Apple v Samsung CAFC Oral Arguments Written Transcript – August 8, 2012

Argued by Mark Perry of Gibson Dunn & Crutcher LLP for Apple
Argued by John Quinn of Quinn Emanuel Urquhart & Sullivan for Samsung
Heard by Judges Prost, Moore, and Reyna

 

Apple v Samsung Oral Arguments Audio Recording

Apple v Samsung Written Transcript Text

 

Judge Prost

The case on the docket today is 2012-1507 Apple v Samsung, Mr. Quinn whenever you’re ready.

Arguments of John Quinn for Samsung

 

Mr. Quinn

Thank you your honors. My name is John Quinn and with the permission of the court I propose to address three points. First, under this court’s teaching in the case between these parties earlier this year, to obtain a preliminary injunction, Apple was required to make a clear showing of substantial and immediate irreparable harm if a preliminary injunction were to issue. Where as here irreparable harm is predicated on lost market share, that market share must be substantial. That Apple did not prove in the district court below. To the contrary the record evidence, which capped the lost market share at .5 percent refutes any such finding

Judge Prost

But this case unlike some of the others also includes the district court’s findings with respect to downstream or whatever term it is people use in terms of other products. So doesn’t that enhance the importance of the .5 percent at the end of the day?

Mr. Quinn

I don’t think so your honor. What we’re talking about there are still sales – potential downstream sales to a relatively small number of people. The theory was that there are network effects follow on sales that somebody buys a iPhone they will buy applications they will buy chargers they might buy iMacs…

Judge Prost

To the extent that that is correct that could significantly enhance that number .5 percent right? I mean that enhances the impact.

Mr. Quinn

It does enhance the impact I agree with that but what we’re still talking about purchases of related products by a very small number of people. It’s a .. we’re talking about 5.5 percent of the market. And I suggest your honor there’s is really

Judge Prost

You said there was .5 percent not 5.5 percent…

Mr. Quinn

.5 percent of the market, so we’re talking about potential follow-on effects purchases by a relatively small number of people..

Judge Reyna

Counsel what about some of the evidence on the record about future sales that Samsung would expect to make?

Mr. Quinn

Your honor Samsung’s projections – there was – there is evidence in the record that Samsung hoped that the Nexus would be a hero project. I think this comes under the category of best laid plans of mice and men. The record evidence is that this product was not very successful, it only captured .5 percent of the market and if anything it’s sales were declining.

Judge Moore

Well but Samsung’s evidence is that they expect to sell what a million units in the next year or two, and in the next 12 to 24 months are absolutely critical for first time phone purchasers, right? Why isn’t that providing the lost market share?

Mr. Quinn

Yes Judge Moore

Judge Moore

But the .5 percent number only goes to what two different quarters or one quarter of sales in the past

Mr. Quinn

Exactly. But there is no reason to think that that number is going to go up.

Judge Moore

But ?? wait the number is going to go up Samsung says – Samsung’s evidence is that they anticipate it to go up, why can’t Apple rely on that as evidence? This is a PI.

Mr. Quinn

Yes they projected sales in the first year of some nine hundred thousand plus units. But again we’re talking about a market where and I think perhaps the district court may have gotten distracted by some of these large numbers, we’re talking about a market where the total sales in exceed over 100 million units to I think the top ten vendors. This is still a very small percentage and the evidence in the record is that smartphone sales Nexus sales Apple’s iPhone sales went down after the introduction of the Nexus phones. So there is simply no evidence to support – sure Samsung had plans, thought this would be a hero product, and that they would capture larger market share, there is simply no evidence in the record that they did or that it would.

Judge Reyna

If you have an increasing trend in sales over a period of two quarters and that’s the only data we’re looking at you have an increase in sales, and that increase represents only over two quarters a .5 percent gain in market share isn’t that evidence of an increasing growth in market share.

Mr. Quinn

It might be your honor. But actually the record evidence here is the actually Nexus sales went down from the fourth quarter of 2011, to the first quarter of this year, and they sold at a higher rate in the fourth quarter than they did in the first quarter. So the evidence, the only evidence we have before us now is that this is a product which at most at most captured .5 percent of the market.

Judge Moore

No, in that one quarter .5 percent but the evidence of record suggests that the sales are going up dramatically after that. So I don’t think you can say at most .5 percent and Mr. Quinn what would be a percentage that would amount to a substantial market share?

Mr. Quinn

I’ll just say your honor, I’m not aware of any evidence in the record that actually sales went up after the first quarter of this year,

Judge Moore

Projections, projections all indicate sales were going to go up

Mr. Quinn

They had projections of about nine hundred thousand something if you multiply that out and compare it to the full market size which is in the record, it comes to somewhere between .5 percent and 1 percent. However, you look at it it is a miniscule amount.

Judge Moore

Well what is a substantial market share because the market is also replete with quotations about how it’s a two horse market between Samsung and Apple as the two leading offerers… the two people most likely to compete for the new phone purchases. So at .5 percent if Samsung’s share is insignificant, then what is a substantial market share that would jeopardize Apple?

