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

Filing 2126

Declaration of Susan Estrich in Support of 2013 MOTION for Judgment as a Matter of Law, New Trial and/or Remittitur Pursuant to Federal Rules of Civil Procedure 50 and 59, 2054 Brief, 2053 Opposition/Response to Motion, filed bySamsung Electronics America, Inc.(a New York corporation), Samsung Electronics Co. Ltd., Samsung Telecommunications America, LLC. (Attachments: # 1 Exhibit 1 to the Estrich Declaration, # 2 Exhibit 2 to the Estrich Declaration, # 3 Exhibit 3 to the Estrich Declaration, # 4 Exhibit 4 to the Estrich Declaration, # 5 Exhibit 5 to the Estrich Declaration, # 6 Exhibit 6 to the Estrich Declaration, # 7 Exhibit 7 to the Estrich Declaration, # 8 Exhibit 8 to the Estrich Declaration, # 9 Exhibit 9 to the Estrich Declaration, # 10 Exhibit 10 to the Estrich Declaration, # 11 Exhibit 11 to the Estrich Declaration, # 12 Exhibit 12 to the Estrich Declaration, # 13 Exhibit 13 to the Estrich Declaration, # 14 Exhibit 14 to the Estrich Declaration, # 15 Exhibit 15 to the Estrich Declaration, # 16 Exhibit 16 to the Estrich Declaration, # 17 Exhibit 17 to the Estrich Declaration, # 18 Exhibit 18 to the Estrich Declaration, # 19 Exhibit 19 to the Estrich Declaration, # 20 Exhibit 20 to the Estrich Declaration, # 21 Exhibit 21 to the Estrich Declaration, # 22 Exhibit 22 to the Estrich Declaration, # 23 Exhibit 23 to the Estrich Declaration, # 24 Exhibit 24 to the Estrich Declaration, # 25 Exhibit 25 to the Estrich Declaration, # 26 Exhibit 26 to the Estrich Declaration, # 27 Exhibit 27 to the Estrich Declaration, # 28 Exhibit 28 to the Estrich Declaration, # 29 Exhibit 29 to the Estrich Declaration, # 30 Exhibit 30 to the Estrich Declaration, # 31 Exhibit 31 to the Estrich Declaration)(Related document(s) 2013 , 2054 , 2053 ) (Maroulis, Victoria) (Filed on 11/9/2012)

Estrich Declaration
Exhibit 10

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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APPLE INC., A CALIFORNIA
CORPORATION,

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PLAINTIFF,
VS.
SAMSUNG ELECTRONICS CO.,
LTD., A KOREAN BUSINESS
ENTITY; SAMSUNG
ELECTRONICS AMERICA,
INC., A NEW YORK
CORPORATION; SAMSUNG
TELECOMMUNICATIONS
AMERICA, LLC, A DELAWARE
LIMITED LIABILITY
COMPANY,

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DEFENDANTS.

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C-11-01846 LHK
SAN JOSE, CALIFORNIA
AUGUST 16, 2012
VOLUME 10
PAGES 2966-3386

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TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE LUCY H. KOH
UNITED STATES DISTRICT JUDGE

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APPEARANCES ON NEXT PAGE

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OFFICIAL COURT REPORTER: LEE-ANNE SHORTRIDGE, CSR, CRR
CERTIFICATE NUMBER 9595
IRENE RODRIGUEZ, CSR, CRR
CERTIFICATE NUMBER 8074

2967

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A P P E A R A N C E S:

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FOR PLAINTIFF
APPLE:

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MORRISON & FOERSTER
BY: HAROLD J. MCELHINNY
MICHAEL A. JACOBS
RACHEL KREVANS
425 MARKET STREET
SAN FRANCISCO, CALIFORNIA

94105

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FOR COUNTERCLAIMANT WILMER, CUTLER, PICKERING,
APPLE:
HALE AND DORR
BY: WILLIAM F. LEE
60 STATE STREET
BOSTON, MASSACHUSETTS 02109

