Tuesday, August 16, 2011

Galaxy Tab 10.1 injunction suspended for all EU countries except Germany

Dutch website Webwereld, which also raised issues yesterday concerning pictures of the Galaxy Tab 10.1 presented by Apple to the Düsseldorf court, was first to break the news that the Landgericht (district court) Düsseldorf has temporarily -- for at least the time between now and the hearing on August 25 -- suspended the enforcement of the preliminary injunction prohibiting Samsung's distribution of the Galaxy Tab 10.1 in all EU countries except in the German market.

The Dutch market was excluded from the German injunction at Apple's own request in order to pursue broader claims in that country. A decision for the Dutch market will be taken in mid September.

I called up the press office of the Düsseldorf court and received confirmation of what Webwereld's Andreas Udo de Haes reported. The court's spokesman clarified the reasoning:

  • He didn't say anything about concerns regarding the substance of Apple's infringement allegations. I conclude from this that this was purely a question of competence (in terms of whether the Düsseldorf district court was a court of competent jurisdiction to enjoin Samsung -- the Korean parent company -- from selling products outside of Germany). Therefore, the question of whether Apple's evidence was suitable or not has, at least in a formal sense, not played a role in this decision on a suspension.

  • The injunction was issued against two legal entities:

    • SAMSUNG Electronics GmbH (Samsung's German subsidiary domiciled in the town of Schwalbach)

    • SAMSUNG Electronics Co., Ltd (the parent company based in Suwon-city, Gyeonggi-do, South Korea)

    Both entities are enjoined under the preliminary injunction (which hasn't been lifted per se, but enforcement has been partially suspended pending next week's hearing) from selling the Galaxy Tab 10.1 in all EU countries except for the Netherlands. The partial enforcement suspension changes nothing at all for the German subsidiary: that one is still not allowed to sell Galaxy Tab 10.1's to anyone in Europe, be it in inside or outside Germany. But the key thing is that the Korean parent company is at this point no longer enjoined for any EU country other than Germany.

  • The simple version (after the legally more precise one): nothing changes for German customers, but Samsung's Korean parent company is free to sell again -- for the time being -- in EU countries outside of Germany.

  • I believe Samsung has a pretty good chance that this temporary partial suspension will result in a partial reversal of the preliminary injunction decision at next week's hearing (which I plan to attend in person to report from there).

Apart from the immediate commercial benefits that this provides to Samsung, it's an unpleasant situation for Apple. Should the court really find that the Düsseldorf court didn't have personal jurisdiction over a Korean company, this would reinforce a lot of people's impression that Apple's enforcement of design-related rights is, even though understandable to a certain degree, overreaching in some areas.

One might also wonder why the court simply granted a preliminary injunction although the complaint didn't provide any indication that the Korean Samsung entity has an "establishment" in Germany. "Establishment" is the requirement under the applicable EU directive, and it appears that subsidiaries, even if wholly-owned, are not considered "establishments" because they are separate legal entities. However, the German language in that EU regulation is misleading and ambiguous. The German word is "Niederlassung". In Germany, we use that term all the time for wholly-owned subsidaries of companies. In fact, most of the time that we use that word, it actually means what corresponds to "subsidiary" in English. That might have confused Apple's lawyers and the court. And since an EU regulation is valid in each language (there isn't one language to rule them all), Apple still has a case -- or if not a case, then at least its lawyers have a valid excuse -- due to that word.

Here's the relevant passage of the applicable EU regulation (the Community Design Regulation):

Article 82 International jurisdiction

  1. Subject to the provisions of this Regulation and to any provisions of the Convention on Jurisdiction and Enforcement applicable by virtue of Article 79, proceedings in respect of the actions and claims referred to in Article 81 shall be brought in the courts of the Member State in which the defendant is domiciled or, if he is not domiciled in any of the Member States, in any Member State in which he has an establishment.

  2. If the defendant is neither domiciled nor has an establishment in any of the Member States, such proceedings shall be brought in the courts of the Member State in which the plaintiff is domiciled or, if he is not domiciled in any of the Member States, in any Member State in which he has an establishment.

  3. f neither the defendant nor the plaintiff is so domiciled or has such an establishment, such proceedings shall be brought in the courts of the Member State where the Office has its seat.

The short version of the above for this particular case is this:

  • The first paragraph applies to Samsung's German subsidiary. It's domiciled in Germany, so a German court can enjoin it (even EU-wide) from infringing activities -- the same way, a Dutch court can enjoin a Dutch subsidiary from this. We can forget about those local subsidiary cases now and focus on Samsung Korea.

  • Samsung Korea is obviously not domiciled in Germany.

  • It could alternatively (still according to the same paragraph) be sued "in any Member State in which [it] has an establishment".

  • However, a subsidiary that is a separate legal person -- a subsidiary -- may not count as an "establishment". An "establishment" might really have to be an office belonging to Samsung Korea itself, or a factory that Samsung Korea would build directly in Germany (without having a local company as a separate legal person doing it).

  • The German version, however, refers to "Niederlassung", which can be either a subsidiary or an establishment in the sense of an office or factory without legal personality of its own.

  • Apple's lawyers had no obligation to read the English version. I do this because I blog in English. They don't have to. If they relied on the German version of the directive, they could still be right, even though lawmakers meant something different. This could get tricky!

  • Assuming that Samsung's German subsidiary isn't considered an "establishment" of Samsung Korea, neither paragraph 1 nor paragraph 2 of that article can apply. But paragraph 3 could apply: however, in that case Apple would have had to sue (or might still sue) in Spain, since "the Office" (which in this case is the Office for Harmonization in the Internal Market) is based in Alicante, Spain. Spain has designated a first-instance court (Juzgados de lo Mercantil de Alicante) and a second-instance court (Audiencia Provincial de Alicante) for these matters. That one could issue such rulings even against a Korean company that ships goods to Europe.

  • A German court can, of course, prevent a foreign company from selling in Germany. The Dutch case is different from this here anyway because it was always about only the Dutch market, not a cross-border injunction. A Dutch court can stop a local Dutch company and also international companies from selling in the Dutch market. And that's all that Apple asked for there.

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