Mr. Quinn

This particular phone – I’m not saying that Samsung as whole that it’s share is insignificant but this particular phone which we are addressing here is insignificant, in terms of what’s the appropriate for a market share that would constitute irreparable harm I don’t think it’s possible to lay out any one general rule of general application. I would suggest the following – that the court should look at effects that are similar to those that were recognized in other cases where this court has found irreparable harm. We’ve collected those cases I think on pages 6 to 7 of our reply brief. Cases where the court said, yes its irreparable harm, where there.. a product has been rendered obsolete, as in the i4i case. Or there is evidence of price erosion, or there is evidence that you had to fundamentally change a business plan. We have nothing like that her your honors. This is a case, and I submit neither party has cited to this court a case where pure losses of market share constituted a finding irreparable harm. In every case there is something else, one of those other factors. And here we are talking about the most valuable may.. arguably the most successful company in the world, record evidence is they capture over 40 percent of the smartphone market, 75 percent of the industry profits, there is simply nothing in the record here whether you count downstream effects, the small number of Nexus purchasers, that would support any finding of irreparable harm.

Judge Prost

Can I turn you – before your time runs out – can I turn you to the other nexus, but not Galaxy Nexus, the causation issue (slight laughter)

Mr Quinn

Causation .. yes

Judge Prost

I’m sure you can appreciate that it’s got a new product, it’s very difficult to be able to show any results in terms of driving consumer demand, and we’ve got an industry here and products here whether it’s Siri or Galaxy Nexus, all of this stuff is relatively new. So it’s kind of difficult to develop a track record through data to support positions, so what are we to do with that?

Mr. Quinn

Well first, it’s not new. The record evidence is that this quick search box feature has actually been on Samsung telephones since July of 2010. That’s the Yung Su Lee declaration the district court cited that fact and discussed the declaration in the opinion at A93. Nobody notices this feature, nobody paid any attention to it. There just isn’t any evidence at all that this feature when it came out .. until this lawsuit was brought, that people were paying any attention to the quick box search.

Judge Prost or Judge Moore

But the claim 6 represents the difference or an improvement on the quick box feature, right?

Mr. Quinn

Well, the unified search, what’s at issue here, the ability to search simultaneously across browser and people was in existence for some time. They got their patent issued in December of last year. But it had been out on Samsung phones for some time before that. But, is it possible to prove causation as this court said – I think it has to be. We’re talking about – this is a company, that they are students of the market, they’ve shown they have the ability to survey – I know there was an issue before …

Judge Prost

They don’t need that do they – I mean our case would allow for circumstantial evidence ??? ???

Mr. Quinn

Of course. There’s lots of ways to prove causation. It’s one of the most you know elementary basic elements of most types of claims. They don’t have to prove customer survey evidence, but they could. It’s possible to do that. They have the wherewithal to do that. It’s possible to look at marketing and advertising materials. What’s being promoted as a nifty new feature, by Samsung. I mean if Samsung were running ads saying you can search people in browser with one quick search in the quick search box that might be some evidence that this drives sales. There was a complete default on that. What did the district court cite to? The district court cited to three things: First, an excerpt from the Androd developers guide – your honors that is not something that’s directed to consumers. This is for

Judge Moore

Technical manual

Mr. Quinn

Technical manual for people who write software for Android programs. And what that says is that search is a core feature and it describes the quick search box. That is not evidence of why people buy Galaxy Nexus.

Judge Moore

Well what if the evidence was all about Siri, but Siri had no feature other than exactly what was claimed. Siri was nothing but unified search. You didn’t have you know the great little voice – she doesn’t call you whatever you ask her to call you ?? thing

Mr. Quinn

Right.

Judge Moore

Only the unified search, and then they presented the exact same evidence that they did about customer satisfaction and desire to purchase on the basis of Siri. Would that be enough?

Mr. Quinn

I would submit your honor that no is the answer to that that would be perhaps a stronger case because that would at least deal with the issue about

Judge Moore

Why wouldn’t that be enough?

Mr. Quinn

Because the issue is what drove purchasers of Nexus. Not why did people buy iPhones. That’s a fundamental error that the district court…

Judge Moore

Why can’t that be substantial evidence. If Siri is only a unified search and nothing more. And the evidence that Apple has shows that this is why people buy iPhones, because they want unified search, unified search is just the bees knees, then why wouldn’t that be enough circumstantial evidence to establish the same would be true for your

Mr. Quinn

I think that that might be some evidence your honor,

Judge Moore

You shouldn’t be afraid to occasionally agree with something a judge says

Mr. Quinn

(laughs). No I – that might well be some evidence if that were the case

Judge Moore

(laughing) That might well be some evidence.

Mr. Quinn

Well I mean with – we’re talking about – I can spin out other – what other things to fill in the hypothetical, what else does Nexus have, do people know that Nexus also has this feature. There is no evidence that people know that Nexus has this feature. What was the total evidence on that? You had the Android developers guide, not for consumers for specialists who write software. You have an excerpt from a Google mobile blog from October of 2009, before the Nexus even goes into the market

Judge Prost

Can I again just before your time runs out again, just the key sentence for me at least in the district court’s opinion in regard to the Nexus seems to be the sentence on A85 where she says that Apple has shown that the 604′ patented feature is core to Siris’s functionality and thus a but-for driver of demand for Siri. Do you think that statement is misplaced as a legal matter or is it just that the evidence wasn’t ?? ???ue?

