Samsung wants you to care about every little tidbit in its phones so it won't have to pay Apple $1 billion

 cnet.com  5/17/2018 11:36:33 PM   Stephen Shankland
Samsung attorney John Quinn argues to jurors that it's tough to tell which Samsung phones violated Apple patents and which didn't.

Samsung attorney John Quinn argues to jurors that it's tough to tell which Samsung phones violated Apple patents and which didn't.

Vicki Behringer

It's a billion-dollar question: Should we care that there's a GH59-09418A printed circuit board inside a Samsung smartphone?

At US District Court in San Jose, California, the heart of Silicon Valley, Apple and Samsung are trying to persuade a jury to see smartphones in very different ways. An earlier trial in the seven-year case already determined that Samsung infringed three Apple design patents, which cover ornamental elements of a product, and two functional patents, which govern how a product works. But the damages payment a jury now will set depends on just how important the GH59-09418A and thousands of other tidbits are in a phone.

As a result, a parade of Apple and Samsung witnesses have handled various components from Samsung phones: front glass faces, screen displays and bezels -- the rims around the phone's face. They're all significant because a Supreme Court decision in 2016 means Samsung could pay damages based on profits from an "article of manufacture." For Apple, that means the whole phone, and by its calculations, damages of more than $1 billion. For Samsung, it means a few components, and potentially a much lower fee.

Also at stake is whether design patents, which govern ornamental aspects of products, are powerful tools that can keep competitors at bay, or tools that're relatively limited in influence. Apple -- where good design is job one, company executives testified Tuesday -- is pushing for power. Co-founder and former Chief Executive Steve Jobs vowed a duel to the death over what he saw as iPhone copying in phones powered by Google's Android operating system.

Repeat after me: Article of manufacture

On Thursday, Samsung began calling its witnesses in the trial. Over and over, the debate boiled down to the components and whether they're an article of manufacture.

Now Playing: Watch this: Apple, Samsung to duke it out in court again

The debate is embodied in this exchange between Apple attorney Amy Wigmore and Timothy Sheppard, a Samsung operations and finance vice president who handled service and repair in the US, as Sheppard held a front glass face from a Samsung smartphone.

Wigmore: "Mr. Sheppard, did Samsung sell that product directly to consumers?"

Sheppard: "Yes, in a roundabout kind of way."

Wigmore also dug into the details of Samsung's SAP accounting software to determine whether it accounted separately for profits, research expenses, sales expenses for various components. "If you tell me about a specific component, I can explain sales information and cost. It's in our SAP database," he said.

Accountant Julie Davis, a witness called by Apple, calculated that Samsung should pay Apple more than $1 billion for infringing three Apple design patents.Accountant Julie Davis, a witness called by Apple, calculated that Samsung should pay Apple more than $1 billion for infringing three Apple design patents.

Accountant Julie Davis, a witness called by Apple, calculated that Samsung should pay Apple more than $1 billion for infringing three Apple design patents.

sketch by Vicki Behringer

An Apple accounting expert, Julie Davis of accounting firm Davis and Hosfield, testified Wednesday that she believes Samsung owes Apple $1,072,453,256 for infringement of the five patents -- all but $5.3 million of that for the design patents.

Thursday, Samsung called a rival witness, Michael Wagner, who offered a very different number. Samsung's profits on selling its entire phones was $370,831,174, he said. His number was much smaller because he deducted expenses like R&D, sales, marketing, and administrative costs. 

Samsung wants to drop that number even further with its argument that it should pay based on the profits from components, not the full phones. His calculation for the profits from the components was just $28,085,061, vastly less than Apple's suggested $1 billion. He didn't offer an opinion on how much Samsung should pay in royalties for the two utility patents.

Jinsoo Kim, a vice president in Samsung's Corporate Design Center, testified through an interpreter that modern smartphones are very complex.

"There are more than 10 antennas involved," handling different mobile networks, Wi-Fi, Bluetooth and other radio communications. And for the total number of components in a phone, the number is hundreds. "If you're talking about the second-tier suppliers and third-tier suppliers, I'd believe we are talking about thousands of components."

Supreme Court helps Samsung's case

After the Supreme Court verdict opened the door for damages based on components instead of the full phone, District Judge Lucy Koh adopted a four-factor test for determining the article of manufacture for an infringed design patent.

In October 2017, US District Judge Lucy Koh ordered Samsung and Apple to use a four-factor test to determine the article of manufacture to which a design patent applies -- and thus on which profits are calculated to determine the design patent infringement penalty.In October 2017, US District Judge Lucy Koh ordered Samsung and Apple to use a four-factor test to determine the article of manufacture to which a design patent applies -- and thus on which profits are calculated to determine the design patent infringement penalty.

In October 2017, US District Judge Lucy Koh ordered Samsung and Apple to use a four-factor test to determine the article of manufacture to which a design patent applies -- and thus on which profits are calculated to determine the design patent infringement penalty.

Screenshot by Stephen Shankland/CNET

To push its case, Samsung called an expert witness, Sam Lucente, an industrial designer and interface designer who worked at IBM, Netscape and Hewlett-Packard. Naturally, he agreed with Samsung.

"My conclusion was the articles of manufacture are the components of the Samsung phone, not the entire phone," Lucente testified -- just as definitively as Apple experts Alan Ball and Susan Kare testified the exact opposite on Wednesday.

He said he applied the four-factor test and indeed ordered parts and kits off the internet to replace screens on Samsung phones. "I replaced the display screen, front glass and bezel in 35 minutes, and the phone worked fine," he said, an action he said bears on the fourth factor about whether a component can be physically separated from the rest of the product.

Three Apple design patents

In 2012, a jury found that 18 now discontinued Samsung phones infringed three Apple design patents: US Patent No. D618,677 (D'677 for short), which describes a black, rectangular, round-cornered front face for an electronic device, US Patent No. D593,087 (D'087), which describes a similar rectangular round-cornered front face plus the surrounding bezel, and  US Patent No. D604,305 (D'305), which describes a grid of colorful icons.

Apple attorney Nate Sabri questions University of Toronto computer scientist Ravin Balakrishnan at a US District Court trial determining Samsung damage payments for infringing an Apple patent.Apple attorney Nate Sabri questions University of Toronto computer scientist Ravin Balakrishnan at a US District Court trial determining Samsung damage payments for infringing an Apple patent.

Apple attorney Nate Sabri questions University of Toronto computer scientist Ravin Balakrishnan at a US District Court trial determining Samsung damage payments for infringing an Apple patent.

Sketch by Vicki Behringer

Lucente argued that the article of manufacture that those patents apply to are only components. "For the D'677 patent, the design applied to glass front face," he said. "For D'087, patent was the applied to bezel and glass front face. For D'305, the patent was applied to the display screen."

To tackle another of the four factors, the prominence of the patented feature in a product, Lucente also compared the infringing Galaxy S phone with the noninfringing Galaxy Ace. The Galaxy S infringed the D'677 and D'087 patents that govern the front face of the phone.

"By simply changing a small detail -- adding a chrome finish to a feature, changing slightly the shape of button at the bottom and a small change of the bezel -- it's now a noninfringing alternative design," Lucente said.Apple: See what's up with the tech giant as it readies new iPhones and more.

First published May 17, 2:17 p.m. PT

Update 3:27 p.m. PT: adds further details from Samsung witnesses Sam Lucente's testimony. Update 4:04 p.m. PT: adds comments from Samsung witnesses Jinsoo Kim and Michael Wagner.

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