Apple's Verdict Will Likely Survive Appeal

Aug.29.12 | About: Apple Inc. (AAPL)

I'm a business lawyer, not a patent lawyer. I have no special knowledge of the facts, aside from what I've read in the press. But I've been struck by the sheer volume of seemingly uninformed comment, which notes that further appeals are likely, and assumes from this there is a significant likelihood the decision or the damage award will be reversed.

Lawsuits generally include both questions of law and questions of fact. Judges and appeals courts concern themselves only with questions of law; in jury cases only the jury decides questions of fact. An appeals court will not substitute its own decision for the jury's decision on a question of fact except in the most obvious cases. Overturning a jury's decision would generally require establishing that the jury's decision was "clearly erroneous", not just that the appeals court would have decided differently.

The jury was given several hundred specific questions to answer as part of the process of reaching its decision. By all reports, this jury did a thorough job, and they reached a unanimous decision.

The jury foreman was interviewed at length Monday on Bloomberg TV. He was very impressive; his answers were measured and thoughtful. Among other things, he was asked about Samsung's (OTC:SSNLF) post-trial comment that Apple (NASDAQ:AAPL) "should not have a monopoly on rectangles with rounded corners." He responded that the jury did not decide that Samsung infringed the design patent because it used rectangles with rounded corners. He said that the jury considered the entire design patent and all its claims, and then examined the respective devices side by side. He said the jury decided the Samsung devices infringed because they so closely resembled the Apple phone in many respects, not because of any single resemblance. He also discussed the reasons why the jury found that infringement had been willful. He mentioned that Google (NASDAQ:GOOG) had asked Samsung at its highest levels to not copy Apple so closely, but that Samsung had decided not to act on this request.

Commenters frequently point out that the amount of the judgment -- $1.05 billion -- is pocket change for these companies. They ignore the very real possibility that the judge will triple the damages because of the jury's finding that infringement was willful, and that the judge will award Apple with attorney fees. That could perhaps raise the amount of the award to around $3.5 billion...

Any decision by a trial court presents opportunities to argue disputed questions of law on appeal, and I am certain Samsung intends to press its appeals strenuously. The appeal process will provide time and continuing opportunities to reach a settlement, and presumably the parties will continue to negotiate. But it seems unlikely that the appeals will involve reconsideration of the jury's decisions on factual questions, including the amount of the damage award, and that will leave Samsung in the position of negotiating and pressing its appeals with one hand tied behind its back.

I have no insight into whether Apple will get the injunction it now seeks, or how this might affect Samsung's ability to sell phones in the US in the short run. In any case, it seems likely they could eventually produce products that would not violate these patents. The most cost effective and therefore most likely outcome remains a negotiated settlement. But I don't think people appreciate that Samsung will now be negotiating from a position of considerable weakness, and that it will need to pay dearly in any settlement for Apple to let it off the hook.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.