U.S. District Judge Lucy Koh recently ruled that Apple did not meet its burden of proof to permanently enjoin Samsung from continuing to make and sell the twenty-six (26) products that a San Jose jury found infringed six Apple patents and Apple’s trade dress, to the tune of $1.05 billion. “[T]o the limited extent that Apple has been able to show that any of its harms were caused by Samsung’s illegal conduct (in this case, only trade dress dilution), Apple has not established that the equities support an injunction,” Judge Koh wrote. This result, if affirmed, unduly limits the scope of one of patent law’s fundamental principles – “the right to exclude” – with respect to all complex, high-tech, multi-feature devices.
The foundation of this longstanding principle of patent law is expressed in Article I, Section 8, Clause 8 of the U.S. Constitution:
The Congress shall have the power . . . to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their writings and discoveries.
In fairness to the District Court, the U.S. Supreme Court arguably laid the groundwork for this divergence six years ago by striking down the “general rule” that once patent infringement and validity were established, an injunction would necessarily follow. See eBay v. MercExchange, L.L.C., 547 U.S., 388 (2006). Indeed, an argument can be made that the Federal Circuit has further eroded that general rule since the eBay decision, ultimately culminating in the recent Apple II decision that reversed the court’s earlier ruling granting Apple preliminary injunctive relief against Samsung’s Galaxy Nexus phone. See Apple, Inc. v. Samsung Electronics Co., Ltd., 695 F.3d 1370 (Fed. Cir. 2012). However, neither eBay nor Apple II require the District Court to go as far as it did in its recent analysis.
The District Court cited to eBay in laying out the standards for issuing a permanent injunction:
(1) That [the patentee] has suffered an irreparable injury;(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;(3) that, considering the balance of hardships between the plaintiff and defendant, remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
(citing eBay at 391.) In applying those broad standards, however, the court proceeded to demonstrate why the devil is often found in the details. In attempting to show that certain infringed elements of its asserted ’381 utility patent were the features consumers most desired in purchasing the smartphones at issue, Apple presented a report produced by a consulting firm hired by Samsung that identified features that Apple customers like about their phones. Among those desired features expressed by customers were the iPhone’s ability to enlarge pictures, as well as the “two finger pinch and flick” feature. Rejecting such evidence as unpersuasive to meet Apple’s burden, the District Court wrote:Apple must show that "the infringing feature drives consumerdemand for the accused product." (quoting Apple II, 695 F.3dat 1375).
Apple did not establish [that] the ‘381 patent was central enough to Samsung’s products to drive sales. . . . Without a causal nexus, this Court cannot conclude that the irreparable harm supports entry of an injunction. See Apple II,695 F.3d at 1377.
To reach this conclusion, the court relied heavily on language from Apple II:
[A] showing that a patentee has suffered harm is insufficient. Rather, "to satisfy the irreparable harm factor in a patent infringement suit, a patentee must establish . . . 1) that absent an injunction, it will suffer irreparable harm, and 2) that a sufficiently strong causal nexus relates the alleged harm to the alleged infringement."
(quoting Apple II) (emphasis added).
The District Court’s application of Apple II’s “sufficiently strong causal nexus” language was too far-reaching. For example, the court’s rationale suggests that unless the infringing feature is so influential in the purchasing decision that it warrants the application of the Entire Market Value Rule (allows use of the total revenue earned on sale of the product – as opposed to using as the royalty basis the lesser revenue apportioned to the patented feature’s contribution to revenue – as the basis for applying the reasonable royalty), there is not a sufficient basis for enjoining infringing conduct. The major problem with the court’s analysis is that it would establish a virtually impossible standard for patentees claiming technology found in high-tech devices that embody hundreds of complex features – some of which infringe and some of which do not – to permanently enjoin infringers. In other words, for such patentees to successfully exclude those found to have violated their intellectual property, it might be easier to crack the DeVinci code than to demonstrate that the specific infringing features are what primarily drove consumers’ buying decisions.
Maybe the court was taking another bite at the apple (no pun intended) to force Apple to craft a licensing arrangement permitting Samsung to keep many of its accused products in the U.S. marketplace. Or maybe it was simply overly cautious about being reversed again, in light of Apple II. Whatever the case, I must agree with the question posed by my law partner upon his reading of the court’s decision: “If you can’t get an injunction where the jury found infringement and a billion dollars in damages, when can you get an injunction?”
The Federal Circuit likely will have to answer that question soon.