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BY: MARK D. SELWYN
950 PAGE MILL ROAD
PALO ALTO, CALIFORNIA

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QUINN, EMANUEL, URQUHART,
OLIVER & HEDGES
BY: CHARLES K. VERHOEVEN
50 CALIFORNIA STREET, 22ND FLOOR
SAN FRANCISCO, CALIFORNIA 94111

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BY:

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FOR THE DEFENDANT:

94304

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VICTORIA F. MAROULIS
KEVIN P.B. JOHNSON
555 TWIN DOLPHIN DRIVE
SUITE 560
REDWOOD SHORES, CALIFORNIA

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BY:

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94065

MICHAEL T. ZELLER
WILLIAM C. PRICE
865 SOUTH FIGUEROA STREET
10TH FLOOR
LOS ANGELES, CALIFORNIA 90017

2968

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INDEX OF WITNESSES

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DEFENDANT'S

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TIMOTHY SHEPPARD
DIRECT EXAM BY MR. PRICE
CROSS-EXAM BY MR. JACOBS

P. 3001
P. 3012

MICHAEL WAGNER
DIRECT EXAM BY MR. PRICE
CROSS-EXAM BY MR. JACOBS
REDIRECT EXAM BY MR. PRICE

P. 3018
P. 3057
P. 3073

RAMAMIRTHAM SUKUMAR
DIRECT EXAM BY MS. MAROULIS
CROSS-EXAM BY MR. SELWYN

P. 3092
P. 3095

VINCENT O'BRIEN
DIRECT EXAM BY MS. MAROULIS
CROSS-EXAM BY MR. SELWYN

P. 3101
P. 3113

DAVID TEECE
DIRECT EXAM BY MS. MAROULIS
CROSS-EXAM BY MR. MUELLER

P. 3123
P. 3141

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PLAINTIFF'S REBUTTAL:

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TONY BLEVINS
DIRECT EXAM BY MR. LEE

P. 3164

EMILIE KIM
DIRECT EXAM BY MR. SELWYN
CROSS-EXAM BY MR. JOHNSON

P. 3173
P. 3185

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PAUL DOURISH
DIRECT EXAM BY MR. SELWYN

P. 3188

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TONY GIVARGIS
DIRECT EXAM BY MR. SELWYN

P. 3220

MANI SRIVASTAVA
DIRECT EXAM BY MR. SELWYN
CROSS-EXAM BY MR. JOHNSON
REDIRECT EXAM BY MR. SELWYN

P. 3287
P. 3317
P. 3320

HYONG KIM
DIRECT EXAM BY MR. LEE

P. 3322

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BROUGHT INTO THE COMPANY AS A RESULT OF THE

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ALLEGEDLY INFRINGING PRODUCTS, LESS ALL OF THE

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COSTS IN ORDER TO MAKE THOSE PRODUCTS AND SELL

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THOSE PRODUCTS.

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AND YOU SUBTRACT THE COST OF REVENUES AND

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YOU GET TOTAL PROFITS.

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Q

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AREA, AND IF WE COULD PUT UP 3965.005.

NOW, LET'S TALK AND FOCUS ON THEIR TOTAL COST

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AND PERHAPS YOU CAN EXPLAIN TO US WHAT

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YOU INCLUDE IN TOTAL COSTS?

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A

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THE COST OF GOODS SOLD, WHICH ARE THE COSTS TO

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ACTUALLY MANUFACTURE THE INFRINGING OR ALLEGEDLY

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INFRINGING SMARTPHONES AND TABLETS BUT ALSO THE

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OPERATING EXPENSES THAT ARE NECESSARY TO SELL THOSE

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PHONES.

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THE COSTS THAT I BELIEVE ARE APPROPRIATE ARE

YOU CAN'T SELL A PHONE JUST BECAUSE

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YOU'VE MADE IT.

YOU HAVE TO MARKET IT, YOU'VE GOT

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TO SELL IT, YOU HAVE TO HAVE DEVELOPED IT

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ORIGINALLY TO ACTUALLY MAKE IT INTO A PRODUCT, AND

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THEN YOU HAVE TO HAVE AN UMBRELLA ORGANIZATION THAT

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ORGANIZES ALL OF THOSE ACTIVITIES.