Mr. Quinn

I think it was – that statement is not supported by the evidence because if you look at the evidence including Mr. Rangall, there are 36 witnesses, about what drives purchasers of Siri, he says it humanizes the smartphone. But you have the ability to voice interaction feature that is humanizes the smartphone, you have this virtual personal assistant. That is, I submit that’s what drove the purchases of Siri. But again I don’t think that’s the question with respect we should be focusing on. We should be focusing on why people bought Nexus’s.

Judge Reyna

Well when you look at the concurrence – and it is a concurrence – in the Apple I case, this is Judge O’Malley’s concurrence. And she says the existence of two player market may well serve as a potential ground for granting injunction ??? creates an inference that an infringing sale amounts to lost sale for the patentee. So, and then, she goes on and then she then says she’s interpreting the majority holding, she’s concurring with it, but she says when you only have two players in the marketplace, you don’t have to go down as deep into consumer demand analysis. It’s enough to say if you have lost sales on one column, you’re going to have – you can infer there’s gained sales on the other column. Don’t we have a two player market here and shouldn’t we be looking at this analysis from this perspective?

Mr. Quinn

With respect, no we don’t. There’s still Motorola. There’s still Nokia. There’s still – there are still Research in Motion, there are still – there are over three hundred manufacturers of Android phones. And we had evidence as to why people Android phones like the Nexus which the district court disregarded – and Apple’s own survey as to why people buy Nexus and Android phones

Judge ?Moore?

JA-1285

Mr. Quinn

People want Androids, people want – they just like the ice-cream sandwich or they like the Android’s operating system, it’s a lower price, it’s – there are various factors.

Judge Reyna

So you don’t agree this is a two-horse market.

Mr. Quinn

I don’t agree that it is. I mean I agree that these are the two dominant companies and ??? ??? There are Samsung documents that say this is increasingly becoming a two

Judge Reyna

So it’s a two horse and several pony market. (some laughter). ??? ?? Well but, let’s look at it. You have Apple which is dominant, you have Samsung that ?graphs? show us – you have over a period of time several years your sales are increasing, you’re the only competitor – true competitor against Apple – why wouldn’t we look at this as a two player market?

Mr. Quinn

Because the evidence is – the record evidence is that it’s not so much a decision between buying a Samsung phone and an iPhone phone, but buying an iPhone phone or and Android phone. And that .5 percent which I said attacks the lost market share, it’s certain that Apple would not have capture that .5 – that full .5 percent.

Judge Moore

Can you – I’m sorry – are you not finished?

Mr. Quinn

Much of that people who prefer Android for the reasons that Apple identified in their surveys would have purchased some other Android phone

Judge Prost

In other words your evidence is that the Nexus is only one out of 315 available Android phones.. ???

Mr. Quinn

I think that’s  – yes – yes.

Judge Moore

Would you mind turning to your claim construction argument on each heuristic module.

Mr. Quinn

Yes.

Judge Moore

I would like to ask you do I have to conclude that there is a disclaimer in order to go the way you want to go on claim construction?

Mr. Quinn

In terms of the Andreoli prosecution history

Judge Moore

Yeah. Do I have to conclude that that amounts to a disclaimer?

Mr. Quinn

No I don’t think that .. your honor I do not believe you have to conclude that – again

Judge Moore

Do you think it is?

Mr. Quinn

I’m sorry?

Judge Moore

Do you think it is a disclaimer?

Mr. Quinn

We think that .. they .. Apple definitely went out of their way to distinguish Andreoli on the grounds that – as they told the patent office, unlike the 604′ patent, Andreoli does not teach having searching with different heuristic algorithms in each field. So yes we do believe that that is a disclaimer. But again we don’t have – we only have to raise a substantial question with respect to the issue of infringement here and on this claim construction. And I think that your honors can look at the plain language, each meaning each, the language here is different in the ResQNet, where the language in the claim was “each of a plurality of fields.” If that were the language I wouldn’t be here making this argument. But it’s quite a bit different here. And if you read the language here it’s clear that each heuristic module must have a predetermined algorithm – different heuristic algorithm. Its different. You have that clear statement in the specification where they say that the heuristic of each plug in module is different. I know that the general rule is you don’t look at specifications – you know citations of a particular embodiment in the specifications to limit claims – but here, that is the only place where they squarely address that issue. And if you go to the claim language they would rely on associated heuristic. Of course that’s on all fours with different heuristics, each can be require a different heuristic and each module still has an associated heuristic…

Judge Reyna

Your opponent argues that the claim language use of the word ?whereand? makes a big difference as to what the word each modifies. Let’s get your response to that.

Mr. Quinn

You know I – it comes back to plain language – I don’t think wherein helps their interpretation on that, with all respect, I this is not if you track the language I think each means each is different. The specification says that, you have the prosecution history where they went out of there way twice to distinguish Andreoli on this ground. And we have the decisions – the ?Scoreves? decision and the Board of Regents Decision, both of which I submit out interpretation. This by the way is a pure question of law, and I submit we at a minimum have raised a substantial question, which is all we need to do at this point in order to beat the preliminary injunction.

Judge Prost

OK I think we have your Argument Mr. Quinn. You’ve gone three minutes beyond your allotted time. What I think I’ll do is will restore you three minutes of your rebuttal time, and that puts you six minutes ahead of the clock, so if Mr. Perry needs it, we’ll add six minutes to his time. Don’t feel compelled to use the entire amount though.

