On Friday I blogged about the Düsseldorf Regional Court's decision to uphold its preliminary injunction against the Galaxy Tab 10.1 (and, by extension, any other look-alike products). Meanwhile, Samsung has declared its intent to appeal this decision to the next instance, the Oberlandesgericht (Higher Regional Court). In parallel to that fast-track appeal (with "fast track" meaning a couple of months in this case), the full-blown main proceeding before the first-instance will continue.
Since the announcement of the court's decision, there's been some confusion on the Internet about whether this would affect German consumers at all. Exactly one month ago, shortly after the preliminary injunction was originally ordered, I already showed an advertisement by the MediaMarkt retail chain and quoted a MediaMarkt spokesperson from a Financial Times Deutschland article as saying that the product was still on sale. The company had received one or more shipments prior to the preliminary injunction and wasn't formally bound to it.
After yesterday's decision, local media quoted a MediaMarkt spokesperson as saying that it was unclear inhowfar MediaMarkt would be affected by the preliminary injunction. After all, there's a common European market, and they could import the Galaxy Tab 10.1 (or even the Galaxy Tab 7.7, which Samsung said it didn't plan to sell in Germany anyway) on their own.
That, in turn, has led some less informed people to conclude that this preliminary injunction is next to useless. But that's not true. Let me explain inhowfar it affects retailers like MediaMarkt.
Samsung's Korean parent company has to respect the preliminary injunction with respect to the German market
There was a jurisdictional issue here: the German court concluded that it can't restrict Samsung's Korean parent company's sales in other markets than Germany. Only Samsung's German subsidiary has to respect the preliminary injunction on an EU-wide basis. Reuters quoted me accurately as saying that this part of the decision -- Samsung's German subsidiary not being allowed to sell in other EU markets than Germany -- didn't have practical consequences because Samsung's European logistics center appears to be in the Netherlands.
That said, Samsung's parent company in Korea must respect the preliminary injunction as far as the German market is concerned. So what if MediaMarkt ordered 10,000 Galaxy Tabs 10.1 from Samsung Korea for shipment to, say, the Netherlands? Then Samsung would be treading a dangerous path because subject to the specifics of the deal and the knowledge Samsung has of what MediaMarkt plans to do with those products, Samsung might be found to act in contempt of the injunction. Since MediaMarkt operates stores in a large number of countries, Samsung could always try to defend itself that it assumed the products were going to be sold in other markets than Germany -- but not if Apple can prove that Samsung clearly knew it.
The fact that Samsung sells someone somewhere in Europe a large number of German-language versions of the product wouldn't be enough to prove that Samsung knew the goods were meant to be sold in Germany. Germany is not the only country in which German is an official language, and there are German expatriates or other people with an interest in German-language products in most countries, so even if an injunction was handed in a country that doesn't share its official language with any other, a company could still products in that language without that fact necessarily constituting a commercial activity in any particular market.
But retailers like MediaMarkt rarely just order a given quantity of units without asking vendors for a cooperative advertising allowance, which is an additional discount related to local promotions. I personally dealt with MediaMarkt and its major competitors in Central Europe. I met their purchasing managers at their headquarters and at trade shows like CeBIT to discuss such commercial matters.
What if it's not Samsung's Korean parent company but one of its Dutch logistics companies doing the sale to MediaMarkt in the Netherlands? Then there would be an additional argument over how independently those Dutch entities acted and whether Samsung's Korean parent company would have had an obligation under the preliminary injunction to use its influence over its subsidiaries to ensure their compliance.
Another scenario would be that MediaMarkt buys Galaxy Tabs from, for example, a wholesaler in the Netherlands who is legally and economically independent from Samsung and its various subsidiaries and bought the goods from one of those entities. In this case, I can't imagine that Apple would be able to prove a violation of the injunction. However, this adds another link to the supply chain: the wholesaler will also want to make money on this deal. As a result, MediaMarkt might determine that it doesn't have enough of a margin opportunity.