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Q

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EXPENSES THAT YOU HAVE HERE, SALES EXPENSES,

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MARKING, ET CETERA, SO THE JURY CAN HAVE AN

SO PERHAPS YOU CAN EXPLAIN THEN THE OPERATING

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UNDERSTANDING AS TO WHAT THE NATURE IS OF THOSE

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EXPENSES?

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A

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YOU JUST HEARD, THERE ARE 40 CARRIERS WHO ARE

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CUSTOMERS FOR THOSE PRODUCTS IN THE UNITED STATES.

STARTING WITH THE FIRST ONE, SALES EXPENSE, AS

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SAMSUNG HAS TO SEND PEOPLE OUT TO THOSE

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CARRIERS.

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THE LIMITED SALE SPACE IN THE CARRIER STORES.

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THERE ARE ALL KINDS OF COMPETITORS FOR

SO SAMSUNG HAS TO ACTIVELY GET IN THERE

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AND TELL THESE CARRIERS WHY THEY SHOULD BE CARRYING

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THEIR PHONES VERSUS APPLE PHONE OR HTC PHONE OR LG

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PHONE.

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Q

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THAT SAMSUNG WOULD HAVE AN EMPLOYEE THAT'S DEVOTED

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TO ONE PHONE, LIKE THE DROID CHARGE?

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A

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LINE FOR THE COMPANY.

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Q

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SALESMAN LIKE THAT?

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A

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PRODUCT, YOU'D HAVE TO ALLOCATE THAT TIME BECAUSE

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THAT SALESPERSON DOESN'T ONLY JUST SELL, SAY, AN

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EPIC 4G.

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MODELS THAT ARE NOT ACCUSED IN THIS CASE AND YOU

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HAVE TO ALLOCATE IT BASED ON EITHER TIME OR SOME

SO THOSE ARE SELLING EXPENSES.

IS IT YOUR UNDERSTANDING THAT IT IS CUSTOMARY

NO.

NORMALLY THEY'RE SELLING A WHOLE PRODUCT

AND SO HOW ARE EXPENSES THEN ALLOCATED FOR A

WELL, IF YOU WANT TO ALLOCATE TO A PARTICULAR

THEY MAY BE SELLING MANY OF THE OTHER

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REASONABLE BASIS LIKE REVENUES.

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Q

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R&D EXPENSES IN GENERAL, AND ADMINISTRATIVE?

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A

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CUSTOMERS AWARE THAT YOU HAVE A PRODUCT.

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MAINLY TV ADVERTISING, BILLBOARDS, MAGAZINE ADS,

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THAT TYPE OF INFORMATION.

AND IF YOU COULD EXPLAIN THE MARKETING AND THE

MARKETING AND GENERAL, YOU AGAIN HAVE TO GET

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IT'S

AND I'VE BEEN WATCHING THE OLYMPICS, OR I
DID, AND EVERY CITE I WOULD SEE THREE DIFFERENT

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SAMSUNG ADS BEING RUN PROMOTING THEIR GALAXY

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PHONES.

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COST IS NECESSARY TO BE SUCCESSFUL IN THE

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MARKETPLACE.

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THAT COST MONEY, A LOT OF MONEY.

THAT

AND R&D, YOU HAVE TO DEVELOP THIS VERY

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COMPLICATED TECHNOLOGY PRODUCT.

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COMPLICATED CONSUMER PRODUCTS IN THE MARKETPLACE.

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THERE'S ALL KINDS OF EFFORTS TO DEVELOP THE RIGHT

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CHIPS, THE RIGHT INTEGRATED CIRCUITS, DETERMINE

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WHAT FEATURES GO INTO IT, ALL OF THOSE THINGS TAKE

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A LOT OF TIME AND EXPENSE TO DO AND THOSE COSTS ARE

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NECESSARY OR YOU'D NEVER SELL A PHONE.

