it has used Samsung‘s patented technology while flatly refusing to pay for its use.
"Coordinated campaign" -- do they mean Florian Mueller, by any chance? He certainly has put out endless streams of anti-Samsung articles. Whoever they mean, they believe it's coordinated by Apple, evidently.

Samsung invested in its tech, contributed to and offered its patented technologies to standards bodies, under FRAND terms, meaning without discrimination and on fair and reasonable terms. Andy Updegrove explains FRAND terms and how it has worked traditionally, in case it's a new term to you. And here's a lengthy article on Patently O on the FRAND wars.

Here's how Samsung puts it:

Unlike Apple, which was not a participant in the mobile communications industry until it released the first iPhone in mid-2007, Samsung began developing mobile communications technology in 1991.

Samsung has since invested billions of dollars in developing the backbone of the industry and the wireless standards necessary for smartphones. Between 2005 and 2010 alone, Samsung invested $35 billion in research and development relating to telecommunications technology, with over 20,000 engineers worldwide dedicated to telecommunications research and development.

Apple relied heavily on Samsung‘s technology to enter the telecommunications space, and it continues to use Samsung‘s technology to this day in its iPhone and iPad products. For example, Samsung supplies the flash memory, main memory, and application processor for the iPhone. Samsung also manufactures Apple‘s A5X processor and is the sole supplier of the Retina display used in the new iPad. But Apple also uses patented Samsung technology that it has not paid for. This includes standards-essential technology required for Apple‘s products to interact with products from other manufacturers, and several device features that Samsung developed for use in its products.

So far, however, Apple has paid nothing, not even some token payment to acknowledge that it certainly owes *something*, and this fight is going on for years and years. So Apple is currently free-riding. Instead of paying anything, or even negotiating for a lower price, Samsung says Apple brought this, and other, cases, trying to get the courts to lower the price for standards patents and also to rule that those holding standards patents can't use injunctions as an enforcement mechanism. I note that a few weeks ago, Nokia, who was also there in the early days, offered an amicus brief in a letter [PDF] to the ITC in support of Microsoft, but it did not support the view that no injunctions should ever issue for standards patents. On page 3, in a footnote, it wrote:

Nokia owns thousands of patents that have been declared essential to various industry standards. Yet in spite of the fact that Nokia has participated in several International Trade Commission investigations as both complainant and respondent, Nokia has never sought an exclusionary order before this Commission based on the infringement of a declared-essential patent. In Nokia’s view, the RAND commitment would not require the relinquishment of the right to seek or enforce an injunction in exceptional circumstances such as the total refusal to negotiate with the holder of an essential patent or the complete refusal to fulfill, or even acknowledge the existence of, a party’s FRAND payment obligations on patents that are valid, essential, and infringed.
That's how Samsung is describing Apple, is it not? If a party simply refuses to pay anything at all and refuses to negotiate, then what can the patent holder do? Nothing? Sue and wait for a decade to get paid, considering all the likely appeals? You could go out of business that way before you see any money.

And so rather than fixing the broken patent system, Apple would prefer to "reform" it in its own image of what would benefit Apple via the courts, telling them that what's reasonable is essentially nothing for these standards patents, so they end up winning due to playing on a field that tilts all their way. Apple in this litigation wants billions for its later patents, including penalties, but it wants to pay close to nothing for Samsung's, as if Samsung had donated their R&D to the world for nothing. I wish. But in reality, that's not how standards patents work currently.

Apple also wants a permanent injunction, while wanting to deny Samsung the right to even ask for one, so Samsung can't compete against it any more, although I notice that Apple's brief says that Samsung claims it can work around all of Apple's patents in a month. Did you know that? Me either. There is so much we haven't heard, I guess because of the coordinated campaign to spin it Apple's way.

Samsung puts it like this, when discussing what Apple wants in damages:

Apple‘s overreaching claim for damages is a natural extension of its attempt to monopolize the marketplace. It demands the entirety of Samsung‘s revenues on the accused phones and tablets for the alleged infringement of a design patent that shows little more than a blank rectangle with rounded corners. It seeks to collect "lost profits" despite the fact that no one buys phones because they have "bounce back" feature or other manifestations of Apple‘s alleged inventions

asserted in this case. Damages are meant to compensate, not confer an absurd windfall at the expense of competitions and consumers worldwide....

