Summit sued Samsung for infringing a patent on “Web-Based Media Submission Tool”. It alleged that Samsung smartphones infringed the patent by enabling users to send pictures through the web/Internet via multimedia messaging service (MMS). A jury awarded Summit $15 million — a little more than half of what it asked for — and the district court entered judgment on the verdict. The Federal Circuit affirmed. Summit 6, LLC v. Samsung Electronics Co., Ltd., 13-1648 (Fed. Cir. Sept. 21, 2015).

The panel’s decision highlights the importance of making complex damages calculations simple.

Summit’s model met the test. It used the following steps:

• What did Samsung charge for the camera in its smart phones? $14.15. “To arrive at this estimate, Mr. Benoit used Samsung’s annual reports, internal cost and revenue spreadsheets, and interrogatory responses to determine that the camera component accounted for 6.2% of the phone’s overall production cost.” Id. at 20.

• What percentage of people who used Samsung smartphones did so in an infringing way (by sending photos via MMS, multimedia messaging service)? 20.8 percent. “To do this, he relied on surveys commissioned by Samsung in the ordinary course of its business and on another survey he found on his own.” Id.

• What profit margin did Samsung earn on its smart phone sales? 19.11 percent. The expert used “Samsung’s annual reports to estimate its profit margins and capital asset contributions”. Id. at 21.

• What profit resulted to Samsung for each smart phone from the infringing use? $.56 ($14.15 x .208 x .1911). Id.

• In a hypothetical negotiation of a reasonable royalty, how would Samsung and the patent owner agree to split the $.56 per smart phone profit? 50-50 ($.28 to Summit). The expert “testified that because neither party had a stronger negotiating position, the parties would have split the $0.56 evenly” and “cited three academic articles and the Nash Bargaining Solution to support his theory”. Id.

The estimate of a reasonable royalty equal to $.28 per device yielded a total of $29 million. Apparently, Samsung sold 103.6 million infringing smartphone during the damages period). Id. at 22.

That seems pretty simple, right? It contains a lot of complexity but presents the steps in a logical and straightforward way.

As Steve Jobs said: “You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”