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THESE ARE THE MOST

AND, FINALLY, GENERAL ADMINISTRATIVE IS

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YOU, AGAIN, YOU NEED AN ORGANIZATION THAT CAN

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MANAGE ALL OF THESE ACTIVITIES IN ORDER TO SELL A

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PHONE.

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Q

LET ME ASK YOU, DID MR. MUSIKA, IN HIS

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CALCULATIONS, DEDUCT THESE EXPENSES, SALES,

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MARKETING, R&D?

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NOT ONE PENNY.

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Q

SO NOT A PENNY OF ADVERTISING?

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A

NO.

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Q

NOT A PENNY OF RESEARCH AND DEVELOPMENT?

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A

NO.

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Q

LET ME ASK YOU, YOU'VE SEEN APPLE'S 10-K'S,

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THEIR FINANCIALS?

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A

I HAVE.

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Q

AND DO THEY DEDUCT THESE EXPENSES ON THEIR

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FINANCIALS?

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A

THEY CERTAINLY DO.

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Q

IF WE COULD LOOK AT EXHIBIT 754.502.

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NUMBER OF, A NUMBER OF FORM 10-K'S, AND I'M GOING

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TO CALL YOUR ATTENTION TO ACTUALLY 754.501, OR 502.

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A

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ON THE FLOOR.

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THERE'S A REASON I COULDN'T FIND IT.

754 IS A

IT WAS

I'VE GOT IT.

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Q

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ENDING SEPTEMBER 24, 2011?

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A

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DO YOU SEE THIS IS APPLE'S 10-K FOR THE PERIOD

CORRECT.
MR. PRICE:

PAGE 2 INTO EVIDENCE.

AND, YOUR HONOR, I'LL MOVE

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THE COURT:

OKAY.

NO OBJECTION; RIGHT?

IT'S ADMITTED.

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(WHEREUPON, DEFENDANT'S EXHIBIT NUMBER

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754.502, PAGE 2, HAVING BEEN PREVIOUSLY

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MARKED FOR IDENTIFICATION, WAS ADMITTED

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INTO EVIDENCE.)

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BY MR. PRICE:

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Q

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CONSOLIDATED STATEMENTS OF OPERATIONS?

IF WE CAN LOOK AT 754.545, IS THIS APPLE'S

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A

IT IS.

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Q

AND IF WE CAN BLOW THAT UP.

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COULD YOU EXPLAIN TO THE JURY WHAT YOU'RE

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TALKING ABOUT IN DEDUCTING THE OPERATING EXPENSES

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FROM INCOME TO GET TOTAL PROFIT?

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A

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REVENUES, AND THEN IT SUBTRACTS COST OF GOODS SOLD

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TO GET GROSS MARGIN, AND THAT IS WHAT IS GROSS

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MARGIN, WHICH MR. MUSIKA CALLED TOTAL PROFIT, WHICH

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IS NOT TOTAL PROFIT.

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WELL, IT STARTS AT NET SALES, WHICH ARE THE

THEN YOU HAVE THE LINES THE OPERATING

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EXPENSES WHICH THEY HAVE COLLAPSED INTO TWO GENERAL

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CATEGORIES, RESEARCH AND DEVELOPMENT, AND THEN

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SELLING, GENERAL AND ADMINISTRATIVE, AND YOU

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SUBTRACT THOSE COSTS AND YOU GET TOTAL OPERATING

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EXPENSES AND TOTAL OPERATING INCOME.

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AND THAT IS WHERE YOU GET THE TOTAL

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PROFITS FROM THEIR OPERATIONS.

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Q

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PROVISIONS OR INCOME TAXES.

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THE GROSS MARGIN?

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A

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TAXES WHICH SUBTRACTS ALL APPROPRIATE EXPENSES.

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Q

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INCOME AND EXPENSE, WHAT IS THAT RELATED TO?

AND IF YOU GO BELOW THAT, IT HAS COME FROM

NO.

