“If you can’t speak proper English,” one wrote, “maybe you weren’t the best choice. . . .”
Even by the dismal standards of online comments, the Gizmodo discussion was appalling. For all their harping about the apocalyptic implications of Hogan’s typos, many of his critics couldn’t string together a grammatically correct paragraph. Cloaked in anonymity, they were free to indulge in not just cruelty but aggressive hypocrisy. None of them appeared to have attended the trial or heard the testimony and evidence. No one showed any particular command of patent law.
The real question was why Hogan had subjected himself to a public whipping. Had he not foreseen how nasty it would get? Did he view the online forum as a chance to defend himself and the rest of the jury? Maybe the foreman simply saw it as his duty to explain the reasoning beyond a billion-dollar verdict. Many of his online comments displayed a touching, almost naïve belief in the primacy of good intentions. He explained that he and his fellow jurors had been well aware of the importance of the case, that they had listened to the evidence, followed the law, and rendered what they believed to be a just decision. As he put it:
“I/we the jury stand by our ruling.”
Hours went by, and the mob grew more livid. They painted Hogan as a fool and a dupe and a troll, and compared him and the other jurors to Nazi war criminals, and asked him how it felt to be so wrong, and did he prefer crack or more traditional forms of cocaine, and was he simply pro-Apple or also anti-Samsung, and how did he sleep at night, and what kind of name was Velvin, anyway? They also vented their wrath toward Apple, ranting about the company’s arrogance, accusing it of being the true thief of innovation, and despairing over how everyone kissed its corporate ass. They wondered if the jury’s verdict was fueled by an anti-Korean, pro-American slant and asked Hogan several more times how much Apple had paid him for the verdict, and how much Apple was paying him now to deny that he had ever been paid. They brushed aside his denials and told him, come on, did he truly expect anyone to believe he wasn’t on the take, and if Apple could patent a geometric shape, did that mean it could patent an orange and sue anyone who sold oranges, and did Hogan realize he was a nobody, and a terrible person, and did he understand that every word he uttered might destroy the verdict?
By then, the foreman had gone silent. But it was too late.
Venomous as the free-for-all on Gizmodo had been, the questions about Hogan’s impartiality were not so easily dismissed. After dissecting his many statements from the media circuit, Samsung’s legal team filed a motion alleging juror misconduct and requesting a new trial. The lawyers noted that the foreman had revealed several misunderstandings about patent law. According to his answers in interviews, Hogan erroneously believed that design patents were based on the look and feel of a device, and that a device had to be entirely different to be cleared of infringing a utility patent. Other comments he’d made, the lawyers argued, could be seen as proof of bias in favor of patent holders such as Apple.
“In this country,” Hogan had told Bloomberg Television, “intellectual property deserves to be protected.”
The most damning accusation involved an incident from Hogan’s distant past that he had not disclosed during jury selection. In his post-trial interviews, Hogan mentioned that decades ago he had worked for Seagate Technology, a company now partly owned by Samsung. After Hogan left, Seagate had sued him for breach of contract, ultimately forcing him to declare bankruptcy. In their motion for the new trial, Samsung’s lawyers argued that the foreman had deliberately omitted any mention of the Seagate dispute—and its connection to Samsung—because he wanted to serve on the jury.
“Mr. Hogan’s failure to disclose the Seagate suit raises issues of bias that Samsung should have been allowed to explore in questioning,” the Korean company said in its filing.
Hogan defended his lack of disclosure, saying that he was only obligated to tell the court about litigation that he had been involved in over the past decade.
“Had I been asked an open-ended question with no time constraint, of course I would’ve disclosed that,” he told Bloomberg. “I’m willing to go in front of the judge to tell her that I had no intention of being on this jury, let alone withholding anything that would’ve allowed me to be excused.”
Apple called the two-decade-old lawsuit between Hogan and Seagate “irrelevant.” If Samsung had a problem with it, counsel should have raised the questions during jury selection. The controversy continued to swirl as the media pointed out that there had been no time frame stipulated when Hogan was asked whether he had been involved in a lawsuit.
