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Ruling Against Apple Sets Higher Bar for Patent Injunctions
There are two ways to read Monday's court order denying Apple's bid for permanent injunctions against 26 Samsung products a federal jury found violated Apple's patents.
At the macro level, the 23-page order from U.S. District Judge Lucy Koh builds on a six-year trend of federal courts restricting the issuance of injunctions in patent cases.
At the micro level, Koh's ruling responds to an October decision from the U.S. Court of Appeals for the Federal Circuit reversing her judgment in a related patent fight between Apple Inc. and Samsung Electronics Co.
Koh's new order applies a heightened standard established by the Federal Circuit that requires patent-holders to show a direct link between lost market-share and a specific infringing feature of a competitor's product.
Patent lawyers said that logic would make it nearly impossible going forward to block the sale of complex devices like smartphones that incorporate numerous features, only some of which infringe patents.
If the rulings stand they could "radically change the calculus of patent suits," said Mark Lemley, director of Stanford Law School's Program in Law, Science, and Technology.
Lemley said courts have already clamped down significantly on injunctions requested by non-practicing entities. Koh's order raises the bar for major consumer companies like Apple to block the sale of competing products, he said.
Koh's ruling leans heavily on the Federal Circuit's opinion in Apple v. Samsung, 12-1507. That opinion, dubbed Apple II, overturned Koh's decision to grant a preliminary injunction against Samsung's Galaxy Nexus phone in a lawsuit over the patented search technology used in Apple's "Siri" feature.
This time, Koh found Apple's evidence for injunctive relief fell short of the Federal Circuit's strict "causal nexus" standard, because lawyers did not prove the copied features, such as Apple's patented pinch-and-zoom technology, specifically drove consumers to buy Samsung devices.
"The Federal Circuit has been quite clear that a showing of harm is not enough; Apple must link any harm it suffers directly to Samsung's infringement," Koh wrote.
The law is evolving quickly. Apple has petitioned the Federal Circuit for en banc rehearing of the Apple II case, arguing the decision forecloses injunctive relief "in a broad swathe of cases."
On the day Koh issued her order, the deputy clerk of the appeals court formally requested a response from Samsung. Apple did not respond to a request for comment. The company was represented at trial by Morrison & Foerster and Wilmer Cutler Pickering Hale & Dorr.
Samsung was represented by Quinn Emanuel Urquhart & Sullivan. A Samsung spokeswoman said the company was pleased that the judge denied "Apple's move to limit consumer choice, and restrict fair competition in the marketplace."
Injunctions once issued in patent cases as a matter of course after a finding of infringement. However, that changed with the U.S. Supreme Court's 2006 decision in eBay v. MercExchange, 547 U.S. 388, which applied a four-prong balancing test weighing irreparable harm, alternative remedies, the balance of hardships, and public interest.
Koh's decision not to grant injunctions is a defeat for Apple, which vigorously patented elements of its iPhone technology to leverage against competitors in the lucrative smartphone market.
Though a jury awarded the company a record $1.1 billion in August, the amount has been described as an incidental expense for Samsung, which reaps annual revenues close to $100 billion.
Apple lawyer Harold McElhinny of MoFo told Koh at a hearing this month the damages award was a "slap on the wrist" to Samsung, and he urged Koh to send a strong signal by imposing an injunction.
But Koh wrote in her order that an injunction "may not be used as a punishment." In addition, the fact Samsung will be able to pay a significant monetary judgment weighed against an injunction, Koh wrote, because it means Apple will be compensated for its injuries.
Koh said she would issue a separate order resolving dueling requests from Apple and Samsung for damages enhancements and reductions.
Alston & Bird partner Ryan Koppelman, a patent litigator in the firm's Silicon Valley office, said Apple's main objective was never a financial remedy but to derail Samsung by blocking the sale of its products.
"Apple took its best shot and lost," said Koppelman, who represented Nokia Corp. in its recent patent litigation against Apple. "This case was never about money. It was about market share and market disruption."
Stanley Gibson, chairman of the patent litigation group at Jeffer Mangels Butler & Mitchell, said Koh's decision and case law from the Federal Circuit makes it extremely difficult to get an injunction against products like smartphones that combine hundreds of features.
"You're going to need to show the reason consumers are buying this particular competing product is really due to the patented feature," Gibson said.
Some patent lawyers, including Apple's team, have responded by commissioning surveys that probe consumer decisions, Gibson said.
In her ruling, Koh rejected evidence from a consumer survey conducted by Apple, which asked Samsung owners to put a monetary value on particular features corresponding to Apple patents. Evidence customers would pay more for certain features does not mean those functions drove their decision to buy the phone in the first place, she wrote.
Koh also concluded that taking Samsung phones off the market was not in the public interest.
"The phones at issue in this case contain a broad range of features, only a small fraction of which are covered by Apple's patents," Koh wrote. "Though Apple does have some interest in retaining certain features as exclusive to Apple, it does not follow that entire products must be forever banned from the market because they incorporate, among their myriad features, a few narrow protected functions."
Some lawyers following the case suggested Koh's ruling could lead to a settlement between Apple and Samsung. Alternatively, it could shift even more of the litigation over smartphone patents into the International Trade Commission or foreign venues more likely to grant injunctions, said Santa Clara law professor Brian Love.
Love said patent-holders historically abused the court's power to grant injunctions to force settlements, as in the patent litigation against BlackBerry maker Research in Motion, which nearly shut down BlackBerry service before the company entered a $612 million settlement in 2006.
Koh's decision instructs lawyers that there is no automatic right to an injunction in patent infringement cases that involve complex products, Lovesaid. In his view, that is a good thing.
"It's a ruling that is getting us in the right direction of trying to make patent rights commensurate to the value of the invention," he said.
This article originally appeared in The Recorder.