IS APPLE TAXED ON THE,

THEY'RE TAXED ON THEIR PROFIT BEFORE

AND THIS HAS ADDITIONAL SUBTRACTION, OTHER

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A

THAT NORMALLY IS INTEREST INCOME OR INTEREST

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EXPENSE IF THEY BORROWED MONEY IN ORDER TO DO THEIR

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BUSINESS.

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Q

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CONSOLIDATED FINANCIALS?

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A

AND YOU ALSO LOOKED AT SAMSUNG'S AUDITED

I HAVE.

THEY DO EXACTLY THE SAME THING.

THE COURT:

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CLARIFICATION.

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CAN I AND HAVE A QUICK

YOU MOVED PAGE 2 INTO EVIDENCE.

YOU WANT THIS PAGE?

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MR. PRICE:

YES, YOUR HONOR.

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THE COURT:

PAGE 2 IS A SUMMARY.

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MR. JACOBS:

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THE WHOLE THING IN.

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YOUR HONOR, WE SHOULD HAVE

THE COURT:
YOUR CASE.

YOU'LL HAVE TO MOVE IT IN

LET ME HEAR WHAT MR. PRICE WANTS.
MR. PRICE:

YES, PAGE 545.

DO

3028

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THE COURT:

OKAY.

THAT'S THE ONLY PAGE,

MR. PRICE:

AND IF WE CAN FIGURE OUT THE

RIGHT.

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BATES RANGE OF THE WHOLE DOCUMENT, I HAVE NO

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OBJECTION.

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BY MR. PRICE:

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Q

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JUST ADMITTED INTO EVIDENCE, THAT'S THAT

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SPREADSHEET, DID YOU LOOK AT -- DID YOU LOOK AT A

NOW, IF YOU'D LOOK AT EXHIBIT 676, WHICH WAS

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SPREADSHEET -- THAT WAS JUST TESTIMONY ABOUT

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SAMSUNG SPREADSHEET THAT HAD THE, THE INCOME,

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COSTS, ET CETERA, OF THE PRODUCTS THAT ARE AT ISSUE

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HERE.

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A

I DID.

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Q

AND DID YOU -- FIRST OF ALL, LET ME ASK YOU,

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IS -- YOU'VE READ MR. MUSIKA'S REPORT?

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A

I HAVE.

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Q

WAS THIS THE SAME SPREADSHEET THAT HE WAS

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USING?

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A

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SELECTED HAVE THE SAME NUMBERS THAT THIS ONE HAS.

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Q

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THE SPREADSHEET THAT YOU GET THE NUMBER FOR INCOME

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ON THESE PRODUCTS?

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A

HE USED A SIMILAR ONE, BUT THE NUMBERS THAT HE

YOU SAID THEY HAVE THE SAME NUMBERS.

FOR REVENUE AND COSTS OF GOODS SOLD.

IS IT

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CERTIFICATE OF REPORTERS

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WE, THE UNDERSIGNED OFFICIAL COURT

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REPORTERS OF THE UNITED STATES DISTRICT COURT FOR

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THE NORTHERN DISTRICT OF CALIFORNIA, 280 SOUTH

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FIRST STREET, SAN JOSE, CALIFORNIA, DO HEREBY

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CERTIFY:

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THAT THE FOREGOING TRANSCRIPT,

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CERTIFICATE INCLUSIVE, CONSTITUTES A TRUE, FULL AND

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CORRECT TRANSCRIPT OF OUR SHORTHAND NOTES TAKEN AS

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SUCH OFFICIAL COURT REPORTERS OF THE PROCEEDINGS

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HEREINBEFORE ENTITLED AND REDUCED BY COMPUTER-AIDED

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TRANSCRIPTION TO THE BEST OF OUR ABILITY.

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/S/
_____________________________
LEE-ANNE SHORTRIDGE, CSR, CRR
CERTIFICATE NUMBER 9595

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/S/
______________________________
IRENE RODRIGUEZ, CSR, CRR
CERTIFICATE NUMBER 8074

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DATED:

AUGUST 16, 2012