Apple Inc. v. Samsung Electronics Co. Ltd. et al

Filing 1384

Unredacted Exhibits to Arnold Declaration ISO Samsung's MSJ by Samsung Electronics America, Inc.(a New York corporation), Samsung Electronics Co. Ltd., Samsung Telecommunications America, LLC(a Delaware limited liability company) re 1256 Order on Administrative Motion to File Under Seal, (Dkt. Nos. 930, 945) (Attachments: # 1 Exhibit 46 to Arnold, # 2 Exhibit 47 to Arnold, # 3 Exhibit 48 to Arnold, # 4 Exhibit 49 to Arnold, # 5 Exhibit 50 to Arnold, # 6 Exhibit 51 to Arnold, # 7 Exhibit 52 to Arnold, # 8 Exhibit 54 to Arnold, # 9 Exhibit 55 to Arnold, # 10 Exhibit 56 to Arnold, # 11 Exhibit 57 to Arnold, # 12 Exhibit 58 to Arnold, # 13 Exhibit 60 to Arnold, # 14 Exhibit 63 to Arnold, # 15 Exhibit 64 to Arnold, # 16 Exhibit 66 to Arnold, # 17 Exhibit 68 to Arnold, # 18 Exhibit 69 to Arnold, # 19 Exhibit 71 to Arnold, # 20 Exhibit 73 to Arnold, # 21 Exhibit 74 to Arnold, # 22 Exhibit 75 to Arnold, # 23 Exhibit 76 to Arnold, # 24 Exhibit 77 to Arnold, # 25 Exhibit 78 to Arnold, # 26 Exhibit 79 to Arnold, # 27 Exhibit 80 to Arnold, # 28 Exhibit 81 to Arnold, # 29 Exhibit 82 to Arnold)(Maroulis, Victoria) (Filed on 7/26/2012) Modified text on 7/27/2012 (dhm, COURT STAFF).

Attorneys' Eyes Only - Pursuant to Protective Order

Page 247
1

A.

Samsung market power that I was

2

concerned about comes from asking for a rate,

3

FRAND rate, is one of the elements that I

4

believe -- for asking for a rate that I believe

5

is excessive.

6

its patents in the standard and that gives them

7

the market power relative to what it would have

8

if the standard were not determined.

9

number one.

10

It reflects the fact that has

So that's

Number two, it comes from Samsung's

11

request or demand for access to Apple's

12

differentiating intellectual property as a

13

price of admission to its SEPs.

14

the extent that it does have the ability to ask

15

for injunction, and there is a dispute whether

16

it can or cannot, that only turbocharges the

17

ability to put pressure on Apple to succumb to

18

these requests for dollars and for IP.

19

Q.

And also to

But if Samsung can't ask for an

20

injunction, then there's no sword hanging over

21

Apple's head; correct, as you put it?

22
23

MS. MILLER:
A.

Yes.

Objection.

I'm speechless because I don't

24

fully understand the counter factual.

25

has asked for an injunction, so it's not like
TSG Reporting - Worldwide

877-702-9580

Samsung

Attorneys' Eyes Only - Pursuant to Protective Order

Page 248
1

they cannot.

2

injunction before they made a FRAND offer, what

3

they considered the FRAND offer to Apple.

4
5
6

They did.

And they asked for an

So I don't understand what the
hypothetical scenario we are conjuring up.
Q.

So then I guess my question is:

Is

7

it the fact that Samsung has brought the

8

litigation and sought an injunction as opposed

9

to whether Samsung is going to actually obtain

10

the injunction that reflects Samsung's market

11

power, in your opinion?

12

A.

The threat of the injunction, the

13

probability that it may, is what is the concern

14

to me from the competitor's perspective.

15

It's my view that they should not be

16

allowed to ask for one, but they should be

17

perfectly permitted to go and sue Apple for

18

violating their intellectual property and ask

19

for damages, possibly with incremental penalty

20

for the reasons we discussed an hour ago.

21

Q.

So it's Samsung's bringing the

22

litigation and seeking the injunction that

23

demonstrates the market power?

24
25

A.

It is a component of their market

power, as we discussed, one of which -- there
TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 249
1

are other aspects to it.

2

they can go in and ask for an injunction and

3

there is perhaps a probability they will obtain

4

it, is something that is of a competitive

5

concern, at least to me.

6

And the fact that

Certainly not necessarily to Dr.

