Apple Bites Back: But Will the Company Come to Regret Its Huge Court Victory?

Abstract:     
Late last week, a San Jose jury awarded Apple $1.05 billion in damages for patent infringement, a huge win for Apple in its worldwide patent fight with smartphone manufacturers that, like Samsung, sell devices equipped with Google's Android operating system. The jury's verdict breaks down to just under $48 for each of the roughly 22 million infringing phones sold by Samsung. To the jury, 50 bucks per phone must have sounded like a reasonable figure, and it may well to you too. But it's not and here's why: The average smartphone may arguably infringe as many as 250,000 patents, not to mention myriad copyrights and other design-related intellectual property. If you were to divide the average retail price of a smartphone -- about $400 -- by those 250,000 potentially applicable patents, you'd find that each one would account for just $0.0016 of the phone's value. Yet for infringing just a handful of Apple's patents, Samsug faces a minimum per phone payment that is a shocking 30,000 times this average per patent value. Put another way, if the owners of all 250,000 inventions that might be present in Samsung smartphone were awarded damages at the same level as Apple, Samsung would have to charge a ludicrous $2 million per phone just to break even.

Number of Pages in PDF File: 1

Keywords: Apple v. Samsung, smartphone wars, patent wars, apportionment, reasonable royalty, patent damages

JEL Classification: O31, O34

Accepted Paper Series