Apple is fighting a strategic battle at the United States Court of Appeals for the Federal Circuit. It's about nothing less than the question of whether Apple or other industry players will have a realistic chance to win U.S. utility patent injunctions (other than ITC import bans, which follow different rules) against multifunctional smartphones and tablet computers. The importance of this basic question can hardly be overstated:
If the answer is that sales bans remain practically unavailable (unless there's a massive design patent infringement), patent holders like Apple will have to focus on other jurisdictions (such as Germany) and will have to content themselves with past damages and ongoing royalties in U.S. federal court, which will eventually give them significant leverage, but it will take a lot of time and money to get there. Apple argues that the "costs to innovation will be profound" in this scenario.
If the appeals court alters course and ensures that utility patent injunctions against multi-feature products remain reasonably available, Apple may later this year have the leverage it needs to get Samsung to make an anti-cloning commitment such as the one made by HTC. The Galaxy Nexus case itself won't have that effect directly, but a modified Federal Circuit opinion would pave the way for a successful appeal of Judge Koh's recent, unprecedented denial of an injunction against two dozen Samsung products over half a dozen intellectual property rights.
The stakes could hardly be higher.
A few days ago, Reuters' Dan Levine reported on this (the only general-interest media report on this topic that I've seen to date) and said that Apple faces "long odds" in the eyes of certain experts. With the greatest respect for the people Reuters quoted and relied on, I disagree. It's a significant challenge, but it's not a long shot at this stage, considering that the Federal Circuit ordered Samsung to respond to Apple's petition and that if the question raised here isn't fundamental enough to warrant a rehearing, nothing else will.
There are actually three kinds of odds that must be properly distinguished:
I would agree that the odds are somewhat long against the ultimate outcome of this process being an injunction against the (now somewhat obsolete) Galaxy Nexus phone. That's because Apple would need to overcome more than one hurdle to get that particular injunction back. There's the causal nexus issue (the question of whether the specific infringements, as opposed to multifunctional products with infringing and non-infringing features, cause irreparable harm), but also a claim construction issue. For the claim construction part let me refer you to Patently-O's excellent explanation. And even if Apple made headway on causal nexus and claim construction, it's possible that the Federal Circuit finds that it simply asked for too broad an injunction, and that a more narrowly-tailored request would have succeeded.
The odds are considerably less long against Apple achieving some improvement on the causal nexus issue alone. In that case, the Galaxy Nexus injunction wouldn't come back, but Apple's appeal of last month's denial of an injunction over half a dozen intellectual property rights would get an unbelievable boost. And I believe Apple would be 99% happy in this scenario.
The first question, in a chronological sense, that needs to be answered now is whether a rehearing en banc will be granted. Such full-bench reviews are rare. I mentioned before that they grant maybe one or two a year. But under the specific circumstances here, I believe Apple now has a 50% chance, if not greater. I'll explain this now in more detail.
The standard for a rehearing en banc is that Apple must show a conflict between a particular panel decision with Federal Circuit precedent or an issue of exceptional importance. As for the conflict, I see stronger indications of this being the case for the aforementioned claim construction issue than the injunctive-relief standard. But in my view there can be no doubt about the exceptional, ongoing importance of the "causal nexus" matter. Let me quote Patently-O's Professor Dennis Crouch:
"Taken as a pair, Apple I [the appeal of the Galaxy Tab preliminary injunction] and Apple II [the appeal of the Galaxy Nexus preliminary injunction] are important because they further reduce the chances that the owner of a component patent will obtain injunctive relief. Before eBay, irreparabl[e] harm was hardly a consideration. Since eBay [v. MercExchange], the irreparable harm factor has largely focused on whether the patentee has a product or potential product being harmed by ongoing infringement. Now, the question will move to the next level of granularity in a way that will be difficult for patentees to prove."
Samsung's brief, which was filed late on Friday (the deadline was extended as per a request by Samsung, which Apple didn't oppose), obviously tries to deny any conflicts with previous decisions and to downplay the importance of this matter, as it must. Its brief makes a number of valid arguments on the issue itself, but I don't really think the filing makes a compelling case for not taking a closer look at the issue.
