It was a big day in the Apple Inc. (NASDAQ:AAPL) versus Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) patent infringement trial being held in federal court in San Jose. Samsung called on Yale University finance and economics professor Judith Chevalier to testify regarding a reasonable value for damages in the event a jury should decide that Samsung had infringed on Apple’s patents.
This latest case in the smartphone wars is officially identified as Apple Inc. v. Samsung Electronics Co., 12-cv-00630, U.S. District Court, Northern District of California (San Jose).
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Damages exaggerated 50-fold
According to Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), Apple’s claims for damages in the case are massively inflated because the five patented smartphone features involved in the suit are really of little value. The Korean electronics firm argues damages should be as little as 35 cents a phone, compared to Apple Inc. (NASDAQ:AAPL)’s claim of over $40 a phone. That would mean a payout of less than $50 million versus the $2.19 billion claimed by the iPhone maker.
Competing expert testimony
Prof. Chevalier was called to testify by Samsung to contest a report produced for Apple Inc. (NASDAQ:AAPL) by Christopher Vellturo, a Boston-based financial consultant.
Vellturo’s report came up with the $2.19 billion figure to account for two types of damages: lost profits and reasonable royalties Apple Inc. (NASDAQ:AAPL) should have made on the 37 million infringing smartphones that Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) sold from August 2011 to December 2013.
When calculating damages in intellectual property disputes, however, firms typically recreate a hypothetical license negotiation. Chevalier points out Vellturo’s damages estimates assumes Samsung would “capitulate” to Apple’s royalty demands when there is no reasonable economic case for the company to do so. Furthermore, Apple Inc. (NASDAQ:AAPL)’s patents at issue in the case are of such marginal value that the company hasn’t actually lost any profits because of Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s infringement.
‘‘My analysis compensates Apple through a reasonable royalty and zero lost profits,” Chevalier explained to jurors. “When Samsung sells a phone, Apple may be losing out. But that is not the same as saying that Apple loses sales because Samsung infringes Apple’s patents.”