Tuesday, September 25, 2012

Samsung's new prior art likely to trump Apple's new design rights in German tablet case

More than a year after Apple won a German preliminary injunction against the Galaxy Tab 10.1 on the grounds of a design right infringement, indications were given today by the Düsseldorf Regional Court that Apple is heading for a defeat in the full-blown main proceeding. But a formal ruling likely won't come down for the next few years, and when it does, it will be appealable. If Apple indeed loses its German tablet design lawsuit, it will be liable for the damages it caused Samsung in Germany through the enforcement of a preliminary injunction that is not affirmed and converted into a permanent one.

For the detailed procedural history of Apple's tablet design rights enforcement against Samsung in Germany, let me refer you to this section of a recent blog post. I obtained information from a local source on what happened at today's trial:

The accused products are the Galaxy Tab 10.1 in the original version as well as the 10.1N and 10.1V variants, as well as the 7.7-inch and 8.9-inch Galaxy Tabs.

In the preliminary injunction proceedings, Apple based its design rights claims on Community design no. 000181607-0001, a European equivalent of a U.S. design patent. That Community design had been registered in 2004, more than five years before the iPad was launched. But the appeals court, the Düsseldorf Higher Regional Court, upheld the preliminary injunction on a different legal basis (violation of German unfair competition law) and did not identify a likely Community design infringement. Apple changed its strategy and withdrew the originally-asserted Community design, but amended its infringement contentions by throwing in three newer Community designs. At this stage of the proceedings, Apple's design rights claims against Samsung's tablets are based primarily on Community design no. 00188454-0013 or, in the alternative, Community design no. 000188454-001, or in the alternative to the latter, Community design no. 0001222905-0002. The first two of these design rights were registered in July 2011, claiming priority to dates in January and February of that year. The third one was registered in July 2010. Samsung is challenging all of these Community designs in a nullity action before the Office for Harmonization of the Internal Market in Alicante, Spain. That action was filed in May 2011.

Apple's claims were not the only aspect of this lawsuit to evolve. Samsung kept searching for prior art. The presentation of additional prior art references already contributed to the appeals court's decision to find a design right infringement insufficiently likely, and by the time of today's trial, even more prior art references formed part of the evidentiary record. Against this expanded background, Presiding Judge Johanna Brueckner-Hofmann ("Brückner-Hofmann" in German) indicated at today's trial that she is not inclined to find an infringement of any of the asserted Community designs. Furthermore, Judge Brueckner-Hofmann is at this point unconvinced of a violation of German unfair competition law.

In light of Samsung's tireless uncovering of additional prior art, the evolution of the positions taken by the two Düsseldorf-based courts is plausible.

Since Samsung brought a declaratory judgment counterclaim in the Düsseldorf case that relates, among other things, to the validity of the asserted Community designs, the court decided to stay this two-way litigation pending the definitive resolution of Samsung's challenge to the validity of the asserted Community designs. After the proceedings in Spain, either party may appeal the matter to the Court of Justice of the European Union. This could take years to resolve.

In the meantime, the preliminary injunctions Apple has won in Germany against Samsung'S tablet designs formally stay in force. I don't know whether Samsung plans to request a stay. In practical terms, Samsung can avoid further damage by selling design-around products such as the Galaxy Tab 10.1N. Should Apple be liable for enforcement of a preliminary injunction (at the end of these multi-year proceedings), the parties will likely disagree on the amount Apple owes Samsung. German courts have a conservative approach to damages. Since Samsung can hardly prove that it would have sold many hundreds of thousands or even millions of Galaxy Tab 10.1's in Germany in the few months before it launched the 10.1N anyway, I guess any damages would likely amount to only a few million euros.

By seeking a preliminary injunction, Apple took the risk of winning a preliminary injunction on the basis of an incomplete body of evidence and losing it later if Samsung managed to strengthen its defenses. This is a business risk Apple can live with, and in financial terms the stakes are low compared to the billion-dollar damages figure a California jury awarded Apple last month.

Regardless of the outcome, enforcing its design rights has positive effects on Apple's business. It's a clear message to its competition that it has to keep its products reasonably distinguishable from Apple's gadgets. If Apple didn't even try to enforce its rights, the market would be flooded with iPhone and iPad lookalikes.

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