Apple's secrets revealed at trial

Apple Inc., one of the world's most secretive companies, is finding there's a price in pushing its grievances against rival Samsung Electronics Co. in federal court: disclosure.

In just the first few days of its patent trial this week, Apple has publicly discussed how it created the iPhone and iPad, showed early designs of the devices and described intimate details about its product team.

It also gave glimpses into its strategy and customers, and each fact—like an internal survey showing that 78% of iPhone owners buy cases—was quickly disseminated and discussed in tweets and blog posts by people tracking the high-stakes case.

Phil Schiller, Apple's senior vice president of world-wide marketing, took the stand Friday and revealed how much Apple spends on marketing the devices at the center of the case. He discussed a document that said Apple had spent $647 million advertising the iPhone in the U.S., from its release in 2007 through its fiscal year 2011. For the iPad, which debuted in 2010, he put the amount at $457.2 million.

Much of the trial so far has concentrated on how Apple's design teams came up with the ideas for iPhones and iPads. Apple is trying to prove that Samsung copied its designs, while Samsung is demonstrating to the jury that its devices are different and that Apple was inspired by Sony Corp.'s products.

On Friday, Scott Forstall, a senior vice president who oversees the software used on the company's mobile devices, testified that as early as January 2011, an Apple executive advocated that the company build a tablet with a 7-inch screen. Apple has generally disputed the appeal of devices smaller than its 9.7-inch iPad, despite reports the company is developing a smaller model.

In cross-examination, Mr. Forstall said Eddy Cue, now head of Apple's Internet services efforts, had used a 7-inch Samsung tablet for a time, and sent an email to Chief Executive Tim Cook that he believed "there will be a 7-inch market and we should do one."

Mr. Forstall also testified that Apple in 2004 placed unusual rules around how it would assemble a team to build the iPhone, or "Project Purple," as it was called then.

Mr. Forstall said co-founder Steve Jobs told him he couldn't hire anyone from outside the company to work on the user interface, or the buttons and images that appear on the screen. So, he said, he found "superstars" from within Apple and said he was starting a secret project and he wanted help.

He recalled telling them, "If you choose to accept this role, you will work harder than you ever have in your entire life."

Mr. Forstall described "locking down" one floor of the company's buildings at first with cameras and keycard readers to beef up security regarding the project. He also took to calling it the "purple dorm," after the project's code-name, purple. They also put a sign up on the front door with the words "Fight Club" written on it, referring to the hit book and movie in which characters are told not to talk about what they were doing.

He cited numerous challenges to developing the iPhone, because his teams had until then only worked with keyboards and mice. "Every single part of the device had to be rebuilt for touch," Mr. Forstall said.

Mr. Forstall also told the court that his team consisted of 1,000 people who directly reported to him. When he holds all-staff meetings, he said that number usually comes to 2,000.

Mr. Forstall said he invented a patent for double-tapping on Web pages because as he had been using a prototype of the iPhone to surf the web, he realized he was spending a lot of time pinching and zooming the page to fit text perfectly on the screen.

"I realized I have this incredibly powerful device, why can't it figure out the right size for me?" he said. So, he challenged his team to make the software automatically size the text into the center of the screen when he double-tapped around a webpage.

Earlier in the week a 99-page document filed in the case revealed some early iPhone prototypes considered by the company. The renderings, dating back to at least early 2006, show what could have been—from bulbous backsides to angled edges. Other documents disclosed variations on the iPad design, including the fact the company considered a kickstand for the device.

Veteran Apple designer Christopher Stringer—the company's first witness—walked through many of the prototypes on Tuesday and said the design team often works around a table in a kitchen, translating ideas to sketches to computer designs to 3-D models. When asked how Apple arrived at the final iPhone design, Mr. Stringer said: "It was the most beautiful of our designs…When we realized what we got, we knew."

But the iPhone almost didn't get off the ground. Mr. Stringer said even Mr. Jobs had doubts Apple could deliver the unprecedented design.

Mr. Schiller, in another part of his testimony, discussed a customer survey of iPhone buyers. The issue of market research is of special interest to Apple watchers, because Mr. Jobs famously maintained that the company didn't rely on tools like focus group in deciding how to craft new products.

Before the trial opened, however, a May 2011 survey of iPhone owners was filed as evidence. The Apple document showed, among other things, that trust in the company's brand was a decisive factor in buying decisions in countries that include the U.S. and China.

Mr. Schiller testified that such surveys are considered important trade secrets because while it is easy for an individual company to survey its own customers, it is very hard to survey a competitor's customers.

Information that was not shared with jurors has triggered some of the biggest fireworks so far in the trial, which kicked off with jury selection Monday and testimony Tuesday and Friday. U.S. District Judge Lucy Koh blocked Samsung from introducing evidence that it says shows the iPhone design was inspired by Sony products, an attempt to weaken Apple positions that the iPhone was an original design copied by Samsung.

A Samsung representative shared the information with reporters, prompting a request from Apple for the court to sanction Samsung. On Friday, Judge Koh denied Apple's request, but criticized Samsung's legal team and polled each juror individually to make sure they hadn't read about it.

"I will not let any theatrics or sideshow keep us from doing what we're here to do," she said.

(Published by WSJ - August 5, 2012)