Saturday, September 1, 2012

Apple adds Galaxy S III, Note and Note 10.1 to Samsung lawsuit, insists on billion-dollar bond

On Friday, Apple made a total of three filings in its two federal lawsuits pending against Samsung in the Northern District of California -- the one filed in April 2011 that is now famous for the billion-dollar jury verdict and a second one, which was filed in February 2012 and has already resulted in a preliminary injunction against the Galaxy Nexus smartphone.

In the first lawsuit, Samsung had asked the court to stay the August 24 verdict. Given that the jury may still be overruled (by Judge Koh or on appeal), Samsung doesn't want to have to pay $1.049 billion right away. Apple doesn't need Samsung's money urgently and is fine with a stay, but it does take issue with Samsung's claim that a bond (especially over such an amount) is costly and should be waived. For its security, Apple believes to be entitled to "a bond for the full amount of the judgment, interest, costs, and other damages from delay", but at this stage it considers the amount of the verdict sufficient, reserving the right to seek additional security after any adjustments in its favor.

Apple's other Friday-afternoon filings are amended versions of documents it previously filed in the February 2012 lawsuit: a first amended complaint and a first amended response (including FRAND-related counterclaims-in-reply) to Samsung's counterclaims.

The eight Apple patents-in-suit are still the same ones as in the original complaint. In addition to the patents from the first lawsuit that were just put before a jury and the patents at issue in the February 2012 lawsuit, Apple and Samsung also have 14 "back-burner patents" sort of pending in California -- patents that were withdrawn before the trial that just took place and can be reasserted anytime now, which could result in a third California lawsuit between the two companies.

While the patents-in-suit have not changed in the second (February 2012) lawsuit, Apple amended its list of accused products, adding five products on top of the previously-asserted 17 Samsung gadgets:

  • the Galaxy S III and its special Verizon version;

  • the Galaxy Note smartphone, or "phablet" (the Note 2 will be released soon but just a bit too late to be included in this amended complaint);

  • the Galaxy Note 10.1 tablet; and

  • the Galaxy S II in its basic and carrier-independent form (the original complaint already targeted the T-Mobile and AT&T versions and two other phones from the Galaxy S II family, the Galaxy S II Skyrocket and the Galaxy S II Epic 4G Touch).

The addition of the S III is a formality. Apple already tried to add the S III to the preliminary injunction motion targeting the Galaxy Nexus, but thought it prudent to refrain from an assertion that could have complicated that particular process and possibly even delayed the trial of the earlier lawsuit. It was always clear that outside the preliminary injunction process, the S III was going to be a issue in this lawsuit since it was launched not long after the filing of the complaint, making a timely amendment of the list of accused products an option that Apple definitely going to choose.

Many reporters and financial analysts around the globe still seem to misunderstand in which ways the formal naming of accused products in a complaint or an injunction order is significant and in which ways it's not.

If a plaintiff wants to collect damages for past infringement of a given set of intellectual property rights, he has to bring a lawsuit accusing those particular products of infringement of that set of rights. The August 24 jury verdict did not award damages to Apple for any past infringement of its rights by the S III -- simply because the S III was launched more than a year after Apple's related complaint and could no longer be added to the lawsuit. A jury can only award damages based on products that are actually at issue in the trial. The fact that Apple now added the S III to the second California lawsuit means that if and when this case goes to trial (currently scheduled for March 2014), a jury can award Apple damages based on any infringements of the eight patents at issue in that lawsuit (completely different ones from the first lawsuit) by the accused products in that action, one of which is now the S III. If Apple wanted to collect damages for the S III's infringement of the patents from the earlier lawsuit, it would have to bring a whole new lawsuit, targeting the S III (and possibly other products) with those particular patents. In other words, the addition of the S III to the second California lawsuit will not result in an extension of the August 24 jury verdict to the S III.

Theoretically, if an infringer releases new infringing products all the time, a right holder would have to file new lawsuits from time to time to collect damages based on products that were released after the window of opportunity for adding them to the most recent lawsuit closed. In practical terms, this would get very costly for a defendant over time, especially since the court would at some point have no doubt about such recidivism being willful, resulting in severe punitive damages (triple damages) and possibly even an award of legal fees due to the extraordinary circumstances.

But damages are always going to be a much less important issue between Apple and Samsung than injunctive relief (this goes both ways, but Samsung has not won a liability finding against Apple in the U.S.). When it comes to injunctions, new lawsuits requesting new injunctions against new products would also be an option, but that would be a tiresome cat-and-mouse game. Contrary to widespread misbelief, infringers can be stopped effectively even in a fast-moving industry.

The aforementioned misconception is based on the oversimplification that someone filing a lawsuit (or, as part of a lawsuit, a preliminary injunction motion) targeting a particular high-tech product really expects that product as a whole to disappear from the market forever. With the exception of certain kinds of standard-essential patents (for example, cellular standards patents), it's clear that the product will still be sold after being modified to work around the enforced patents, maybe after a minor disruption caused by the need to make those modifications.

If products are named in an injunction order, they are only examples of infringement and do not limit the scope of an injunction that is worded like Judge Koh's two recent injunctions against Samsung:

"Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America, Inc., its officers, directors, partners, agents, servants, employees, attorneys, subsidiaries, and those acting in concert with any of them, are enjoined from making, using, offering to sell, or selling within the United States, or importing into the United States, [the exemplary infringing product], and any product that is no more than colorably different from this specified product and [infringe the relevant patent]." (emphasis mine)

With an injunction like this, Apple doesn't need a product like the S III to be named in an injunction order to go after it if it infringes in more or less the same way as one of the products that were evaluated before. Apple can ask the judge to impose sanctions on Samsung for contempt of court. Apple would have to prove such contempt with clear and convincing evidence, which is a reasonably high standard, but there wouldn't be a need for a new jury trial. The issue would be put before Judge Koh, who is already familiar with the relevant patents and technologies. And the standard and the procedure would be the very same if a product that is named in an injunction order still infringed after some modifications.

In other words, if Apple enforces a multi-touch software patent or a Siri-related patent, it doesn't really matter what the name of the Samsung product at issue is. What's far more important is what version of the operating software runs on the devices that are sold. If Samsung puts a new and non-infringing version of its operating software on a product named in the injunction order, the order doesn't apply just because the product still has the same name -- nor does it help Samsung to put the same old infringing operating software on a device with a new name.

It still makes sense to name the (relatively) newest products at issue in a lawsuit as exemplary infringing devices. They are also most likely to have the latest operating software (relative to the versions at issue in a lawsuit), and subsequent versions are therefore more likely to infringe in a way that is no more than colorably different. Any of the infringements that the court has already found, in a full infringement proceeding, to be infringing are a useful pattern against which new infringements can be matched. But again, the name of an exemplary product is unimportant.

Last year, the Federal Circuit issued an opinion on a case (TiVo v. EchoStar) in which the two law firms that represented Apple against Samsung at the recnt trial, WilmerHale and Morrison & Foerster, stood on opposing sides. I recommend PatentlyO's summary of the implications of that ruling for injunctions of the "colorable difference" kind that Judge Koh has already granted twice in the Apple-Samsung dispute. The bottom line is that it's not trivial for right holders to prove contempt, but infringers can't easily end-run injunctions by launching new products under ever new names. And at least at this point there is absolutely no reason to believe that Samsung would not comply with an enforceable injunction across its whole range of products. Samsung knows how it works, even if countless analysts don't.

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