Either Mr. Quinn or Mr. Perry

Thank you your honor.

 

Arguments of Mark Perry for Apple

 

Mr. Perry

Thank you your honor. May it please the court.

This is a two horse market, this is head to head competition. Mr. Quinn is arguing not only with the evidence but with the district court’s factual findings.

Judge Prost?

Well there’s no dispute that the market share is .5 percent is there?

Mr. Perry

Your honor, for two quarters – remember, the Galaxy started at a standing start, so it was zero on December of 2011 when they talk about this market. This market one phone sold gangbusters – it was the top selling phone at Verizon. It was the top selling phone at Spring. It came out of the box and captured that in two quarters. And their projecting – what is .5 percent, let me back up a minute. That’s the population of Idaho, .5 percent of the United States. Mr. Quinn’s argument is you can just ignore Idaho, your honor.

Judge Prost

Well everything is relative in this case. I’m sure you ??? So Idaho is ?? big or small if you are comparing – depending on what you’re comparing them to.

Mr. Perry

The .5 percent

Judge Prost

What is your view. Is there some floor on the percent of market share that would be sufficient to establish? I mean the standard is the same – substantial market share

Mr. Perry

Substantial market share your honor.

Judge Prost

Well is there some sort of floor… based on our cases that I’ve discussed ???

Mr. Perry

There’s no numerical floor your honor. It’s important to note that that .5 percent is of all phone sales. What we have here is a two phone market. The iPhone 4S  and the Galaxy Nexus. That’s what there documents say A2693 is a good example your honor.

Judge Prost

So all these other .. phones on the market are irrelevant?

Mr. Perry

They are not full feature smartphones. This is their top of the line gold plated Cadillac phone that they trotted out specifically to compete with the iPhone 4S. This is the first phone in Samsung’s history that has interoperability among the platform. You’ve read a lot about platform stickiness and so forth,

Judge Prost

Yeah but the way phones go its already probably been superseded by something else –

Mr. Perry

The Galaxy S3 is now on the market your honor an issue as to this injunction. This market moves fast. And Samsung here wants to get to that trot in 2014. Between now and then 100 million people are going to buy their first smartphone. They already own a phone but they are going to buy their first smartphone.

Judge Reyna

Why are they going to buy those smartphones – and I agree you look at the data and the data show a very sharp increase at the end of 2011 beginning of 2012 of this year. With the introduction of the Nexus, there’s a sharp increase. But why is there a sharp increase. Why are there people buying the Nexus?

Mr. Perry

Your honor the . it is the full featured phone that can compete on all fours with the iPhone 4S. That’s what their marketing documents ???? . This is the beat Apple strategy. They finally came up with a product that had all the features

Judge Reyna

Is there any evidence in the record that shows they’re buying the Nexus because of the infringing feature?

Mr. Perry

There is your honor. There’s three pieces of evidence and I’d like to focus on that. First is the Siri evidence – and this is important circumstantial evidence – and Judge Moore this goes to your question. You asked Mr. Quinn what if the evidence showed the Siri was just unified search and people were buying it for that reason? That’s not only what the evidence shows, that’s what the district court found, citing Dr. Polish’s deposition which appears in the record at A909 where he testified, set aside speech recognition. Siri – what matters to consumers is

Judge Moore

But ?? ??? speech recognition? That’s what Siri is all about!

Mr. Perry

It’s not your honor. Because speech recognition only gets you so far. If it doesn’t return the results that you want people don’t care. And Dr. Polish testified to this and their is a finding of fact to this affect. That results matter. People care about search because of the result. 30 percent of people..

Judge Prost

Wait are you referring to the deposition that she cited?

Mr. Perry

Yes your honor on page A83. Her citation is A83 the actual citation is A909.

Judge Moore

But if you look at 1285 and 1297, I don’t understand how the district court failed to address the evidence that you provided. It seems like the only direct evidence in the record of any kind that goes to why people are buying the Galaxy Nexus phone suggests that it was a whole bunch of reasons – none of which is unified search.

Mr. Perry

Your honor. Thank you for asking.

Judge Moore

?? ?? as tangential evidence…

Mr. Perry

Your honor. Thank you for asking. Look .. if the court would look at A1297 it’s the reason people choose an Android phone over an Android phone, they are the differences between the two phones. These two phones both have unified search so that wouldn’t ever appear on this list. It’s not a surprise that – these are showing the differences – the reasons that people choose the Android rather than Apple. The title of that chart – A1297 ???

Judge Prost

Just for clarification, you didn’t invent – 604′ isn’t claiming a unified search. It’s claiming a particular unified search – on interface search locally and through the network. So just to that point I mean the district court – one of the two sentences that I read kind of being the be all end all findings for her. She says Samsung does not contest the Siri feature uses the claims like search features in the 604′ patent. But unified search wasn’t invented by that. ?? that’s been the driving force.

Mr. Perry

Your honor there is no other – there is not evidence that there is any non-infringing way to do unified search in this sense that is put in one input have it go out to multiple search areas and return an answer using heuristics. There is no other way to do that. This is a really cool invention that has really revolutionized search

Judge Reyna

?Does? the Apple 4 have a unified search capability?

Mr. Perry

No, your honor. The Apple 4 search function indexes the information locally on the device it doesn’t use the heuristic methodology the way that Siri does.

