SAN JOSE, Calif. -- Samsung's future relied on beating Apple in the mobile market, the company's top executive said in a 2012 memo revealed in a court here Monday.
During cross-examination of Dale Sohn, the former CEO of Samsung's US mobile business, Apple attorney Bill Lee presented an internal Samsung document from April 2012 that said the company targeted Apple. The document, for a monthly department meeting for business operations and planning, included a letter from Sohn to rally Samsung employees.
"Beating Apple is no longer merely an objective," Sohn said in the document. "It is our survival strategy. We must take consumers back from them and generate the type of brand loyalty that Apple currently enjoys."
He added that the company's top priority was the Galaxy Note phablet, which launched in October 2011. With that hybrid phone and tablet device, Samsung had the ability to outsell the iPhone and make the Note "the most desired smartphone in the industry," Sohn's note said.
Earlier in the cross-examination, Lee asked Sohn if the company followed the launch of the iPhone. Sohn disputed the use of the word "following" and said Samsung performs routine benchmarking of its device versus competitors essentially daily. He later clarified that Samsung did track Apple in the market and had the goal to become No. 1 in mobile.
Almost two years after Apple and Samsung faced off in a messy patent dispute, the smartphone and tablet rivals have returned to the same San Jose, Calif., courtroom to argue once again over patents before federal Judge Lucy Koh. Apple is arguing that Samsung infringed on five of its patents for the iPhone, its biggest moneymaker, and that Apple is due $2 billion for that infringement. Samsung wants about $7 million from Apple for infringing two of its software patents.
While the companies are asking for damages, the case is about more than money. What's really at stake is the market for mobile devices. Apple now gets two-thirds of its sales from the iPhone and iPad; South Korea-based Samsung is the world's largest maker of smartphones; and both want to keep dominating the market. So far, Apple is ahead when it comes to litigation in the US. Samsung has been ordered to pay the company about $930 million in damages.
Most Samsung features that Apple says infringe are items that are a part of Android, Google's mobile operating system that powers Samsung's devices. All patents except one, called "slide to unlock," are built into Android. Apple has argued the patent-infringement trial has nothing to do with Android. However, Samsung argues that Apple's suit is an "attack on Android" and that Google had invented certain features before Apple patented them.
Sohn took the stand Monday to walk the jury through the company's meteoric rise in the smartphone market. When Sohn became president and CEO of Samsung Telecommunications America in 2006, his goal was changing the company's "sluggish" growth by better competing with Motorola Mobility, he said.
"By that time, Motorola had been so successful [with] very innovative products like the Motorola Razr," Sohn said. "I tried to make a big turnaround by beating Motorola."
The company quickly realized that it had to become more "carrier friendly" by showing it was stable and by courting wireless companies such as Verizon, AT&T, and Sprint. It had different names for its early Galaxy devices at the various carriers based on what they preferred. It also provided them with advertising funds.
When Samsung launched the Galaxy S2 in 2011, the company "drastically" shifted strategy in its sales and marketing operations to focus on pleasing consumers rather than the carriers, Sohn said. It also worked to change the retail experience to make it easy for buyers to find Samsung devices in stores, and the company spent marketing on those devices throughout the year rather than with a big push solely when a device launched.
"The first thing we really had to do in the beginning was make customers come into stores, asking for the Galaxy brand," Sohn said.
Meanwhile, Todd Pendleton, chief marketing officer for Samsung Telecommunications America, took the stand to testify how he and his team helped turn around Samsung's position in mobile through their marketing push. He noted that Samsung has become the "most viral" brand in the world based on the number of social media followers and shares. Before Pendleton joined Samsung in June 2011, the company had no Twitter presence.
Another message from Sohn, this time an email to Pendleton and other executives from June 5, 2012, was presented by Apple. In the message, Sohn there would be a "tsunami" when the iPhone 5 launched.
"According to CEO's direction, we have to set up a counter plan to neutralize this tsunami," Sohn wrote in his message.
He also said Samsung's weaknesses included criticism about product quality and the plastic feeling of its devices, lack of a key feature, and carrier influence because of contractual commitments.
Pendleton said some people have complained about Samsung's use of plastic, but others like it. He also disputed Samsung's reputation as a "fast follower," or company that doesn't invent new products but is adept at quickly making its own variations once something has been created.
Apple rested its case against Samsung on Friday after an expert detailed the $2.191 billion in damages the company says it's due from Samsung. Samsung kicked off its defense that day with Google Android engineers such as Hiroshi Lockheimer. Earlier Monday, Google Android engineers Bjorn Bringert and Dianne Hackborn testified about features of the operating system.
In the case, Apple and Samsung have accused each other of copying features used in their popular smartphones and tablets, and the jury will have to decide who actually infringed and how much money is due. This trial involves different patents and newer devices than the ones disputed at trial in August 2012 and in a damages retrial in November 2013. For instance, the new trial involves the iPhone 5, released in September 2012, and Samsung's Galaxy S3, which also debuted in 2012.
The latest trial kicked off March 31 with jury selection. The following day featured opening arguments and testimony by Phil Schiller, Apple's head of marketing. Other witnesses who have testified include Greg Christie, an Apple engineer who invented the slide-to-unlock iPhone feature; Thomas Deniau, a France-based Apple engineer who helped develop the company's quick link technology; and Justin Denison, chief strategy officer of Samsung Telecommunications America. Denison's testimony came via a deposition video.
Apple experts who took the stand over the past couple of weeks included Andrew Cockburn, a professor of computer science and software engineering at the University of Canterbury, New Zealand; Todd Mowry, a professor of computer science at Carnegie Mellon University; and Alex Snoeren, a professor of computer science and engineering at the University of California at San Diego.
There are seven patents at issue in the latest case -- five held by Apple and two by Samsung. Apple has accused Samsung of infringing US patents Nos. 5,946,647; 6,847,959; 7,761,414; 8,046,721; and 8,074,172. All relate to software features, such as "quick links" for '647, universal search for '959, background syncing for '414, slide-to-unlock for '721, and automatic word correction for '172. Overall, Apple argues that the patents enable ease of use and make a user interface more engaging.
Samsung, meanwhile, has accused Apple of infringing US patents Nos. 6,226,449 and 5,579,239. The '449 patent, which Samsung purchased from Hitachi, involves camera and folder organization functionality. The '239 patent, which Samsung also acquired, covers video transmission functionality and could have implications for Apple's use of FaceTime.
The Samsung gadgets that Apple says infringe are the Admire, Galaxy Nexus, Galaxy Note, Galaxy Note 2, Galaxy S2, Galaxy S2 Epic 4G Touch, Galaxy S2 Skyrocket, Galaxy S3, Galaxy Tab 2 10.1, and the Stratosphere. Samsung, meanwhile, says the iPhone 4, iPhone 4S, iPhone 5, iPad 2, iPad 3, iPad 4, iPad Mini, iPod Touch (fifth generation) and iPod Touch (fourth generation) all infringe.
The arguments by Apple and Samsung in the latest case are expected to last until April 29 or 30, at which time the jury will deliberate. Court will be in session three days each week -- Mondays, Tuesdays, and Fridays -- though the jury will deliberate every business day until it has reached a verdict.
Updated at 3:15 p.m. PT with testimony from Samsung Telecommunications America CMO Todd Pendleton.