Tuesday, December 4, 2012

Apple says ITC judge lacked legal basis for ruling on Samsung's designarounds

Approximately a year ago I said that workarounds (or designarounds) would become a big issue in the smartphone patent disputes, and this topic has indeed come up in multiple litigations this year. But there's been very little coverage of this by the media, presumably because there's more attention to binary decisions (injunction granted/denied; injunction affirmed/lifted) and because designarounds depend on technical and legal details. That doesn't make the topic less relevant. Even the most spectacular injunction, no matter over how many patents and against which high-profile products it is ordered, isn't worth anything if it can be worked around in a way that no consumer would ever notice and that would not require the infringer to devote more than a negligible amount of resources to the effort. Sometimes that's the way it works out. In most cases, however workarounds do affect product quality and/or the allocation of development resources in significant ways, even though a former infringer will always claim that the workaround was easy and smooth and has no impact on functionality, performance, or user experience.

On Thursday there could be some talk in the media about designarounds (though presumably still less than about jury misconduct issues and the Apple-HTC agreement) because of an Apple v. Samsung hearing in California, where Samsung will argue that the existence of purported designarounds should weigh against the grant of an injunction. I commented on Samsung's workarounds in October and a week ago I reported that Apple disputes that what Samsung calls a workaround for the '915 pinch-to-zoom API patent really steers clear of infringement -- a controversy I had predicted in my initial analysis.

Two years ago, this blog already discussed FRAND issues such as Microsoft's contract lawsuit against Motorola, taking consistent positions on injunctive relief over standard-essential patents during all of this time. For the first year or so that I was blogging about it, FRAND and its synonym RAND were known to only a small number of industry professionals. By now, many more people are at least roughly familiar with this once-esoteric concept at the intersection of intellectual property and antitrust law. Depending on how things evolve, workarounds (designarounds) could also receive more attention in the future once people realize that they're impact-determinative. Independently of the mainstream, I will keep blogging about this.

In the ITC investigation of Apple's complaint against Samsung, designarounds came up at an unusually early stage. Normally, there's an infringement action and a ruling, and if the ruling includes an injunction, then the infringer will try to work around the enforced patent(s) and release modified, allegedly non-infringing products. In many of these cases, the patent holder will disagree and allege continued infringement, and if the parties can't agree, then there has to be an enforcement proceeding to determine whether the defendant's actions constitute contempt of court. For example, the ITC was looking at an enforcement complaint by Apple against HTC that alleged violation of a previously-ordered import ban (the parties' settlement has resolved this matter). Besides clearance or a finding of contempt, the outcome of an enforcement proceeding can also be that an infringement is possible, but if there is one, its pattern is distinct from the one that has been adjudicated in the infringement proceeding, requiring a whole new lawsuit to adjudge the new implementation.

What I've just described applies to all of the jurisdictions in which I follow such disputes in detail: ITC, U.S. district courts, and German courts. There are obviously some differences (particularly with respect to whether an infringer has the option or obligation to ask the court for an advisory opinion prior to shipping modified products), but the basic concept is the one I just outlined. And presumably it's the same in the rest of the world.

The rare thing that happened in ITC investigation no. 337-TA-794 is that the original ruling (a preliminary ruling to be precise) already adjudicated workarounds for multiple patents-in-suit at the defendant's (Samsung's) request and against the plaintiff's (Apple's) objections. The judge's initial determination was that all of those workarounds, which were presented later in the process, do avoid infringement. If the Commission (the six-member decision-making body at the top of the ITC) affirmed these workaround-related rulings, Samsung would have immediate legal certainty about how it can keep selling its products without any disruption being caused by whatever import ban may be ordered against products that infringed in the past.

It does happen that defendants present workarounds to a court during the original infringement litigation instead of waiting for a subsequent enforcement proceeding. For example, Nokia and HTC have done so in the UK and Germany in litigation with patent monetizer IPCom. But most of the time, workarounds come up only in the next step, and where a defendant does present workarounds early on, some plaintiffs actually appreciate the fact that this enables them to get a ruling on them sooner rather than later. Not Apple in this case.

Three months ago, Judge Pender asked the parties for briefing on the question of Samsung's designarounds. The pleadings were sealed, but now that the parties' petitions for review as well as their responses have been made available in a redacted form, some information (still not as much as I'd like to get) has entered the public record. Here's what Judge Pender wrote (as quoted by Samsung) to justify his decision to rule on the designarounds:

"The design around products are within the scope of this investigation, have been imported into the United States or sold in the United States [a footnote clarifies that Apple said "some of the design arounds were implemented in prototypes rather than commercially sold products", which did not matter to the judge], were the subject of extensive discovery as well as testimony during the evidentiary hearing in this investigation. Thus, I find that infringement of Samsung's design around products should be adjudicated as part of this Initial Determination.


