Ten days ago I reported and commented on Samsung's opposition to Apple's request for a rehearing en banc (full-bench review) of a Federal Circuit decision reversing a preliminary injunction against the Galaxy Nexus smartphone. The important N/nexus here is not the Nexus phone, which has limited market relevance at this stage, but the causal nexus requirement for injunctive relief. For alleged lack of a feature-specific causal nexus (a controversial requirement to show that certain patented features drive demand for multifunctional products), Apple was also denied a permanent injunction against a host of Samsung products despite a multiplicity of jury findings of willful infringement. Apple's latest procedural proposal to the Court of Appeals for the Federal Circuit is to hold a rare initial full-bench hearing on the multi-product permament injunction case and to combine this with a full-bench rehearing on the Galaxy Nexus preliminary injunction case.
In Apple's filings as well as legal literature (such as the Patently-O blog, my preferred online reference for developments in U.S. patent law), the Apple v. Samsung injunction appeals that have been adjudicated by Federal Circuit panels are referred to as Apple I (Galaxy Tab 10.1 case) and Apple II (Galaxy Nexus case). The multi-product permanent injunction appeal is likely going to go down in history as Apple III.
Today counsel for Apple filed a motion for leave to file a reply brief in support of a rehearing en banc on the Nexus case (Apple II), responding to the Samsung filing I mentioned at the start of this post. If the Federal Circuit grants the motion for leave, Apple's six-page brief, which was filed along with the motion, will become part of the record. Such motions for leave to file replies (or sur-replies) are often adjudged simultaneously with the original motion. I'll comment on Apple's brief now even though it's possible that it won't be admitted into the record.
Apple's reply brief addresses some of the fundamental questions and repeats, in different words, some of the key arguments. A particularly strong claim is that the panel decision on the Nexus appeal "endorses, without congressional authorization, a compulsory licensing regime for the smartphone, computer, and tablet industries". In my opinion, those who want a compulsory licensing regime, such as Samsung (and Google), should be forthright about their intentions and objectives because they can't credibly deny that a compulsory licensing regime would indeed be the practical consequence of the "causal nexus" requirement, at least in the form in which that one is currently stated and applied.
At the legal level, Apple's latest submission is primarily about whether or not there are now conflicting Federal Circuit decisions on injunctive relief, with Apple I and Apple II being the only cases in which there is a causal nexus requirement. Furthermore, a key question on which Apple and Samsung disagree is whether the causal nexus requirement can be reconciled with the Supreme Court's eBay v. MercExchange decision, which laid out four factors for injunctive relief.
Apple's strongest argument for conflicting Federal Circuit decisions is the Federal Circuit's December 19, 2012 panel opinion on Presidio Components, Inc. v. Am. Technical Cermaics Corp.. This decision is mentioned in Apple's request for an initial full-bench hearing on Apple III (and I mentioned that fact in my post on that petition), but it was handed down approximately three weeks after Apple's petition for a rehearing en banc in Apple II. Today's filing criticizes the fact that Samsung's opposition brief, filed this month, mentioned all sorts of other cases but made no reference whatsoever to Presidio. I agree with Apple that the only plausible explanation is that Samsung didn't want to mention a decision that runs counter to the Apple II panel decision. Presidio is a ruling that reinforces a patentee's entitlement to injunctive relief and does not mention or even obliquely reference the causal nexus requirement.
The most fundamental disagreement between Apple and Samsung relates to whether the causal nexus requirement or, alternatively, Apple's proposal to drop or modify the causal nexus requirement can be reconciled with eBay. Apple says in today's submission that Apple I and Apple II "cannot be reconciled with eBay Inc. v. MercExchange, L.L.C.. Apple notes that eBay "forbids an injunction standard that all but eliminates injunctions in 'a broad swath of cases'", and I would agree that smartphone and tablet computer patent infringement cases are a huge category -- and the same requirement would affect countless other multifunctional product categories, so yes, I think we are talking about a "broad swath of cases" in which injunctive relief would become unavailable. Samsung is trying to leverage the other aspect of eBay, which is that an injunction should not be granted pretty much automatically as a result of infringement. That's why Samsung's opposition brief describes Apple's position as saying "that patent exclusivity, like trespass to real property, warrants injunctive relief for infringement as a matter of course". And Samsung's opposition brief noted that after eBay there can be no presumption of irreparable harm.