Judge Prost

Can I go back to substantial market. I mean Bosch which you rely heavily on which the district court relied heavily on is considerably different that this case with respect to market share, right? They had a – I don’t have the numbers in front of me but there clearly they talked about the accused infringer – the infringer the permanent injunction right? The infringer having already obtained the Walmart contract which in and of itself consumed a substantial share of the market. Doesn’t that make it a lot different

Mr. Perry

It is not your honor. And I want to come back to this head to head competition. If you look at the Samsung documents, the Galaxy Nexus is setup against the 4S, that is the only competition – that’s A2693 – and their expert at A1825 testified that if the cu..if the Galaxy Nexus is not available at least some customers are going to buy the Apple iPhone 4S. And this .5 percent, their projections – and these weren’t just some random marketing projections. These are what they came into the district court and asked for a bond to protect them from the injunction – from June of 2011 to July of 2012 we are going to sell 1 million units.

Judge Prost

OK but why isn’t that- leaving aside the downstream effect. Why isn’t that ???? whether its a million or twenty million what you can calculate in damages. Where is the irreparable harm?

Mr. Perry

Your honor it is the downstream effect because it’s not just a million units of the phone but it’s a million customers that they represent and in this market the evidence is absolutely undisputed that once a customer selects a platform, a significant number 75 80 percent are going to stay on that platform for life. So if those customers are stolen away from Apple by an infringing device and move to the Android platform Apple may never get them back. Which means not only do we not sell the iPhone 4S today, but tomorrow we don’t sell an iPod, and iPad, an iMac, the iToons songs. Apps.

Judge Prost

Well, I’m sure you can get a damages expert that can calculate that. As you well know in these patent cases damages – determining damages is no small matter.

Mr. Perry

It is not your honor.

Judge Prost

And you get ranges of one dollar to one hundred million dollars. So damages are disputed ad nauseum in these cases so why is this not a classic example of what happens in a patent case, and we’ll all decide how much your owed if you win based on in the damages phase of the trial.

Mr. Perry

Well first your honor, Judge Koh looked at that and found that these would be incalculable in the district court’s perspective that’s a finding of fact.And these defendants would come in, if we tried to put in that damage calculation and say that’s all speculative once you get past the first sale you’ll never know what the person’s going to do. We know from our market research that there is platform stickiness

Judge Prost

Well yes you have your market research.That’s right that is exactly what you would say in the damages phase

Mr. Perry

That’s right

Judge Prost

I’m sure you’d have a very compelling

Mr. Perry

Your honor

Judge Prost

to show market ??

Mr. Perry

And Samsung made that argument to the district court and the district court said no those are the kinds of harms – downstream sales, that are not presently calculable they’re not remedial in damages because we’ll never know. There’s also one other important point which is totally incalculable which is the network effect. Again an undisputed finding of fact by the district court in this kind of environment the number of people on a platform matters because it drives development of future applications and so forth. And once you drop below a certain number, the platform is going to wither and die. And that network effects, that is ability to keep enough people on a platform to make

Judge Moore

OK well I’m pretty sure the Galaxy Nexus isn’t going to make Apple iPhones wither and die such that their entire network goes under and I don’t think I saw Judge Koh make any findings ?? ?? support that argument

Mr. Perry

No your honor. Is the point is more people in the network the stronger the network itself. So every customer they take a way is not just the sale of an iPhone, not just the sale of downstream projects, but diminution of the network, and she made express findings on this has value

Judge Moore

Do you have a citation?

Mr. Perry

Yes your honor.

Judge Prost

Is this in her original one or

Mr. Perry

This is in her original order

Judge Prost

OK.

Mr. Perry

It is..

Judge Moore

So how many iPhones are sold in a year?

Mr. Perry

It is page A76 your honor.

Judge Moore

How many iPhones are sold in a year?

Mr. Perry

Of all

Judge Moore

How many iPhones are sold in a year

Mr. Perry

Well there’s multiple models of iPhones ??? that’s why ??? some 35 million iPhones.

Judge Moore

35 million iPhones sold in a year. The Galaxy Nexus the largest estimate is that it stands to sell a million phones the next year.

Mr. Perry

That’s correct your honor.

Judge Moore

Large ??? So one thirty fifth even if we’re doing only a head to head comparison between iPhones and the Galaxy..

Mr. Perry

Well that’s why I asked the first question – the head to head comparison is the Galaxy Nexus versus the iPhone 4S. The top of the line iPhones. There are smaller less full feature iPhones just as there are less full featured Galaxy phones that’s not the same company to company but there are product lines here not just

Judge Moore

OK so what is your evidence regarding the number of iPhone 4S’s a year that are sold?

Mr. Perry

I don’t know the answer to that but I do believe there is a citation in the record in the confidential part of the record your honor – I can’t…

Judge Moore

Well you keep on harping on the .5 percent number not being right OK and that’s already out there the .5 percent and so the question is well what is the number? If you’re telling me the number is .5 percent.. no no .5 percent is not the accurate number because that’s looking at the one phone as compared to the entire market and you’re telling me no I should be looking at one phone compared to one phone, and so what is that percentage..

Mr. Perry

It’s roughly 25 percent your honor. And the actual data is in the record as I said.