7

Teece.

8

wrong with asking for an injunction unless

9

there are some competitive concerns that doing

10
11
12

He doesn't think that there is anything

so triggers.
Q.

Could you please turn to paragraph 24

of your report at page 12.

13

A.

Okay.

14

Q.

I'm sorry, it's actually the first

15

bullet point on page 13.

16

A.

"Samsung Conduct"?

17

Q.

Correct.

18

A.

Let me read that.

19

(Document Review.)

20

Yes.

21

Q.

In your opinion, is the harm to

22

downstream competition that Samsung might cause

23

contingent upon it prevailing on its claims?

24
25

A.

It says if Samsung were to prevail,

that would harm downstream competition.
TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 250
1

Q.

So in the absence of Samsung

2

prevailing on its claims, there would not be

3

harm to downstream competition?

4

A.

Yes.

It's like, you know, attempted

5

murder doesn't -- it's still bad news, but it's

6

not the same thing as killing somebody.

7

Q.

Well, sorry.

I appreciate the

8

editorializing, but just answer the questions

9

clearly.

10

If Samsung doesn't prevail in its

11

claims, then there is no harm to downstream

12

competition; correct?

13

A.

That is true within that limited

14

issue that I'm addressing here.

15

particular, if Samsung does not prevail, it

16

will be competing against Apple.

17

competing against Samsung.

18

benefiting.

19

And, in

Apple will be

Consumers will be

And sooner or later across all these

20

many jurisdictions, a resolution of the dispute

21

the dispute is going to come to some

22

resolution -- the dispute is going to come to

23

some resolution regarding the FRAND rate and

24

all the other aspects of this litigation, yes.

25

Q.

If Samsung does prevail, is it the
TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 251
1

case that it's the court's action in enjoining

2

Apple that causes the antitrust entry?

3

A.

It would be hard to blame the court

4

for causing an antitrust injury.

5

makes a ruling in response to Samsung's request

6

or demand for injunctive relief.

7

The court

I am opposed to the whole concept of

8

Samsung asking for injunctive relief, given its

9

repeated FRAND commitments on these seven

10

patents, the blanket commitment and then the

11

individual FRAND commitments relating to each

12

one of those seven patents made late but,

13

nevertheless, they were made.

14
15

Q.

Are you aware of any actual -- strike

that.

16

Is it your opinion that Apple has

17

sustained any actual injury to date -- strike

18

that again.

19
20

Is it your opinion that Apple has
sustained antitrust injury to date?

21
22

MS. MILLER:
A.

Objection.

I think that "antitrust injury" is a

23

term of art.

24

harm due to the needs to defend itself across a

25

broad range of jurisdictions, that is no doubt

It certainly sustained certain

TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 252
1

significant cost.

2

So that's a harm to Apple.

3

yet to harm competition because Apple, at this

4

point, can pay the bills.

5

necessarily cut back on its R&D.

6

lucky that that's the -- that they are the

7

target as opposed to some other company which

8

may have a lesser ability to survive the

9

multi-jurisdictional litigation that Samsung

10

has rolled out in this particular situation.

It has

It does not have to
So we are

11

So someone else may actually have --

12

be forced to exit, and such exit may, in fact,

13

harm competition and, therefore, be an

14

antitrust injury.

15

Q.

But -- so the only injury you're

16

aware of Apple sustaining to this point is

17

incurring litigation costs; correct?

18

A.

No.

I believe that they are also

19

incurring additional costs, such as the time of

20

the management that's being diverted perhaps

21

from other matters that they should be paying

22

attention to.

23

It's a highly -- it's a quickly moving

24

marketplace and, clearly, there's been a lot of

25

time and energy spent at Apple trying to

It's a competitive environment.

TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 253
1

respond to these litigations and trying to

2

perhaps map out how the -- how its market

3

circumstances are going to unfold, given the

4

allegations and the claims made by Samsung.

5

So there's more to the effect other

6

than just, you know, whatever the millions and

7

tens of millions of dollars worth of costs

8

incurred.

9

consequences.

10

Q.

There is other less tangible

In terms of the setting aside

11

legitimate costs, any other, with respect to

12

any injury that Apple has sustained, other than

13

litigation costs, have you conducted any

14

investigation as to the extent of that injury?

15

A.

No.

I have not conducted any such

16

investigation, neither do I know what Apple's

17

litigation costs have been heretofore.

18

Q.