I would agree with Samsung to the extent that whatever happens now in Apple II and Apple III could theoretically make the pendulum swing in the other direction and result in too low a standard for injunctive relief, but I don't think that Apple is, at least at this stage, proposing such an extreme outcome. Samsung's argument must be considered, but at this point Apple has the stronger point when it essentially tells the appeals court that Apple II (and Judge Koh's denial of a permanent injunction) set a hurdle that is far higher than a reasonable reading of eBay would suggest. I think it will be hard for Samsung to prevent Apple from achieving at least some adjustment this year, but it's important that Samsung continue to ensure that such adjustment won't be overreaching. For example, Samsung is reasonably concerned about another recent decision (after Apple II) by the Federal Circuit could be interpreted in overly injunction-friendly ways: Edwards Lifesciences AG v. CoreValve, Inc. Apple quotes from Edwards Lifesciences that "[a]bsent adverse equitable considerations, the winner of a judgment of validity and infringement may normally expect to regain the exclusivity that was lost", and "may normally expect" appears very favorable to patent holders. From a public interest point of view both companies are doing the industry at large a service here, helping the Federal Circuit to consider all of the relevant considerations.
Now I'll quote a passage from Apple's latest brief that shows what it is really concerned about from a business point of view -- that Samsung may deem infringement a highly profitable commercial strategy if Apple can only seek damages and not realistically win U.S. injunctions:
"This means that copycat competitors like Samsung can allow innovators like Apple to spend huge amounts of time and money developing new features, incorporate them into their own devices, and then defeat any injunction by arguing that the lower price of the device enabled by the patent infringement itself led consumers to purchase the device for 'price' or 'better value' rather than the patented functionality. Competitors such as Samsung are willing to pay patent damages because the downstream sales they will make from stolen customers make this strategy profitable. See Presidio, 2012 WL 6602786, at *8 (noting potential for 'a calculating infringer' to gain windfalls by obtaining licenses at discount prices)."
The U.S. really has a patent enforcement problem. I don't like everything that I see happen here in Germany, where there are no equitable considerations and injunctions are a standard remedy, but the high standard for injunctive relief combined with the time-consuming and costly process in U.S. patent litigation makes it very hard for legitimate right holders to enforce their patents.
Finally, my favorite part of Apple's brief is that it stresses the option of a workaround:
"Samsung has no answer to the point that a more narrowly tailored injunction-- such as requiring Samsung to remove the infringing features from the Galaxy Nexus smartphone, the use of a sunset period, or even the district court's evaluation of the balance of the hardships--would safeguard against any risk of windfall without need for the novel and dangerous 'causal nexus' requirement. To be sure, Apple initially secured a complete ban on Galaxy Nexus sales (Opp. 12 n.8), but Samsung does not deny that it could have attempted to remove the infringing features and then applied for a modification of the injunction. Where, as here, the traditional equitable factors all point in favor of an injunction, the onus for justifying alternative relief should be on the wrongdoer, not the victim."
I've been criticizing for some time the entire-product-gets-banned perspective that Apple and some of its rivals have taken in various contexts. Many media reports also suggest that products will be removed from shelves when all that needs to be done is to remove or re-implement a particular feature. It makes no sense to have a feature-specific causal nexus requirement but to evaluate the hardship on the defendant from a full-product angle. I believe that the debate over injunctive relief will be much more fruitful on a feature-by-feature than a product-by-product basis. I also think Apple's proposal that the infringer should have the burden of proof for monetary compensation being a preferable alternative to an injunction is worth considering in scenarios in which a workaround is a viable option, if the right balance is struck.
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