By the way I don’t , 1.5 percent a million phones a quarter of a billion dollars on past revenues 600 million dollars in future revenue we’re talking about a billion dollar product, that is substantial market share – I don’t mean to denigrate ?? question

Judge Moore

Substantial market share as compared to what? And if the market is 35 billion it’s really not substantial market share.

Mr. Perry

It is substantial in the world of injunctions your honor. Remember the ???

Judge Reyna

When you look at the data and you look at the charts – and let’s see these are the charts that are at A1176 and right towards the end at the end of the last quarter of 2011 we see an increase in sales of the smartphone and we see your 4S still making upward trends and then suddenly we see the iPhone just take off. Almost off the chart and we see a tapering off effect of the Samsung phone. I mean how can you say that that’s eroding your market share.

Mr. Perry

Well your honor..

Judge Reyna

That’s one question. And then the other question before we get away is that assuming there is market erosion then where do you show or where do I find in the record that market share erosion is accounted for because of the infringing feature of the Nexus?

Mr. Perry

So if I could answer that as well in two steps. First is the market share – there are obviously things going on holidays and so forth in there if you look at the overall trend lines and Dr. Vellturo our expert testified to this it is clear that Samsung over time has been gaining ground on Apple and it is through the sale of this ?and other? product?s?. Then as you look directly at the Galaxy Nexus, the court spent a lot of time detailed findings here on what drives the sales here as I started to say earlier there are three pieces of evidence. One is the circumstantial evidence from the Siri sales, and I would like to pause there because if we look at Apple I remember the court affirmed the finding of irreparable harm ??? to the 889′ design patent there. At the end of the opinion. A lot of what get’s talked about is the beginning of the opinion, when the court established the causal nexus requirement. At the end of the opinion the court applied it and said design matters to tablet customers. Not to Galaxy tablet customers or to Ipad customers or to tablet customers at large because this is head to competition and so the customer demographics is the customers for iPads or for tablets, and when the district court made a factual finding that design matters to that customer base this court affirmed the causal nexus finding. The court made the same finding here. Search matters to smartphone customers. Unified search matters to smartphone customers and we know that from direct evidence of Apple’s

Judge Reyna

There is no showing of – I mean she says she says it is a core feature. Just like ??? ??? and having a screen is a core feature of a smartphone or having an alarm or maybe a it tells you of an incoming call that’s a core feature. So searching is a core feature but you still haven’t answered the question and that’s that your alleging that the Nexus phone has an infringing feature

Mr. Perry

Correct your honor.

Judge Reyna

Alright.

Mr. Perry

OK.

Judge Reyna

Well. Show me or where do I find in the record that it’s that infringing feature that drove these sales that allowed it to gain a .5 market share.

Mr. Perry

Again, it’s the Siri evidence that is the search matters to smartphone customers, its the Android developers guide and this is a document – Google developed Android and put this out to developers. How do you sell products to these customers? You give them search capability because search is a core user feature that’s Google’s words, and if you read through the end of that same document which appears at A155 or the record you will find that it says – please write your programs developers with the search capability to use it as a plug-in module to.. precisely described in this patent so that you can sell more of these things to these customers because they like to be able to search the things on their phone. And third is, we have expert testimony thawt explained – we had both Dr. Vellturo to explain the dynamics of the market on why search matters and Dr. Polish to explain the technology and to explain in his depositions

Judge Reyna

??? is ??abolutley ??nothing?? that shows that customers are buying the Nexus because of the infringing feature

Mr. Perry

That’s not true your honor I don’t agree with that

Judge Prost

Well you keep saying it matters – it matters – you’ve used that word four times in the past two minutes. Is that the same as driving demand?

Mr. Perry

It is your honor. The court mad a finding or a determination – well first – I’m quoting from Apple I is why I am saying that. Design matters is a direct quote from page 1328 of the Apple I decision that was the basis of the causal nexus determination there as to the 889′ design patent. But more importantly the court said – when the court said, when this court said des.. excuse me drives demand, that that can be shown in two ways. You can either show that it affirmatively drives demand, people go out and seek it. Or, that it negatively drives demand. That is the absence of the feature would lessen consumer demand. Samsung doesn’t standard on appeal because I think it’s clearly correct and the district court said both were true here. We know from the Siri evidence that people affirmatively …. excuse me .. seeks out unified search capability in ?? phone

Judge Moore

Can you remind me, what is the Siri evidence that shows that people are looking for unified search as opposed from people just like Siri?

Mr. Perry

Well they talk about Siri in general and they talk about what they like about Siri when you drill down to the next question in that survey is that it produces results. And Dr. Polish in his deposition explained that’s what you

Judge Prost

Where is that evidence? Help me now.

Mr. Perry

Your honor that is at

Judge Moore

?? why they like Siri…

Mr. Perry

Yes, it is A83 at the bottom where it is quoting the Vellturo ??? ??? 61 percent of the users report using Siri to find the information and 30 percent to find a contact, Dr. Polish

Judge Moore

No but find information. I use Siri to find information via voice recognition I love it it’s awesome. So where is the evidence that shows that if the unified search feature

Mr. Perry

Yes your honor. And that’s also on page A83 just above that when she is .. excuse me Judge Koh is quoting Dr. Polish’s deposition at A909 and he is explains the comprehensiveness of search results is what drivers..

Judge Moore?

Page A83

Judge Reyna

Which line?

