Apple Witness Claims Samsung Abused Its 'Monopoly' Over Patents - Businessweek

Samsung Electronics Co. (005930) used “monopoly power” to make exorbitant licensing demands of Apple Inc. (AAPL) over two patents the South Korean company accuses the iPhone maker of infringing, a witness told a jury.

Janusz Ordover, a New York University economics professor, said Samsung “distorted” the process through which a standard- setting body in Europe set industry requirements based on its wireless-technology patents. Ordover testified yesterday at the end of a three-week long intellectual-property trial in San Jose, California.

Ordover, hired by Apple as an expert witness, said Samsung “acted in a way that evidences it has gained monopoly power by making licensing demands to Apple that are inconsistent” with reduced licensing rates required of patents used by the European Telecommunications Standards Institute to set technological requirements.

Samsung has declared the patents “essential” and is seeking as much as $399 million in royalties from Apple for infringing them, according to court testimony. Apple has argued in court filings that Samsung can’t assert its claims on the two patents because it didn’t properly disclose them to the institute.

Testimony concluded yesterday at the trial. U.S. District Judge Lucy Koh limited each side to 25 hours and Samsung told the court that it declined to cross-examine Ordover due to the time constraints. Koh said she aims to finish with jury instruction arguments by the end of Aug. 20 and to have the companies present closing arguments Aug. 21. Jury deliberations may begin later that day.

Apple, based in Cupertino, California, sued Samsung in April 2011, accusing it of copying patented designs for mobile devices, and Suwon, South Korea-based Samsung countersued.

Four Continents

The case is the first to go before a federal jury in a battle being waged on four continents for dominance in a smartphone market valued by Bloomberg Industries at $219.1 billion.

Ordover said his conclusions relied on testimony from Michael Walker, former chairman of the European Telecommunications Standards Institute, who was called by Apple as a witness. Samsung filed a Korean application for one of the two patents in April 2006, Walker said. It was required to disclose that application to the standard-setting body by early June 2005 and didn’t until May 16, 2006, Walker said.

“I concluded in both cases that they did not” make timely disclosures about the intellectual property, Walker said of Samsung.

Licensing Rate

Ordover said he was also drawing on testimony by former Texas Instruments Inc. (TXN) executive Richard Donaldson, who said a 2.4 percent licensing rate Samsung demanded of Apple for the patents didn’t comply with the “fair reasonable and non- discriminatory” rates required by patents used by the institute.

Under cross-examination by Samsung lawyer Charles Verhoeven, Walker agreed that he didn’t know if Samsung intentionally missed its patent disclosure deadlines.

Samsung also called a damages expert, David Teece of University of California, Berkeley’s business school, to refute Ordover’s claims.

Walker hasn’t done the “background work necessary” to conclude Samsung possesses monopoly power with its patents at issue, Teece said.

250 Days

Teece said he did a study of how long companies take to disclose their patents after ETSI adopts standards that may be covered by the intellectual property. He said Apple has taken as long as 250 days and other companies such as units of Telefonaktiebolaget LM Ericsson (ERICB) and Google Inc.’s Motorola Mobility Holdings unit may take weeks, months and sometimes years to make their disclosures.

The 2.4 percent licensing rate Samsung offered Apple for the patents was “in the range of rates that I’ve observed from other companies,” Teece said.

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net