Skeletons from Hogan’s past were only one of several issues raised with the court. Apple may have won a billion-dollar verdict, but Samsung was still fighting to have the damages reduced or thrown out. More important, the crucial battle over the injunctions had not been resolved. The key question was whether Apple could get an injunction on all of the twenty-six Samsung devices that were found to have infringed its patents.
Apple’s request for an injunction wasn’t heard until December 6, three and a half months after the verdict. That afternoon, attorneys for both sides reconvened at the San Jose courthouse. Reporters found themselves once again in the back of the courtroom. The agenda included Samsung’s appeal in addition to the injunction.
For the first couple of hours, the lawyers sparred over the damages. Back and forth the two sides battled, filling the courtroom with a fog of words. Apple’s lawyers talked about “the mootness claim.” Samsung’s lawyers insisted that Apple’s arguments were “completely fanciful,” “astonishing,” “preposterous.” Somehow a billion-dollar argument descended into tedium. When the attorneys suggested they might need to file more paperwork, Judge Koh expressed frustration. Whichever way she ruled, she knew an appeal was inevitable. Couldn’t they just get on with it?
“I was hoping,” said the judge, “to send you on your merry way to the federal circuit.”
When the discussion turned to Apple’s injunction request, Koh wanted to know: If Apple was no longer using an old iPhone or an iPad design, then how would Samsung’s use of a similar design hurt Apple?
Apple’s attorney drew a comparison to the automobile industry. If Chevrolet came out with a car that looked like a 1967 Ford Mustang, would that be okay if Ford wasn’t making that car anymore? In a similar way, allowing Samsung to sell products that looked like the iPhone 3G or 3GS would dilute the uniqueness of Apple’s designs.
By the time the iPhone maker had made its case, three hours had gone by.
“I’d like to finish before 2013,” the visibly fatigued judge said as she gave Samsung an opportunity to respond.
The company’s counsel argued that an injunction would result in hardship because the ban would create fear among retailers about selling Galaxy devices.
As the hearing drew to a close, the exasperated judge asked, “When is this case going to resolve? Is there some endpoint here?”
The room broke into laughter. But Koh wasn’t kidding.
“For Samsung, these are dollars-and-cents decisions,” said Apple’s attorney Harold McElhinny, accusing Samsung of calculating its moves based on whether they thought the courts could catch up to them. “They make the decision every day how close they are going to get to the line.”
He described the damages awarded as “a slap on the wrist.” Apple was looking for more than that. The courts needed to stop Samsung from copying the company’s products going forward.
“I’ll be frank. If it ends up that we get a new trial on damages and there’s no injunction and there’s no—if you didn’t see the same case that the jury saw, then I’m not sure how we get to a resolution from there,” McElhinny said.
Samsung’s attorney Charles Verhoeven argued again that Apple was trying to eliminate its competition through the courts rather than the marketplace. Samsung was willing to negotiate, he said, but the ball was in Apple’s court.
McElhinny protested that Apple had agreed to
a meeting of their executives, but the talks had never happened because of Samsung.
The judge encouraged the two sides to find some way to find resolution.
“It’s time for global peace,” she said. “It would be good for the consumers. It would be good for the industry.”
In the last ten minutes of the hearing, John Quinn, the Samsung attorney who had gotten into trouble with the judge during the trial, spoke for the first time to broach the issue of jury misconduct. Velvin Hogan, claimed Quinn, had been deliberately dishonest.
“Your Honor, what do we know about the foreman in this case?” the lawyer asked. “This is a juror that just wanted to be on the jury.”
When Koh asked why Samsung hadn’t inquired about the relationship with Seagate during jury selection, Quinn said they would have asked, but they didn’t know about the dispute. He asked that Hogan and the other jurors be brought back into court for questioning.
“Your Honor,” said Quinn. “It would be an abuse of the court’s discretion at this point not to hold a hearing.”
One of Apple’s attorneys rose to speak.
“Very briefly,” Koh warned.
