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Apple wants $2.525 billion from Samsung in damages, but prefers injunctions against allegedly infringing products

July 24, 2012

It looks like it’s Super Tuesday today when it comes to legal matters here at Android Authority. We talked just earlier today about Apple’s and Samsung’s second mediation meeting that did not go that well, and then we heard that Apple obtained an EU-wide injunction against the Galaxy Tab 7.7 in Germany, but was denied one against the Galaxy Tab 10.1N in the same region.

Now we have one more rather important piece of legal news for you in this complex Apple vs Samsung and it concerns Apple’s financial requests in the American lawsuit that’s about to start –  you should expect more such updates, as the U.S. Apple vs Samsung case is set to start in just a few days, on July 30, while a similar case is already being tried in Australia.

Not to mention that we’re looking at around 50 patent-based cases between the two giants, spread across four continents, in 10 countries, and we’re far from reaching an end in either one.

“A combined total of $2.525 billion”

In a redacted pre-trial filing from Apple, the company is basically telling the court that it considers that Samsung should pay $2.525 billion for its allegedly infringing products. This is the first time an actual number has come up, and we can’t but wonder if it has anything to do with the recently dismissed (with prejudice) U.S. Apple vs Motorola trial in which Judge Richard Posner said that neither party was able to prove that it has lost money due to the allegedly infringing products of the competitor.

This time around Apple clearly asks for $2.525 billion in damages:

“Samsung adopted as its number one goal to [redacted]’ in the smartphone and tablet markets, and it chose to compete by copying Apple. Samsung’s infringing sales have enabled Samsung to overtake Apple as the largest manufacturer of smartphones in the world. Samsung has reaped billions of dollars in profits and caused Apple to lose hundreds of millions of dollars through its violation of Apple’s intellectual property. Apple conservatively estimates that as of March 31, 2012, Samsung has been unjustly enriched by about [redacted; presumably $2 billion] and has additionally cost Apple about $500 million in lost profits. Apple also conservatively estimates that it is entitled to over $25 million in reasonable royalty damages on the proportionately small set of remaining sales for which it cannot obtain an award of Samsung’s profits or Apple’s own lost profits, for a combined total of $2.525 billion.”

But Foss Patents reveals that Apple would rather have the court award a sales ban on the allegedly infringing products instead of getting paid:

“In an interview a few weeks ago [the one at AllThingsD’s D10 conference], Apple’s Chief Executive Officer Tim Cook explained the significance of this case for Apple. ‘[I]t is important for Apple not to be the developer for the world,’ Mr. Cook said. ‘We just want other people to invent their own stuff.’
Apple looks forward to a trial that will vindicate its intellectual property rights. Samsung must play by the rules. It must invent its own stuff. Its flagrant copying and massive infringement must stop.”

Whatever the case is, should Apple obtain a clear victory in this particular case, then Samsung is in a world of trouble.

The same publication notes that an Apple expert’s study reveals that “Samsung’s customers are willing to pay between $90 and $100 above the base price of a $199 smartphone and a $499 tablet, respectively, to obtain the patented features covered by Apple’s utility patents”.

In fact, here are some of the royalties calculated by Apple for its different patents covered by the suit, which apply to every single allegedly infringing Samsung device sold:

  • $2.02 for the “overscroll bounce” (or “rubber-banding”) ‘318 patent
  • $3.10 for the “scrolling API” ‘915 patent
  • $2.02 for the “tap to zoom and navigate” ‘163 patent
  • $24 for use of any of Apple’s design patents or trade dress rights

Should an injunction not be awarded to Apple, then the court should offer Apple a “reasonable royalty,” which Samsung would have to pay hence forward, for every infringing device, in addition to paying for the devices that have been or will be found to be infringing Apple’s patents.

“$0.0049 per unit for each infringed patent”

Sure, you’ll say that Samsung has its own patents that are allegedly infringed by Apple, and they do, but the South Korean manufacturer is relying on FRAND patents, or standard essential patents. These are patents that are used – therefore licensed for a decent fee – by a variety of companies that make mobile devices.

Samsung says that it wants Apple to pay 2.4% of Apple’s sales for its wireless standard essential patents, which cover 3G technology. That’s a number Apple has not agreed to. Instead, it’s saying that for each infringing iOS device (iPad or iPhone with 3G support) it’s willing to pay $0.0049 or almost half a cent.

According to the Cupertino-based company, that number has been obtained by looking at similar deals involving standard essential patents:

“Samsung’s declared-essential patents represent only a small portion of the total set of declared essential UMTS patents–around 5.45%”. Apple argues that the proper royalty base for Samsung is not the entire market value of Apple’s products, “which contain computer and application functionality far beyond simple UMTS wireless technology”. Instead, “the royalty should be applied to a base equal to the price of the baseband processor, the smallest priceable unit containing the accused functionality”. […]
Apple used an analogy and said that all car drivers pay the same highway toll, whether they own a jalopy or a new sports car.

Therefore, Apple is essentially arguing that Samsung’s 3G patents are responsible for only a portion of the functionality of a 3G baseband chip, which commonly retails for around $10.

Apple has sold to date over 350 million iOS devices – probably well over 400 million if we include unannounced iOS sales for Q2 2012 – which include non-3G devices such as the iPod touch or the iPad Wi-Fi. Assuming for a second that all these 400 million iOS devices would have 3G connectivity and Apple would pay half a cent in royalties for each then Apple would end up paying around $2 million for infringing devices.

It’s too early to tell what’s going to happen in this Apple vs Samsung case, but things are not looking good for Samsung if Apple’s infringement claims will be held up by the court, and that’s expecially so if more than one Galaxy-brand product will be found to be infringing. In that case, the South Korean company will either have to pay damages and/or royalties or have the device(s) banned from selling in the region. In turn, Apple won’t shell out a lot of cash for standards essential patents, with courts not likely to offer injunctions based on FRAND patents either.

We’ll be back with more news once we have them, in the mean time we’re five days away from this Apple vs Samsung lawsuit, and we can only expect more details from the proceeding to come to the surface.