Here's one aspect of the rehearing-or-not analysis on which I tend to agree with Samsung. Apple argued in its petition that the causal nexus requirement is effectively a new, fifth eBay factor. That's Apple's strategy for claiming that there's a conflict with Federal Circuit precedent, but I'm also inclined to think that the causal nexus is just, as Dennis Crouch said in the paragraph quoted above, "the next level of granularity".
Samsung argues that "[i]njunctions have long been denied for lack of causal nexus between alleged illegality and injury outside the patent area" (emphasis mine). In this context, Samsung points to two Ninth Circuit and three district court decisions from other circuits. But the fact that Samsung can't point to Federal Circuit precedent, or at least some district court patent cases, supports Apple's claim of this being novel. A new development it is for sure -- maybe a conflict with same-court precedent as Apple says, but even if not, it's at least a new and important issue that warrants review.
In its petition Apple pointed to certain cases in which injunctions were granted, including, among others, the i4i v. Microsoft case. In this regard I agree with Samsung to some degree, but ultimately come down on Apple's side as far as the need for a rehearing is concerned. Samsung's pleading explains very well why the cases adduced by Apple are distinguishable from a smartphone or tablet computer case. In all of those cases there certainly was (even if the "causal nexus" issue wasn't addressed per se) a much closer relationship between the patents held infringed and the alleged irreparable harm. One of the relates to a medical device that Samsung claims was "effectively coextensive" with the patent-in-suit, and Samsung's related arguments are plausible. Nevertheless it is an issue of exceptional importance to the entire U.S. patent system whether injunctive relief is or is not realistically available (meaning that the requirements for proof aren't so exacting that no one can reasonably meet them) in connection with products of this kind. As a matter of fact, this product category of multifunctional, mobile computing devices has given rise to more high-profile patent lawsuits than any other in recent history.
Samsung obviously argues that one could still win an injunction if it's more narrowly-tailored than the one Apple sought (and this again is a point on which Samsung may be right) and presents different kinds of evidence. On the latter part I have my doubts. It really looks to me like the current requirements represent an insurmountable hurdle, even for a company with Apple's sophistication and resources.
If the Galaxy Nexus appellate opinion is not modified, the U.S. patent enforcement system (apart from the ITC, which is different in various ways and not really a substitute for the federal courts) will basically abdicate with respect to this industry. The result will be that a Silicon Valley icon like Apple will have to turn to the courts in Dusseldorf, Mannheim, Munich, The Hague, Paris, or maybe also London, Sydney, Milan and Madrid, to prevent its closest competitor from copying some of its patented features.
There simply is no single utility patent that can be seen as driving demand for an entire smartphone or tablet computer. It's always a combination of numerous features. Samsung does not cite an example of a patent that it would recognize to be a driver of demand. If Samsung was forced to come up with one, it would likely name some of its own patents (it's one of the largest patent filers in the world, but the impact of its scattershot litigation against Apple, outside of Korea, has been next to nil) and would never concede this with respect to an Apple patent. But again, there simply isn't "the iPhone patent" or "the iPad patent". And no U.S. federal court would have allowed Apple to assert a couple hundred patents in the same action and put them all before a jury. So the question is what the courts will do, and whether they will impose sales bans, if a smaller number of patents (which is not that small in the Apple v. Samsung case that went to trial in the summer) is found infringed.
In its brief, Samsung argues that Apple was able to win an injunction against the Galaxy Tab 10.1, but it only did so over one of several patents deemed infringed, and that one was a design patent. There obviously aren't tens or hundreds of thousands of design patents that read on a single product. But there are massive numbers of utility patents that such devices can infringe, and the Federal Circuit has apparently begun to ask itself whether it needs to alter the course. I have a hunch that the rehearing will take place, and that there will be some improvement for Apple, though likely not enough to get the Galaxy Nexus banned, which doesn't really matter commercially compared to the implications for the appeal of last month's denial of a permanent injunction. There are some good points in Samsung's pleading, but all in all I think it's not very dissuasive with respect to the enormous importance of the issue.
As a side note, Samsung's brief also quotes from an Apple filing in an Eastman Kodak case (by now, Apple owns some former Kodak patents and co-owns others) in which Apple argued against injunctive relief and made a causation-related argument. Each party to a dispute makes the opposite argument when the shoe is on the other foot. I don't expect this to bear much weight.
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