Mr Perry

Your honors, it starts page – line 18, as Apple’s expert stated during his deposition

Judge Prost

Right, a lot of Siri’s value comes from its comprehensiveness, and claims features are 604′ are important to achieving that comprehensiveness

Mr. Perry

Yes your honor.

Judge Reyna

That doesn’t answer Judge Moore’s question though. I mean she’s asking where does it say that it’s a search feature, not a Siri feature? But voice.

Mr. Perry

Well. With respect your honor, that’s exactly what he was talking about it’s not for voice it’s comprehensiveness is what people like and what allows that comprehensiveness is the patented feature it allows us to go out to multiple areas, not just one. And that was the invention.

Judge Prost

Can I just turn you quickly, before your time runs out to the claim construction question

Mr. Perry

Surely.

Judge Prost

I don’t have the – I can’t find the ??? but my recollection is so correct me if I am wrong did the district court in doing her claim construction reference the prosecution history saying it supported your position but didn’t really cite to what prosecution history she was talking about. Am I right about that?

Mr. Perry

She referred to that same part of the file history where the distinction of Andreoli was made I believe your honor.

Judge Prost

And so what helps you on this prosecution history? Because I think the sentence .. and I think this was raised in the earlier argument with your friend is that it seems to me that ?? goes quite in the direction of supporting the position their taking ?? claim construction right?

Mr. Perry

Your honor

Judge Prost

I’m looking at A1403.

Mr. Perry

Her point, and our point is the Andreoli reference was distinguished because he was using a constraint parameter search not a heuristic search and he used it in two ways. And when the applicant distinguished it there their distinguishing the type of searches being made it has nothing to do with this question ??. And if I could just directly answer the each question I think I can make it very simple

Judge Prost

Well can I just .. can you just tell me what about this quote that I’m looking at, the ??? I’m looking at to support the statement you just made?

Mr. Perry

Yes your honor. If you look at the very top of 1843, Andreoli teaches that the processor can use the solution to a constraint satisfaction algorithm to formulate a search constraint..

Judge Prost

OK

Mr. Perry

..and employ any important combination of local and remote search operations. Andreoli does not describe each of those search operations – that is the local and remote search operations. It described about employs a heuristic – a different heuristic algorithm – but the emphasis there is on heuristic because what he teaches is

Judge Prost

Well how do we know that – I mean employs a different ?? ?? the emphasis on different

Mr. Perry

Your honor

Judge Prost

that’s what the claim language talks about..

Mr. Perry

And we have no objection to that. Let me just go to the claim language.

Judge Prost

OK. Everyone agrees, and I think there’s some confusion here, each heuristic algorithm must be different. We agree with that. They agree with that. Judge Koh agrees with that. The question is, each heuristic algorithm of what subset of heuristic algorithms? The Samsung position is, every heuristic algorithm in the device, that’s page 4 of their brief or in the apparatus that’s page 35 of their brief. Our position is, each heuristic algorithm in a plurality of heuristic algorithms. That’s the limitation of claim 6. That’s the difference between the parties.

Judge Moore

But why doesn’t plurality of heuristic algorithms or heuristic modules I’m sorry – why isn’t the plurality of heuristic modules all of the heuristic modules?

Mr. Perry

Because your honor this is a comprising claim not a consists of claim. If you look at the end of the limita… – of the preamble of the comprising claim

Judge Moore

Yes but

Mr. Perry

Moreover

Judge Moore

Of course it’s a comprising claim but the language of the claim itself is “a plurality of heuristic modules” which means two or more right?

Mr. Perry

Right.

Judge Moore

That’s a plurality. And so if the invention has ten heuristic modules in it why are all ten of them the plurality of heuristic modules?

Mr. Perry

Because in the infringement analysis your honor, we only need to show the minimum that if it has two of them that is a plurality that have different heuristics it infringes the patent. You don’t ever get to the third one, it doesn’t matter for infringement purposes.

Judge Prost

And your – and that ??ks us the word comprising is used?

Mr. Perry

No your honor. There’s two different things there. The limitation is a plurality wherein each of ?? things. The infringement happens once you get two and the reason that you don’t look at the entire apparatus which I believe Judge Moore’s first question if I understood it correctly is that this is a apparatus claim but it’s a comprising transition and therefore this is an included but not limited to. You can have more than one plurality and of course the spec actually discloses multiple pluralities implementations of the invention.

Judge Prost

With different heuristic modules?

Mr. Perry

Your honor it doesn’t

Judge Moore

Same heuristic …

Mr. Perry

It doesn’t – it doesn’t say anything about what heuristics are being used and there’s a finite number of heuristics and an infinite number of modules, so common sense tells us that you could always – nothing in the specs or the claim limits it in that way. It only is two or more that have different heuristics the 604′ patent claims and it’s undisputed that that’s what this device…

Judge Prost

Well not surprisingly you’ve managed to use up your time and more.

Mr. Perry

I appreciate the court’s indulgence your honor.

Judge Prost

A little a minute over so to even things out you need it Mr. Quinn you’re up to four minutes now

Rebuttal of Mr. Quinn for Samsung

Mr. Quinn

OK, of rebuttal time. Thank you your honor. I think my friend is arguing about the record and arguing from a position that we should compare market share as to a specific Apple phone and, the Nexus Galaxy. There is no information in the record about the relative market share as to any specific Apple phone and the Galaxy phone and that was not the basis on which made any of its decisions. To answer some of the questions, Apple’s smartphone market share first quarter 2012, was 45 percent. The court can see that A1174 to 1178, in fact Apple’s market share in each quarter is collected in the record at A1568.