Apple argues that because it did not accuse the design around products of infringing the asserted patents there is no need to determine whether they infringe the asserted patents. At the same time, Apple argues that the design around products should not be carved out of any exclusion order that may issue in this investigation. Taken together, it would seem that Apple does not want the design [arounds] adjudicated on the merits, but wants to still be able to argue that they fall within the scope of the exclusion order that may issue. I find Apple's position unimpressive."

I can't put it past any plaintiff, Apple in this case, that he may want to create commercial uncertainty about the legality of a rival's products. Obviously, a ruling that formally bans various Samsung products creates more doubt among resellers and consumers about the future availability of Samsung's products than a ruling like the initial determination in late October that found Samsung to have infringed four Apple patents but also cleared multiple workarounds. Judge Pender was almost certainly right in concluding from Apple's objection to an adjudication of the workarounds on their merits that Apple did not feel that it could prevail over those workarounds. And at this stage, where the parties are petitioning for a Commission review of the initial determination, it doesn't excude much confidence on Apple's part that it wants the designaround rulings thrown out instead of attacking them exclusively on the merits.

But even if commercial uncertainty (and the resultant settlement pressure on Samsung) was Apple's motive, or a substantial part of its motivation, that would not be the most important thing in this context. The question that the ITC (or any other court in the same situation) really has to ask itself more than any other one is whether it's good policy from the fairness and efficiency angles to allow a defendant to complicate an infringement proceeding through the injection of workarounds, especially at a relatively late stage.

Apple argues that the plaintiff ("complainant" in ITC terminology) must always be in charge of the infringement contentions. If the plaintiff accused a technology, it has to be adjudged, and if he doesn't, then it's outside the scope. Germany is obviously a different jurisdiction, but over here it would be absolutely unthinkable that a defendant could unilaterally extend the scope of a litigation by any means other than a counterclaim. It's logical that each plaintiff is the master of his infringement accusations, no matter how much a court might think that it would make sense to adjudicate additional issues in the same process.

The problem with the ITC, however, is that it does not adjudge counterclaims. If parties bring counterclaims, they have to be immediately severed and removed to a district court. So if Samsung had immediately brought a declaratory judgment counterclaim to ask a court to hold that its non-accused workarounds do not infringe, it would have had to do so in a different forum, where things could take much longer and where the decision might be based on a different claim construction and a different evidentiary record. That's why Samsung's desire to have the same forum apply consistent standards to the accused products and the presented workarounds also makes a lot of sense.

That said, Apple has a point that a plaintiff having to deal with unwanted workarounds may have to address those at the expense of its pursuit of the intended infringement contentions. There are page limits for pleadings, time limits at hearings and trials, and a respondent could game the system by presenting all sorts of workarounds at a late stage of a proceeding. And it's not like Samsung never tried to stall or otherwise derail different proceedings initiated by Apple.

The bottom line is that a bad-faith plaintiff can try to get an advantage by opposing the adjudication of workarounds only to create commercial uncertainty (which will work only if there has been at least some past infringement) but a bad-faith respondent can also act abusively and deprive a plaintiff of a fair chance to prevail. That's why speculation on the parties' motives doesn't serve the interests of justice in this context.

I'm looking at this from a business point of view, and from that angle I oppose uncertainty that could actually be avoided. I think Samsung highlighted an important problem but there must be a better solution. Maybe the ITC should consider allowing respondents like Samsung to request an advisory opinion on workarounds even while an investigation is ongoing. Maybe it's even a good idea to ensure in one way or another that the workarounds will be adjudged simultaneously with the original complaint. But as long as a plaintiff's ability to pursue his infringement claims is impaired by the presentation of workarounds, it's difficult to support the idea that a respondent can unilaterally, without having to bring a counterclaim, extend the scope of an investigation someone else triggered, especially since there would never be a problem without any infringement in the first place, so if Samsung was found to have infringed in the past, it might be fair to expect Samsung to deal with the consequences, including some temporary commercial uncertainty between an infringement finding against past products and an advisory opinion or clearance decision (in an enforcement proceeding) on the modified ones.

It will be interesting to see how the ITC addresses this problem in its decision on Apple's complaint against Samsung, and whether there will be any effort to set clear rules that minimize prejudice to both parties. In a fast-paced industry like mobile devices, there clearly is a problem if non-infringing products might be held up at customs, or if customers shied away from purchasing them, only because their predecessors infringed.

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