William Lee denied that Hogan had deceived anyone. “It’s outrageous that he’s being called a liar. They’re claiming that . . . it was his goal in life to get on the jury.”
The attorney pointed out that Hogan’s legal troubles with Seagate had occurred in 1993 and that Samsung had not acquired a 10 percent holding in Seagate until 2011, only several months before the trial. Why would the foreman have harbored any ill feelings about Samsung?
“The most preposterous part, your honor, is this: They’re claiming Mr. Hogan lied about an event that occurred nineteen years ago, that he harbored a grudge for nineteen years,” said Lee. “That doesn’t make any sense.”
The judge responded noncommittally. She thanked the lawyers and promised to issue her rulings as soon as she could.
Eleven days later, Koh denied Samsung’s request for a new trial. She dismissed the suggestion of jury misconduct, saying that Samsung had failed to prove whether Hogan had intentionally concealed his lawsuit or engaged in any misconduct. She also said that Samsung had been given ample time to question him during the trial about his employment at Seagate, which Hogan had mentioned in the jury selection process.
“What changed between Samsung’s initial decision not to pursue questioning or investigation of Mr. Hogan, and Samsung’s later decision to investigate was simple,” the judge wrote in her order. “The jury found against Samsung and made a very large damage award.”
But the judge also denied Apple’s request for an injunction banning Samsung’s devices. Her reasoning was that it was unnecessary. Samsung no longer sold most of the phones in question. The company also had already changed their software to avoid infringing on Apple’s patents.
The ruling was a blow for Apple. What the judge said was true—the products that would have been banned were obsolete. But the injunction would have given Apple ammunition to pressure Samsung into making changes throughout their newer lineup. Courts around the world were watching closely, so a favorable decision by Koh had the potential to tilt the scale for Apple in other battles, too.
The $1 billion hardly made a dent in Samsung’s coffers. At the end of 2012, Samsung’s electronics business alone had about $35 billion in cash. The war had never been about money. The real battle was over market share and protecting the iPhone and iPad’s competitive advantage.
The verdict had at least allowed Apple to reach a ten-year licensing agreement with HTC in November. Though the terms were confidential, experts believed that the Taiwanese smartphone maker felt the pressure to reach a deal because HTC had been accused of violating some of the same kinds of patents as Samsung. Unlike the Korean company, HTC couldn’t afford the prolonged battle or the potential damages if they lost their case.
A settlement at some point between Apple and Samsung seemed inevitable as well. But on what terms?
After arguing in front of Koh about who was to blame for a face-to-face meeting that wasn’t held, the two sides met the following week in Seoul, where they agreed to another meeting in January. Proposals and counterproposals were sent back and forth across the ocean, but nothing had come of the talks.
Samsung had no reason to settle. Apple had yet to land a knockout punch against Samsung anywhere in the world. The iPhone maker had bagged some early wins in Europe and Australia, where courts banned Samsung from selling some of its devices. But some of the injunctions were later scaled back or overturned. In other cases Samsung had quickly developed workarounds to avoid violating Apple’s patents. In yet another case between Apple and Samsung that was proceeding around the same time as the San Jose trial, a judge at the U.S. International Trade Commission ruled in favor of Apple on four patents. The decision potentially had immense ramifications because the ITC had the authority to ban sales or imports to the United States, but the decision carried no weight until it was approved by the full commission in a process that would likely take months.
Even in the California case, there was no material impact on Samsung until the appeals court ruled. The company didn’t have to pay damages yet, and the immediate danger of an injunction had been averted in December.
As Samsung’s executives had promised Chairman Lee, the company was fighting back hard. In the fall of 2012, courts in Tokyo and the Netherlands handed Samsung wins, declaring that the Korean maker did not infringe on Apple’s patents. Meanwhile, an anonymous entity—possibly Samsung—was submitting reexamination requests to the U.S. Patent and Trademark Office on some of Apple’s patents. In response, the office had invalidated Apple’s “rubber band” patent, which Samsung had been found to have infringed in the California trial. The patent would remain valid through the appeals process, but the decision threw an additional element of uncertainty into Apple’s case. Samsung’s strategy was clear. It was planting seeds of doubt in the public about the strength of Apple’s claims.
