ParenteBeard Forensic Brief
August 2012

High Stakes Poker in Patent Litigation
Apple v. Samsung

For the last several weeks we've heard much about this battle of the giants involving phones, tablets and other forms of portable communication devices. In this epic dispute, despite inquiries by the judge about "smoking crack," the risk involves not only the very core products we see and use every day, but significant dollars. On Friday evening, the jury spoke loudly in awarding Apple over $1 billion.  Samsung, Wall Street, consumers, the technology industry, and IP experts, all listened.  This monumental decision has far reaching implications that will need sorting out in the weeks and months ahead. 

Key witnesses presenting the affirmative and rebuttal damage testimony in Apple Inc. v. Samsung Electronics, Co. LTD, et al. were Certified Public Accountants. CPAs are uniquely qualified to sort through financial and other records of the parties to quantify damages in intellectual property infringements, among other types of disputes. Many CPAs who assist counsel in these disputes are considered Forensic Accountants, and may possess additional certifications based on their specialty areas. In patent infringement matters, CPAs are typically called upon to opine upon a party's damages, which may be measured as a loss of profits or no less than a "reasonable royalty."

The complex nature of the damage issues underlying Apple v. Samsung has been further complicated in recent years due to rulings that place greater emphasis on demonstrating the economic link between the infringing activities and the losses asserted. One can no longer merely suggest that a royalty is reasonable and can be measured by applying 25 percent of a patented product's profit. Further, the significance of non-patented or other components cannot be ignored before determining damages based on the revenue of an entire product; it has been said that the iPhone contains over 200 patents, while only a few were at issue. The evaluation of comparable licenses, profitability, capacity, among other complex issues, requires the skills to collect and analyze evidential matter, and further, to interpret and communicate findings in the courtroom. This is the Forensic Accountant's livelihood – in Apple v. Samsung, and other intellectual property disputes.

Experts acknowledge the jurors’ quick decision, in and among itself, may be cause for appeal; especially, since no liability was found relative to some Samsung products although damages were initially awarded.  Given the 700 plus issues that required factual findings, perhaps it is not surprising the jury could make such an error.  In addition, we can further expect the parties to posture on such issues as a permanent injunction, ongoing royalties, willfulness (possibly resulting in up to three times compensatory damages), and the inevitable settlement discussions, among other topics.

As the dispute enters the post-verdict era, no doubt there will be numerous references to the key testimony presented by fact and expert witnesses alike. Accordingly, the role of the CPA/Forensic Accountants in Apple v. Samsung will likely remain in the spotlight.

If you have questions or require expert analysis regarding damages, including patent infringement, or are interested in speaking with us about this brief, please contact Glenn Newman, CPA/ABV/CFF at 215.972.2354 or [email protected]

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