Sunday, July 1, 2012

Samsung's public statements contradict its motion to stay the Galaxy Tab 10.1 injunction

It's very difficult for companies to speak out in public on pending litigation, which is why most companies decline to comment on the record or make only short and somewhat repetitive statements. As U.S. policemen routinely highlight, anything you say can and will be used against you in a court of law -- and that's what Samsung is just experiencing this weekend in a non-criminal case. Apple basically "Mirandized" its Korean rival through its opposition brief to the motion to stay the U.S. preliminary injunction against the Galaxy Tab 10.1.

In connection with the key question of the balance of hardships, Apple points the court to Samsung's public downplaying of the impact of the injunction on its business. According to a report in the San Francisco Daily Journal, a Samsung spokesman said in a prepared statement that the company "did not expect the ruling enjoining the sale of the Galaxy Tab 10.1 to have a 'significant impact on [Samsung's] business operations,' noting that the company has other Galaxy Tab products to sell.'" Apple also provided an English translation of an article on a Korean website according to which Samsung's "view is that in the U.S. this will not deal a big blow to sales of tablet PC's, since the successor model to the Galaxy Tab 10.1 is already on the market."

I understand that a hearing on Samsung's motion to stay will take place on Monday. Judge Koh wasn't going to say, less than a week after ordering the injunction, that she erred. She's not going to stay the injunction for the entire duration of the appeal. At the most she will stay it until the Federal Circuit has decided on whether or not to grant a stay. Either way, Samsung can't have it both ways and tell the general public that everything's fine despite the injunction while telling the courts that Apple should have to tolerate continued infringement.

Since it took so long for the Galaxy Tab 10.1 to be banned, the economic benefit of the injunction to Apple is very limited. The court is well aware of that fact. Tellingly, it required a 35 times higher bond for its more recent injunction against the Galaxy Nexus, a considerably newer product. And should Apple request and win a preliminary injunction against the Galaxy S III, the amount will likely be even greater.

Samsung's argument that the injunction was improperly-granted stands on four pillars.

  1. Samsung presents new prior art references and argues that Apple's iPad design patent (D'889) is invalid.

    I previously said that there's the risk that maybe just one of the new pieces of evidence Samsung wants to present could be found to have been relevant and admissible. Having read Apple's opposition brief, I now doubt that Samsung will get to present new prior art at this stage of the litigation. It had a window of opportunity for this last year. Apple's brief explains why those "new" prior art references aren't really new. Apparently Samsung used them (or closely related material) already. For example, a prototype that Apple submitted to the USPTO was apparently also discussed in the appellate proceeding.

  2. Samsung argues that even if the D'889 patent wasn't invalidated in its entirety by those prior art references, it would at least have to be interpreted more narrowly, which could result in a finding of non-infringement.

    Since I doubt that Samsung will get to relitigate the validity question, I also doubt that there would be a new analysis of the infringement issue. Also, both kinds of analysis fall outside the scope of what the Federal Circuit told the district court to do on remand.

  3. Samsung says that Judge Koh should have performed a complete new equitable analysis.

    Even after reading Apple's opposition brief, I think Samsung may have a point here. The decision to order an injunction has important implications (even though Samsung itself downplayed them in public statements), and the Federal Circuit may find that a more thorough equitable analysis would have been warranted. After all, that new equitable analysis is the whole purpose for which the Federal Circuit remanded the case to Judge Koh without telling her directly to enter a preliminary injunction. One of the circuit judges, Judge O'Malley, wanted an immediate injunction, but she didn't get the support of a majority of judges. Judge Koh concurred with Judge O'Malley's thinking, but you can't rely on a minority opinion.

    If the Federal Circuit feels that Judge Koh's equitable analysis was insufficient, Samsung may win a stay, but it won't necessarily: the appeals court may feel that the injunction is more likely than not to be upheld anyway.

  4. Samsung wanted that new equitable analysis to be based on partly new evidence concerning the evolution of the market since the original analysis that was performed in December 2011. In this regard, Samsung wanted new evidence to be produced and presented.

    There are different ways in which a reasonable person advocating the interest of justice could look at the implications of an extremely rapidly-evolving market like the tablet computer market. One can certainly say that the Federal Circuit found Judge Koh to have erred with her original thinking on the validity of the D'889 patent, and if she had not erred, the product would have been removed from the market six to seven months ago -- so Samsung can't complain, and Apple shouldn't have to accept further delay since it already lost a lot of precious time only due to Judge Koh's original error. But one can also argue that six months is a lot of time in this market, which was created (as far as a real mass market is concerned) just about two years ago with the launch of the original iPad, so a new analysis of the current market situation could be deemed necessary.

    There's no doubt that the market has changed. There's a lot of doubt, however, that the ways in which it has changed really have a bearing on the question of whether the Galaxy Tab 10.1 should be sold. Given that the harm to Samsung from removing the product from the market is a much lesser one at this stage, it would probably be an even easier decision now to ban the product than it would have been back in December.

    If the appeals court feels that Judge Koh should have taken a closer look at the ways in which the market has evolved, that still doesn't necessarily mean a stay.

Samsung really isn't worried about the direct impact of the injunction. It's more of a problem for Samsung's reputation and for Samsung's chances at the trial that is scheduled to start toward the end of this month. If the final judgment is the same as far as validity, infringement and the harm to Apple's business are concerned, this can get quite costly even for a company the size of Samsung.

Apple will go into the trial with a coherent story of how Samsung imitated everything from packaging to exterior product design to the user interface and the inner workings of the operating system.

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