Apple's New Expert Tallies Damages
In a trial with a strong sense of déjà vu, Apple brought forth a fresh face Thursday—damages expert Julie Davis.
The Chicago accountant was tapped to replace Apple's original expert, Terry Musika, who died late last year. But her assignment was an unusually narrow one: to walk step-by-step through her predecessor's calculations, adjusting them for a shorter time window, and testify to the resulting figure.
Although she is a newcomer to the blockbuster case, Davis did not blink in the face of her adversary, Samsung lawyer William Price. The partner at Quinn Emanuel Urquhart & Sullivan prodded Davis to concede that Apple typically rolls out one new product a year. Samsung, he claimed, introduces new products and features around the world each day.
"Sounds like apples and oranges," Davis said.
Price pounced. "Maybe it's apples and oranges," he quipped. "But I'm talking about Apple and Samsung right now."
After a landmark patent trial last fall, the smartphone rivals are back in court in San Jose to hash out damages because U.S. District Judge Lucy Koh ruled that a chunk of the original $1.05 billion award relied on the wrong notice date. Testifying on the second day of the damages rematch, Davis explained how she rang up a $380 million bill—nearly $330 million more than Samsung argues it should have to pay.
Davis testified that she had gone to great lengths to recreate Musika's process, from interviewing the same Apple executives to poring over his testimony from the first trial. She said that she and her staff at Davis & Hosfield Consulting have spent about 900 hours preparing damages calculations, on top of the 7,000 hours logged by Musika and his colleagues in connection with the first trial.
"I was asked to step into his shoes and complete the calculation," Davis told jurors.
Jurors can award Apple lost profits, typically the most lucrative award, if they conclude that sales made by Samsung would have gone to Apple if not for the infringement. They will consider the strength of consumer demand for Apple's products, what alternatives were on the market and whether Apple was capable of stepping up its manufacturing.
"I absolutely think Apple lost sales," Davis said under questioning from Apple lawyer Rachel Krevans, a partner at Morrison & Foerster.
But Samsung's Price grilled Davis as to why Apple had not surveyed Samsung customers to determine their motives for purchasing particular phones. He sneered at Davis' assumption that at least some Samsung customers who purchased infringing devices would have decamped to Apple and asked Davis whether it would also be reasonable to assume that Tea Party voters would transfer their support to a moderate Republican if their candidate fell out of the election.
Davis, who grew up on a farm in Western Kansas, told Price that she had been taught not to discuss politics in polite company. And she was reluctant to stray so far from the dispute before her.
"I don't know that I was brought here to talk about politics," Davis said. "What might drive a Tea Party voter is very different than what drives a Samsung buyer."
Even if Apple did not lose a single sale, it deserves $287 million in damages from Samsung, Davis said. Price told jurors during his opening statement on Wednesday that the Korean company should be billed just $52 million.
Much of that gap stems from the dueling calculations of Samsung's expenses. Samsung's expert, Michael Wagner, is expected to testify that operating expenses totaling more than $230 million should be deducted from revenue made off the infringing products.
But Davis argues that the operating expenses come into play only if Samsung can show that they were directly connected to the production of the infringing devices. She insists Samsung has not produced any evidence of that link. Thus, Davis deducted only the cost of the products from Samsung's revenue in her calculation.
Davis stressed that she has taken other precautions to ensure Samsung does not overpay. She noted that she has taken into account that several carriers did not offer the iPhone during the damages period. She said she also assumed that Samsung would regain market share quickly after addressing the infringement.
"So," Krevans prompted, "we're slicing the number down and down and down is what you're saying."