Apple seeks to recover windfall profits that bear no proportion to any claimed harm to Apple or alleged wrongful gains by Samsung.

And meanwhile, instead of negotiating a price or paying the patent owners for using the patents, they pay nothing at all. And of course Samsung has to deal with the costs of litigation over something that ought to have been negotiated instead, even according to the judge in this case.

So much for Most Holy Patents. I've come to the conclusion that they are only Most Holy when you own them. If someone else owns some, then they are worthless or they cost too much. A cynic might think that what this is really about is the Samsung is beating Apple in the market. And here's how Samsung says it does it:

Also contrary to Apple‘s accusations, Samsung does not need or want to copy; rather, it strives to best the competition by developing multiple, unique products.

Update 2: Wired's David Kravetz has an article about this litigation, and the article includes this:

Some legal experts suggest the legal flap might involve intellectual property that should never have been patented.

“Regardless of the outcome of the trial, we might want to step back and consider whether society should be granting such powerful rights so easily. Are the features at issue here really deserving of so much protection?” asked Robin Feldman, a legal scholar at UC Hastings College of the Law and author of Rethinking Patent Law. “On the whole, the trial is one more indication of a patent system that has lost its bearings, with litigation rather than innovation leading the way.”

Amen. Wired also links to Justia, which has made the documents available for free. *Now* they tell me.

: )

Here's Samsung's trial brief, as text:


For entire article at Groklaw:


TOPICS: Business/Economy; Computers/Internet
KEYWORDS: apple; patentwars; samsung; tech; technology

This is the first part of a very lengthy post at Groklaw.

Much detail and photos.

1 posted on 07/31/2012 9:18:45 AM PDT by Ernest_at_the_Beach
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To: All
Related thread:

Apple aims for salted earth in Samsung fight (Patent Wars)

2 posted on 07/31/2012 9:20:43 AM PDT by Ernest_at_the_Beach (The Global Warming Hoax was a Criminal Act....where is Al Gore?)
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To: Ernest_at_the_Beach

Yeah, what is this frand all about anyway?

3 posted on 07/31/2012 9:22:22 AM PDT by BipolarBob
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To: Ernest_at_the_Beach

I’m not up on all the details, but from what I’ve heard, Apple seems to be angry that Samsung has been cutting into their iPhone sales, and is litigating them.

When a company is resorting to lawsuits to stifle their competitors, then that’s a sign of weakness.

4 posted on 07/31/2012 9:25:32 AM PDT by Shadow44
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To: Shadow44

>> When a company is resorting to lawsuits to stifle their competitors, then that’s a sign of weakness.

Hide and watch; if the lawsuits fail, the faggot that runs Apple will scream “homophobia”. :-)

5 posted on 07/31/2012 9:30:26 AM PDT by Nervous Tick (Love the cult, respect the leader, but I simply can't drink the koolaid and die.)
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To: Shadow44; ShadowAce; Marine_Uncle; NormsRevenge; blam; SunkenCiv
Every Tech company on the planet may end up involved in this....

We already have IBM in it:

Reuters Wants to Publish Unredacted IBM-Samsung Patent License Agreement (Apple v. Samsung); IBM Moves to Block ~pj Updated 2Xs

6 posted on 07/31/2012 9:35:02 AM PDT by Ernest_at_the_Beach (The Global Warming Hoax was a Criminal Act....where is Al Gore?)
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To: Nervous Tick

I’m personally angry with Samsung for being too accommodating with Apple. However, I’m sure them threatening to stop buying components gives them a lot of leverage.

I recently upgraded my phone for the Galaxy S III, and the phone is clearly made to NOT look like an iPhone at all with the rounded edges, asymmetrical positioning of the screen, and not selling it in black.

Of course, I just read an article the other day saying that in the new update and newer models being sold, they’re removing aspects of the software because of more lawsuits.