So you haven't don't -- quantified

19

any of the injury that Apple has sustained as a

20

result of any antitrust injury; correct?

21

A.

I think you misspoke a couple of

22

times, but I know what you have in mind -- I

23

think that I have not quantified the dollar

24

harm to Apple as a result of these issues that

25

we are now talking about, the Samsung lawsuits
TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 254
1
2

across the globe.
Q.

Are you aware of any evidence that

3

Apple has reduced its investments in products

4

and services implementing the standard as a

5

result of any of Samsung's activities?

6
7
8
9
10

And by the "standard," I mean the
UMTS standard.
A.

Not as yet.

There might be future

effects.
Q.

You're not aware of any effect on

11

Apple's handset market as the result of any

12

Samsung activity; is that correct?

13

A.

That is true.

14

Q.

In your antitrust report you discuss

15

a demand that Samsung made that we've spoke

16

about earlier for -- excuse me -- Apple's

17

non-declared essential patents in exchange for

18

Samsung's declared essential patents.

19
20

Do you recall that?
A.

The differentiating on intellectual

21

property, the DIPS, as we call them.

22

us called them.

23

it something different.

24
25

Q.

Some of

Others, perhaps, have called

Is it the case that Apple would only

be harmed by that demand if it had to accede to
TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 255
1

it?

2
3

MS. MILLER:
A.

Objection.

Again, you're asking these

4

hypothetical questions.

5

hundred million dollars, and I said no, and you

6

say, oh, okay, there is no, you know, there is

7

a demand, there is no payment; therefore, I

8

have not been harmed, clearly.

9

If you say to me pay a

So the answer is that there was a

10

demand and Apple refused.

11

concerned about is the situation which the firm

12

like Samsung, again, I'm not singling, you

13

know, singling them out.

14

which has a range of the portfolio of SEPs is

15

now using that portfolio to extract as a part

16

of payment for access to those SEPs, access to

17

the -- its rival's crown jewels almost; right?

18

But what I'm

A firm like Samsung

This is the standards everybody has

19

those -- that IP, what makes Apple Apple and

20

what makes Samsung Samsung is their proprietary

21

technologies.

And now Samsung says, I want

22

access to it.

And I believe that is in

23

flagrant violation of the FRAND principles.

24
25

Q.

There's a question, to go back a

topic, that I neglected to ask you.
TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 256
1

A.

Okay.

2

Q.

And I think I know the answer, but if

3

Sure.

you'll entertain it.

4

Are you aware of any affect on

5

Apple's market share in the tablet market as a

6

result of Samsung's activity?

7

A.

No, sir.

8

Q.

Okay.

9

No.

Aside from Apple, are you aware of

10

any injury to any other participant in the

11

market for UMTS compliant products as a result

12

of Samsung's actions?

13

A.

I had not looked into that issue, to

14

be honest; and, therefore, I cannot say

15

anything beyond that.

16
17

Q.

regarding -- strike that.

18
19

I'd like to turn now to your opinions

I'd like to turn to your rebuttal
report regarding damages.

20

A.

Okay.

21

Q.

Do you have any opinion as to what a

22

reasonable royalty should be in this case?

23

A.

No.

24

Q.

With respect to the hypothetical

25

negotiation, do you agree that the hypothetical
TSG Reporting - Worldwide

877-702-9580

Attorneys' Eyes Only - Pursuant to Protective Order

Page 257
1

negotiation is presumed to incur on the eve of

2

infringement?

3

A.

That's what Georgia-Pacific factor or

4

the approach mandates.

5

typical setting -- I hate to use the word

6

"standard" -- in a typical setting, that's the

7

reasonable date on which to presume that kind

8

of negotiation.

9

And in a standard,

Here the situation is somewhat more

10

complicated, maybe much more complicated, as I

11

explained in my report, i.e., that the

12

infringement occurs, if we take the first --

13

just on the eve of the infringement, that eve

14

is in the world in which standards have already

15

been set.

16

And I believe that even if I were to

17

go with the Georgia-Pacific factors, in order

18

to determine what the right rate is, I explain

19

in my report that hypothetical negotiation

20

should take place prior to standard setting,

21

consistent with my -- or when the standard has

22

not yet been set, which is consistent with my

23

view that this ex ante approach is the right

24

way to look at the competitive dynamics of the

25

negotiation dynamics.
TSG Reporting - Worldwide

877-702-9580