All the while, Samsung was continuing to arm itself with even more mobile patents that it could use as ammunition against Apple. By the end of 2012, Samsung had become the largest mobile patent holder, topping industry pioneers like Nokia, Ericsson, Alcatel-Lucent, and Qualcomm. Apple didn’t even make the top ten.
A few months later, Judge Koh handed Samsung another advantage. She struck $450.5 million from the $1 billion in damages that Apple was awarded because the jury had incorrectly calculated them. A new trial would have to be held to determine the damages on fourteen Samsung devices. Apple could potentially be awarded even higher damages than before, but either way, Apple’s ability to claim its win was postponed yet again. Samsung had been remarkably effective at pushing the narrative that the jury had no idea what it was doing and Apple didn’t deserve the magnitude of the win that it scored.
The failure—at least until then—to protect its innovations was a bitter pill for Apple. When the company developed the iPhone, Steve Jobs had patented everything. He had trusted that the legal system would enforce those patents. But up against a formidable, wealthy opponent like Samsung, Apple’s innovations seemed poorly protected even after millions of dollars in legal and expert fees as well as countless hours of executives’ time.
Apple appealed Koh’s denial of the injunction, but a decision would take months.
Jobs had wanted to go thermonuclear, and under Cook’s leadership Apple had followed through on that threat. But to what end? The lawyers were still filing their motions, arguing back and forth, and Samsung was still making billions in the United States on its phones and tablets. At the end of 2012, Samsung’s global smartphone market share was nearly 40 percent. Apple’s was 25 percent. A year earlier, the two companies had been neck-and-neck.
By participating in the trial, Apple had also given up many development secrets. None may have been material information, but the reveals diminished the company’s mystique.
Even if Apple had been able to win an injunct
ion, the impact of it was debatable. Samsung had devices in the works that steered clear of Apple’s patents. The assumption was that they would be inferior, but that wouldn’t necessarily be true.
Samsung had lost a verdict. But Jobs’s strategy wasn’t winning the war, either.
17
Critical Mass
Outside the courts, Apple basked in the spotlight. The company was considered the pride of America—a reputation confirmed in February 2013, when President Obama lauded the company during his annual State of the Union address.
Tim Cook had been invited to the ceremony as one of Michelle Obama’s guests of honor. The tradition had started in 1982 when President Reagan had invited a man named Lenny Skutnik, who had helped save a passenger from a jetliner that had crashed into the Potomac River. Since then the invitees, from Rosa Parks to Sammy Sosa, were known as Skutniks. Though some considered the tradition to be political theater, the guests embodied what each president thought America stood for.
As a champion of the technology sector, Obama had included people from the industry before. Last year, Jobs’s widow, Laurene, had been a guest along with Instagram cofounder Mike Krieger. Obama had spoken about how America should support risk takers and entrepreneurs who aspired to be the next Steve Jobs. This year Cook had been invited along with two dozen other guests of honor, including a teenage inventor who had devised a low-cost way of detecting pancreatic cancer; a first-grade teacher from Newtown, Connecticut’s Sandy Hook Elementary School, site of a mass murder in November 2012; and a lesbian couple fighting for equal rights for same-sex military couples.
Sitting behind the first lady, Cook looked distinguished in a conservative black suit and tie. Earlier, Jack Andraka, the teenage inventor, had asked to take a photo of him. Andraka had posted it online with the message, “taking a picture of Mr. Cook w an iPhone! priceless!”
Midway through his speech, President Obama addressed the country’s manufacturing industry. “After shedding jobs for more than ten years, our manufacturers have added about five hundred thousand jobs over the past three. Caterpillar is bringing jobs back from Japan. Ford is bringing jobs back from Mexico. After locating plants in other countries like China, Intel is opening its most advanced plant right here at home,” he said. “And this year, Apple will start making Macs in America again.”
Haunted Empire: Apple After Steve Jobs Page 31