7 posted on 07/31/2012 9:35:42 AM PDT by Shadow44
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To: BipolarBob

Reasonable and non-discriminatory licensing--FRAND

8 posted on 07/31/2012 9:40:05 AM PDT by Ernest_at_the_Beach (The Global Warming Hoax was a Criminal Act....where is Al Gore?)
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To: Shadow44
Believe I saw an article that stated the original shape of things for Apple came from some drawings by a SONY executive for Mobile Devices that SONY might produce.
9 posted on 07/31/2012 9:45:41 AM PDT by Ernest_at_the_Beach (The Global Warming Hoax was a Criminal Act....where is Al Gore?)
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To: Ernest_at_the_Beach

As an investor in Virnetx (VHC) for the past 3 years, I am only too familiar with Apple’s ‘business’ model.

10 posted on 07/31/2012 10:09:43 AM PDT by SueRae (See it? Hell, I can TASTE November from my house!)
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To: Ernest_at_the_Beach

Cracks me up because I can remember all the hipsters from my college days complaining about Microsoft’s unfair monopolistic practices, and that Apple was great for being David v.s. big bad Goliath.

Now that Apple has gained a large part of the market, imagine that, they don’t like it when they get upstaged and lose profits.

11 posted on 07/31/2012 10:14:52 AM PDT by Shadow44
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To: Ernest_at_the_Beach
Much detail and photos.

Much detail, save for one giant one. Samsung's FRAND rate is not being negotiated by Apple because the opening rate Samsung set was not made in good faith. The analysis for FRAND is what is a fair rate in light of what all other licensees have paid for the same pooled standards essential patents. The most common FRAND abuse is the one Samsung is trying, i.e., attempting to charge more to Apple than Samsung has historically charged others. The ND in FRAND is for "Non Discriminatory." The benefit of FRAND to its holder is that EVERYONE voluntarily pays when it is done right. In return for this "nearly automatic" licensing, the issuer has to grant a license to all comers on more or less the same terms. Since companies want other corporations to pay without litigating the cost or trying to infringe their patents, the rates are generally reasonable.

OTOH, Apple is suing Samsung for the infringement of non-standards essential patents. Apple has not licensed many of their patents to anybody, and under the law, it is their right as a patent holder of such rights to NOT license if they do not wish to do so. They have the right to demand market exclusion for adjudicated "copiers." Whether they ultimately prevail at such a strategy is an open question, as this remedy is disfavored, but Apple is under no obligation to be reasonable as they have not released most of the patents they have ever been awarded to any competitors aside from some broad cross licensing with Microsoft.

I am all for balance in the coverage of these lawsuits, but leaving out a critical difference in the patent claims of the two parties involved, whether by omission or commission, undermines the "quest for balance" the author sought.
12 posted on 07/31/2012 10:44:42 AM PDT by Goldsborough
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To: Ernest_at_the_Beach
Did you know that Apple is asking, among other things, for 100% of Samsung's profits from phones and tablets, because of the design of the *cases*?

I have not yet read the whole article and I can't tell (at a glance) whether Groklaw has any actual expertise in IP law, but YES, that's generally how (design) patent infringement works.

If someone copies Rolex watches or Hermes handbags, should the design owner only ask for a fraction of the unlawfully gained profits?

And YES, though the author seems surprised, it is the *case* of the item that is protected by a design patent. The external appearance. The design. The author should not feign astonishment about this. If your product has a multitude of novel *technical* features but you choose to make it *look exactly like* a competitor's product, well, sucks to be you. Your IP experts should've told you beforehand.

I am not on either side here, but IMO the design is close, but has sufficient differentiating features. The scope of protection for a design patent is narrow. I'm looking forward to seeing how this pans out.

13 posted on 07/31/2012 12:23:37 PM PDT by Moltke ("I am Dr. Sonderborg," he said, "and I don't want any nonsense.")
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To: Ernest_at_the_Beach
Looks like Apple is a bunch of crooks :)
On a more serious note. Obviously these things have been going on for years, as your well aware. And often justice due to a given patent holder in the end, doesn't amount to a hill of beans.

14 posted on 07/31/2012 2:35:02 PM PDT by Marine_Uncle (Honor must be earned.)
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