Wednesday, June 20, 2012

Court upholds sanctions (for now): Samsung cannot leverage workarounds at trial

Tuesday was not a good day for Samsung's defense against Apple. A few hours after the Federal Circuit denied Samsung a rehearing regarding the Galaxy Tab 10.1, Magistrate Judge Paul S. Grewal in the Northern District of California entered an order that flatly denied a Samsung motion for "clarification" regarding its right to present workarounds for three of Apple's patents-in-suit at the trial that is scheduled to begin in six weeks.

On May 4, Magistrate Judge Grewal had barred Samsung from offering, at trial, any evidence of its design-around efforts for Apple's '381 ("overscroll bounce", or "rubber-banding"), '891 ("tap to zoom and navigate") and '163 ("timed window") patents as a penalty for Samsung's non-compliance with a discovery order that required Samsung to deliver the related source code to Apple's lawyers (to enable their analysis) before the end of the year. This is a relatively tough sanction because it means that Samsung has to accept liability at trial time for infringements that may already have stopped. For example, Samsung may have to pay damages for products that never infringed, or for periods during which previously-infringing products were no longer infringing.

Samsung was also worried that in a hypothetical worst-case scenario, which Samsung mentioned in its motion but which probably won't materialize here, the court could even order an injunction against non-infringing products. It's actually hard to imagine how this would work. And Magistrate Judge Grewal's clarifying order makes clear that the sanctions imposed relate only to the jury trial, while injunctive relief would be discussed with Judge Koh after the jury trial, and "Samsung’s right to offer design-around evidence in any post-trial proceeding remains for another day".

But with respect to the jury trial, Samsung's motion for clarification has failed. Samsung had already prepared for this event. That's why it had simultaneously filed a conditional motion for relief, asking Judge Koh to overrule Magistrate Judge Grewal. That motion is now going to have to be adjudicated, though chances are slim for that one to succeed.

Magistrate Judge Grewal was unimpressed with Samsung's argument that, contrary to earlier representations, it actually had produced some design-around code by the December 31, 2011 deadline. He notes that "any need for clarification by Samsung is ultimately of Samsung’s own making" and "that Samsung failed miserably in meeting its obligation to produce all design-around code for all of the accused products by the December 22 Order’s deadline". The key thing here is the repeated use of the word "all". Samsung now claims that it produced design-around code for some devices in time, but not for all. Therefore, Magistrate Judge Grewal says:

"Against this backdrop of non-compliance, it would hardly be fair to allow Samsung to offer what little design-around code it may have produced for a handful of the accused products, or to allow Samsung to produce all kinds of non-source code evidence, after it withheld substantial source code that would have permitted Apple to challenge such evidence."

I think this is a bit too harsh. The expression "what little" in connection with design-around code misses an important point: if a design-around is in place and if the code for it is the same on all devices, Apple actually had a chance to analyze that code. Multiple delivery would have been duplicative except for informing Apple that certain other devices shipped with the same code. But under Magistrate Judge Grewal's Draconian order, "Samsung may not offer any evidence of its design-arounds. This means no source code evidence, no non-source code evidence, no evidence of any kind, whether for liability purposes or any other purpose. Period."

I understand that the courts want parties to comply with their orders. That requires sanctions if they don't. In this case, I believe the sanctions go too far. I have repeatedly criticized Samsung's efforts to stall the process, but I think design-arounds are a fundamental issue in patent disputes. In the particular case of the '381 "overscroll bounce" (or "rubber-banding") patent, source code is unnecessary to see that Samsung no longer infringes: you just have to perform a scrolling operation on a Samsung device to see it.

It would even be in Apple's interest to have the jury adjudicate those design-arounds sooner rather than later, but Apple apparently wants to win a liability verdict based on obsolete, deprecated code. It can seek damages for past infringement, but in this huge strategic battle, that's a less than secondary consideration. What Apple may mostly be interested in is to win some infringement findings that make Samsung look bad in the eyes of courts and the public, and that buttress Apple's claim of Samsung copying its products. But if those design-arounds aren't analyzed at trial time, the question of continued infringement will have to be addressed by Judge Koh at an injunction hearing or in a subsequent enforcement proceeding. Apple is just having an enforcement dispute over alleged design-arounds with HTC over at the ITC (and dealing with the same lawyers as in the Samsung case, Quinn Emanuel, on HTC's side).

As I just mentioned that HTC dispute, I saw that HTC filed a 131-page letter in response to Apple's enforcement complaint, but for now it's sealed. On Monday, T-Mobile filed a statement on the public interest, which entered the public record late on Tuesday. T-Mobile had already supported HTC with a view to the December ruling, and indeed helped to persuade the ITC to grant HTC a generous transitional period of four months to modify its products. T-Mobile once again argues that it would be harmed by an immediate import ban and, without taking a position on the merits of Apple's enforcement complaint, wants to ensure some transitional period once again. There actually is a 60-day presidential review period in ITC proceedings anyway, but T-Mobile wants HTC to get more (in the event it loses). I believe T-Mobile's argument has much less weight this time since the ITC will want its exclusion orders to be respected. After the import ban was ordered, HTC CEO Peter Chou said that this feature was little-used anyway. If HTC had thrown out the feature altogether, there wouldn't be an enforcement dispute. There's a genuine dispute over whether HTC's devices still infringe. Should the ITC conclude that they still do, then I doubt that there will be sympathy for non-compliance.

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