Apple expert shines light on Samsung sales in U.S.

SAN JOSE Tue Aug 14, 2012 3:58am IST

An employee sits in front of a poster advertising the New iPad at an Apple dealership in Wuhan, Hubei province July 19, 2012. REUTERS/Stringer

An employee sits in front of a poster advertising the New iPad at an Apple dealership in Wuhan, Hubei province July 19, 2012.

Credit: Reuters/Stringer

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SAN JOSE (Reuters) - Apple Inc is claiming that more than a quarter of Samsung Electronics' $30.4 billion in U.S. smartphone and tablet sales result from copying of the iPhone and iPad or infringe on other patents, a damages expert for the U.S. company said on Monday.

The Silicon Valley company is demanding up to $2.75 billion of damages from its Korean rival, which includes profits lost to infringing Samsung gadgets. However, Samsung attorneys argued that Apple's evidence was not sufficient to recoup such an award.

The Korean company sold more than 87 million mobile devices from mid-2010 to March 2012, according to documents displayed before the jury.

Accountant Terry Musika, citing Samsung records and testifying as an Apple expert witness, estimated that $8.16 billion in revenue, or 22.7 million of those total unit sales over that two-year period, came from products that infringed Apple patents, such as the first Galaxy S smartphone in July 2010.

Samsung typically does not reveal its sales in the United States.

Samsung earned roughly a 35.5 percent gross profit margin on that revenue, between June 2010 through March 2012, Musika said.

"It's not me sitting at a desk with a calculator," Musika, a former KPMG and PriceWaterhouseCoopers accounting partner, told the court.

"There are literally hundreds of millions of calculations," he said, adding that it took more than $1.75 million to employ a team of 20 programmers, accountants, statisticians and economists to work out damages over a plethora of gadgets.

But Samsung argued that Apple, which was struggling to keep up with demand for the iPhone 4 from July to October of 2010, did not have the capacity to have delivered on those additional sales.

"Apple couldn't service its own customers with the iPhone 4, but it could service customers it didn't have?" Samsung attorney Bill Price asked Musika.

Price also argued that the damages should vary depending on whether the Samsung products at issue in the lawsuit infringed on just one or all of Apple's patents.

THIS MEANS WAR

Apple's legal battle with its fiercest business rival, which has transfixed the global mobile industry, moved into a technical damages-estimate phase this week. The trial, which began in late July, has seen a procession of executives, designers and patent experts testifying on behalf of the U.S. company. Closing arguments should begin next week.

The world's most valuable technology company is accusing Samsung, now the leader in smartphones, of copying its iPhone and iPad. The Korean company denies that and says Apple infringes several of its wireless technology patents.

Musika also cited Samsung documents that identified the iPhone back in 2007, when the first of the revolutionary smartphones emerged, as one of four major factors defining mobile trends in the ensuing five years.

ANOTHER PEEK

The trial continues to offer glimpses behind Apple's secretive operations, from its industrial design process to its product marketing machine.

On Monday, an Apple executive testified that the company had licensed prized design patents to Microsoft Corp but with an "anti-cloning agreement" to prevent copying of its iPhone and iPad.

Apple had reached out to Samsung in 2010, hoping to strike an agreement with its rival on patent licensing before their dispute hit the courts, patent licensing director Boris Teksler said.

Teksler testified that Apple offered a clutch of patents for licensing but, crucially, viewed patents related to what he called the "unique user experience" as a highly protected category.

Those included design patents at issue in the lawsuit, covering the look and feel of the iPhone and iPad. Teksler told jurors last week he could count "on one hand" the instances Apple has licensed those patents.

Negotiations between Apple and Samsung did not produce a licensing agreement, and Apple filed a lawsuit in federal court in San Jose, California, in April 2011.

Apple's decision to license its design patents to Microsoft was consistent with its corporate strategy, Teksler said, because the agreement prohibited Microsoft from manufacturing copies.

"There was no right with respect to these design patents to build clones of any type," Teksler said.

Apple finished presenting evidence on its own patent claims on Monday, and Samsung began calling witnesses. U.S. District Judge Lucy Koh said she hoped the attorneys would be able to present closing arguments next week.

The case in U.S. District Court, Northern District of California, is Apple Inc v. Samsung Electronics Co Ltd et al, No. 11-1846.

(Reporting By Dan Levine and Edwin Chan; editing by Jeffrey Benkoe and Carol Bishopric)

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