There is as I said there is no evidence concerning relative market shares between specific Samsung and Apple smartphones

Judge Reyna

What about 1176 we see here U.S. Smartphone revenue Apple and Samsung it refers specifically to the iPhone 4S and the Galaxy Nexus.

Mr. Quinn

Amm…

Judge Reyna

It seems to me that that would be act.. could constitute a .. as a minimum some market erosion

Mr. Quinn

Well it doesn’t – my point was your honor it doesn’t  really give us market share data for those particular phones. But I listened to counsel and I take it now there isn’t really a dispute that maximum market share for this phone was .5 percent. There is no other evidence in the record, we’re talking about miniscule sales, we’re talking about in the fourth quarter of 2011, the first quarter of 2012 of a grand total of 250 million dollars in sales for the Nexus

Judge Moore

??? he doesn’t agree with your definition of market – that’s what he’s saying .5 sure that’s the market for all cell phones. But these two phones are competing only against each other and people are going to buy one or the other of them so the market should be limtied to those two phones and within the market for those two phones its 25 percent. That does seem like a substantial market share to me. I may be wrong but that’s what I understood Mark to say.

Mr. Quinn

I don’t think there is any evidence at all, that these two phones are competing – are only competing against each other. To the contrary I think the evidence is that people make the fundamental decision whether or not they want to buy an Android phone or they whether they want to buy an iPhone. There was never a ???

Judge Moore

People are going to buy the Galaxy Nexus are looking for all those features and willing to spend that much money are not going to go to the lowest level flip phone that still exists of the market. So to say that that is part of the relevant market seems quite frankly irrelevant to me. I mean you know there has to be a reasonable market that your looking at.

Mr. Quinn

No. And quite right your honor. And

Judge Moore

I’m not sure all cell phones is the right market.

Mr. Quinn

I’m not talking about all phones. I’m talking about smartphones. The total market for the year, one hundred and five million dollars is the evidence before the court. That the iPhone in the fourth quarter alone, iPhone sold 9.35 billion, 9.35 billion, versus Nexus sales in two quarters of two hundred and fifty million.

Judge Reyna

But doesn’t the stickiness nature of the sales also account for market share.

Mr. Quinn

Well accept the stickiness, so what that means is you have new entrants coming into the market. New buyers, and let’s accept by hypothesis that if you buy an Android phone your more likely to buy an Android phone and that will be harder for Apple to …

Judge Reyna

Or also that you are more likely to stay with an Android if you have one.

Mr. Quinn

Exactly

Judge Reyna

But your market and the data show that your increasing in your market or sales – your up – I know you can measure market share many ways. Domestic shipments. Domestic consumption. Production numbers. But one of the best ways is by sales.

Mr. Quinn

Sure. And that ??? ??? raises the ???s we’re working with. But what does that tell us. The stickiness and this phenomena that new buyers are coming into the market. Fine. The market’s going to expand. But what reasonig do we hae. What evidence in the record do we have that can be pointed to that suggests that these new smart phone purchases are likely to buy Nexus’s at a rate higher than .5 percent?

There’s nothin. The market may expand, but there’s no reason to think that miniscule market share is going to go up. There’s simply nothing in the record on that.

Judge Prost

And that’s the last word.

Statements of Judge Moore about Mudslinging at Beginning of Briefs

Judge Moore

Can I have the last word? Am I allowed?

Judge Prost

Sure.

Judge Moore

Well my last word is not really directed to either of you. It’s something that we actually talked about beforehand. I’ll say that I think that your argument by sides was excellent. I think the briefing in general was excellent. With the huge exception. And the huge exception is OK, precipitous judicial intervention, thermonuclear dimension, ubiquitous patent litigation, threatening market, discrete and incidental patent infringement making collateral cash ??? consumer choice and natural market competition. That’s all in a single sentence. In the first page of the blue brief.

Mr. Quinn

Did we write that?

Judge Moore

You wrote that.

Judge Moore

So, if it was – is it the sentence spans half the page and it has got like 18 adjectives and adverbs in it, that’s a little bit of an exaggeration. But it’s just – it isn’t helpful. And I’ll tell you when I read the first page of your brief I closed it and turned to theirs because I thought all this mudslinging and rhetoric, I don’t want to read it. Problem was sentence number one in the red brief. Systematically copied Apple’s innovative technology diluting market share infringing devices in a relentless effort to steal customers and usurp market share. Oh my goodness. I was ???? so I thought I’d give you a fair shot since you both did it. But it doesn’t help. Your briefs are really good. And when I got into it I really liked it. I don’t know who drives the mudslinging. Whether it’s the lawyers or it’s the client. But in this any event it turns off the judges. So I would ..

Mr. Quinn

OK. Thanks your honor.

Judge Moore

For what it’s worth, I would tell you you both did a great job apart from that. I’d like to see lots of ????

Mr. Quinn

Thank you. We’ve gotten things to learn still. Thank you.

Judge Prost

And that the case has been submitted. We thank both parties and it was very helpful. We thank you both ????

 

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