Last Thursday Apple filed its reply brief in the appeal of Judge Koh's denial of a permanent injunction against Samsung despite a multiplicity of infringement findings by a California jury in August 2012. The reply brief finally became publicly available today.
Judge Koh's order came down approximately five months before this reply brief. Now that briefing is complete, a Federal Circuit hearing can take place in a matter of months. If anything can help Apple to convince Samsung to settle their world-spanning dispute on terms that protect Apple's interest in differentiation (with respect to the user experience as well as overall design), it's this appeal.
In this post I won't outline the key issues because I already did this in detail after Samsung's brief. I'll just highlight some key points of the reply brief. Here's the brief (this post continues below the document):
HEre are a few items I'd like to highlight:
The key Supreme Court decision both parties reference over and over again is eBay v. MercExchange. It's not just the per curiam opinion that the parties are debating, but also Justice Kennedy's influential concurring opinion, which Samsung interprets as discouraging injunctions when smaller parts of the overall functionality of a complex product are at issue. Apple, however, says that Justice Kennedy's concurrence is limited to non-practicing entities and points to the Federal Circuit's Bosch v. Pylon ruling, which confirmed that eBay did away with the presumption of irreparable harm but nevertheless stressed the importance of the role of patents as exclusionary property rights. Apple quotes from Bosch that Justice Kennedy didn't mean to address "traditional cases, such as this, where the patentee and adjudged infringer both practice the patented technology". Indeed, in Bosch the Federal Circuit went on to describe Justice Kennedy's concurrence as "contrasting the relevant considerations in traditional patent infringement actions with certain cases arising now 'in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees,' '[w]hen the patented invention is but a small component of the product,' and those involving 'the burgeoning number of patents over business methods'". But Justice Kennedy's concurrence has frequently been understood to discourage injunctions over small components regardless of whether the patentee is an NPE.
I've previously disagreed with how Judge Koh interpreted and weighted Apple's license agreements with IBM, Nokia and HTC in the Samsung case. If there's one area in her denial of the injunction in which I think she wasn't just being extremely conservative after the Federal Circuit's preliminary-injunction-related Apple v. Samsung decisions but got the strategic business implications wrong, it's how she concluded from the existence of those license agreements, without properly taking into account how they differ from the Apple-Samsung rivalry and the net effect of a de facto compulsory license (for example, HTC is not allowed to "clone" Apple's products), and the weight she afforded this. From the beginning I disagreed and expressed concern that this would discourage license deals. And this is precisely the context in which I believe Apple's reply brief makes the most compelling points. In its reply brief Apple warns that under these circumstances (absent a reversal) "litigants would face an enormous disincentive to settle patent litigation, because even offering a license could preclude an injunction in the future". It doesn't want to be "somehow forever barred from obtaining an order enjoining its primary direct competitor" only because of license deals that came with restrictions and resulted from rather different circumstances. With respect to Apple's design patents there isn't even any evidence of Apple ever having licensed them to anyone. I tend to agree with Applethat Judge Koh "treated this factor as dispositive of the adequacy of money damages".
These three sentences are my favorite ones in Apple's reply brief:
"The question is not whether Apple could be adequately compensated by a narrow, voluntary license to a non-competitor. Instead, the court must ask whether an unrestricted compulsory license to Apple's primary direct competitor is an adequate remedy. The answer to that question is clearly no."
I keep referring to my previous post on this appeal because I had put so much effort into outlining the key issues there. One issue that Samsung stressed a lot is the existence of workarounds/designarounds. I think Apple could stress the implications of workarounds/designarounds even more than Samsung does. Apple agrees that injunctions shouldn't result in a ban of entire multi-feature products because of a few infringing features, and mentions the possibility of narrowly-tailored injunctions and "carefully constructed sunset provisions" (quoting from Broadcom v. Qualcomm, "which allowed the infringer twenty months to redesign its products to eliminate the infringing features before enforcing the injunction"). I hope that workarounds/designarounds will be a key topic of debate at the appellate hearing. If Apple makes headway and the Federal Circuit considers a remand, then the question of narrowly-tailored remedies and transitional periods is going to come up.
Even after having read Apple's reply brief (twice) I'm unconvinced of suggestions that the "causal nexus" requirement is like an additional fifth factor to the four eBay factors and that it might only be relevant in connection with preliminary (not permanent) injunctions. Apple doesn't emphasize those claims in its reply brief. I do, however, concur with Apple that Judge Koh "treat[ed] the causal nexus requirement as a single dispositive factor", and that a patent holder prevailing on infringement and overcoming an invalidity defense is in a particularly strong position to insist on exclusivity (unless there are circumstances such as the ones relevant in standard-essential patent cases).
Earlier today I blogged about Apple's proposed amended infringement contentions in the second Calfiornia lawsuit with Samsung, accusing the Galaxy S4 of infringement of five of the patents-in-suit and the Google Now search app of infringement of two of those patents. Unless the question of access to injunctive relief is resolved by the Federal Circuit, Apple can prove infringement of many more U.S. patents and overcome Samsung's related invalidity defenses without ever obtaining the strategically most important remedy. Damages alone can't put this dispute to rest.
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