In this section, it was all about Samsung's responsibility. The bottom line is that the more directly Samsung deals with MediaMarkt, the more it has to fear legal consequences. The less directly Samsung supplies goods to MediaMarkt, the safer Samsung is on the legal side but the less attractive the commercial terms will be from MediaMarkt's point of view. And this was, again, only about Samsung's obligations under the injunction, with MediaMarkt's interest being assumed on a purely hypothetical basis -- now let's talk about the situation between MediaMarkt and Apple.
Apple could easily extend the injunction to retailers or, more likely, use soft pressure to dissuade them from selling the Galaxy Tab 10.1 (and 7.7) in Germany
From a purely legal point of view, it would be as easy as 1-2-3 for Apple to have the injunction formally extended to any retailer who sells a Galaxy Tab 10.1 (or 7.7) in Germany.
Apple could easily find a witness who confirms to the court in a written declaration in lieu of an oath that he bought an infringing product at a particular store. They would probably present a copy of the sales receipt to the court. Since the Düsseldorf court is highly familiar with the matter, it would probably rubberstamp extensions of the injunction to other parties within a matter of hours, maybe a day or two at the most. Formally those would be new injunctions with a new case number and new defendants, but the merits of the substantive infringement allegations wouldn't require any new analysis.
However, Samsung's customers are, in all (or almost all) cases, also Apple's customers. MediaMarkt is an example.
Therefore, Apple would try to resolve this kind of issue constructively and amicably with them. If Apple served an injunction on a powerful retailer like MediaMarkt, that one might immediately cancel all of its standing orders from Apple to demonstrate that this is not how they want to be treated as a customer and partner.
But this goes both ways. MediaMarkt also wants to stay on good terms with Apple because it makes a lot of money from selling Apple's products. So if Apple contacted MediaMarkt and told them that the Galaxy Tab 10.1 has been found by a German court to infringe, it's hard to imagine that MediaMarkt would simply tell a major vendor like Apple that it doesn't care.
Therefore, if the two talk, the most likely outcome is that Apple will let MediaMarkt sell off whatever they have on the shelves and in their warehouse, or to agree on a particular period of time -- a transitional period -- during which MediaMarkt can sell the product.
Apple benefits from this court victory regardless of the extent to which it actually affects the German market
Apart from what exactly happens in the marketplace in the short term, Apple benefits greatly from this court victory with a view to the wider war that is raging.
Having handed a preliminary injunction to Apple, the Düsseldorf Regional Court is quite likely to also hand Apple a victory in the main proceeding. But more importantly, Apple has court battles going with Samsung around the globe. I recently listed the 19 lawsuits filed between the two companies with 12 different courts in 9 countries on 4 continents. By the way, that list already included four Japanese lawsuits. A few days ago there was a whole news cycle about a court hearing in Tokyo. It appears that the hearing was not about a brandnew lawsuit but just about one or more of the lawsuits I already listed weeks ago.The single most important process is the one that's underway in the United States. Apple asked the United States District Court for the Northern District of California for a preliminary injunction relating to four Samsung products, one of which is the Galaxy Tab 10.1. As I explained on Friday, the German decision doesn't legally bind or influence the court in California in any way, but it is psychologically very useful to Apple.
It's likely that Apple's motions for preliminary injunctions in Germany, the Netherlands and Australia were -- not exclusively, but to a very significant degree -- meant to build credibility for its "copycat" case against Samsung with a view to the hearing in California, which is scheduled for October 13. If Apple wins that one, there could be a tipping point at which Samsung will be forced to agree to change the design of its products.
Otherwise, things will take longer. We would see a war of attrition, and Apple clearly hopes that Samsung will be discouraged from building iPhone and iPad look-alike products at some point.
In order to achieve that strategic goal, Apple won't have to pursue each and every retailer in Germany. They can give the larger ones some time to sell off whatever they have already purchased, and they can decide that some smaller ones aren't even worth any administrative effort. That's just local details. What Apple needs to do is convince courts that Samsung's products are unlawful. Those are the trophies Apple is collecting.
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