Thursday, March 5, 2015

U.S. appeals court unlikely to grant Apple an injunction against Samsung over three software patents

The five-year anniversary of Apple's patent enforcement efforts against Google's Android mobile operating system (on March 2, 2010, Apple sued HTC) went unnoticed because there was nothing to celebrate in Cupertino. Half a decade after Steve Jobs told his biographer he considered Android a "stolen product" and wanted to "right this wrong" by means of thermonuclear patent war, it's clear that this industry's greatest product visionary simply overestimated the impact that his company's patents would have. Other companies than Apple haven't been much more successful in recent years, to be fair. This is an industry-wide issue.

Yesterday, the United States Court of Appeals for the Federal Circuit held a hearing on Apple's appeal of Judge Koh's August 2014 denial of a permanent injunction against Samsung based on the spring 2014 trial in the second California litigation between these parties. It's the sole remaining case in which Apple is still trying to obtain injunctive relief against Android-based products anywhere in the world. In July, Apple dropped a cross-appeal that could have led (in theory) to an injunction against Samsung based on the first case (which had initially gone to trial in the summer of 2012).

After seeing various reports (such as this one on AppleInsider) that already suggested Apple faced a skeptical court, I've just listened to the official recording (MP3) and agree that affirmance of the denial is the most likely outcome.

On Apple's behalf, WilmerHale's Bill Lee argued, as he and his team already had in their appellate briefs, that this time around Apple was entitled to an injunction despite unfavorable results in prior proceedings, attempting to distinguish the present injunction push from previous ones on three bases:

  1. feature-based rather than product-based injunction

  2. availability of designarounds (at least at the end of a sunset period)

  3. reputational injury

In its responsive brief, filed in December 2014, Samsung said that no matter what Apple says, it still couldn't tie patented features to lost sales. But that's what the causal nexus requirement that was at the heart of previous Apple-Samsung injunction denials is all about.

A majority of the three-judge panel -- specifically, Chief Judge Prost and Circuit Judge Moore -- appears to be unimpressed with Apple's new twist. Mr. Lee tried hard to win them over, but at the end of the day they appear to feel that none of Apple's "new" arguments get Apple over the decisive hurdle of showing a causal nexus between the infringements identified by the jury (those findings are on appeal and at least a partial reversal is quite a possiblity) and the irreparable harm it claims to suffer. Apple would like its "new" arguments to have a bearing on all eBay factors, but the most critical one, irreparable harm to Apple, must be shown regardless of the scope of the injunction and regardless of the availability of designarounds at the end of a sunset period. A purely reputation-based argument (having to compete against one's own features) doesn't appear to have traction either. Samsung's counsel, Quinn Emanuel's Kathleen Sullivan, noted that neither Apple nor Samsung ever advertised the features in question.

Samsung's counsel also had to answer some questions that appeared reasonably tough, but the one that was posed most emphatically ("why are you fighting [Apple's injunction request if you say you don't infringe anyway]?") had absolutely nothing to do with Apple's need to establish a causal nexus.

Of the three judges, Circuit Judge Reyna appears (only relatively speaking) most sympathetic to Apple's appeal. He expressed great admiration for Apple's contribution to innovation in a 2013 ruling in an Apple v. Motorola case. However, the patent Judge Reyna described as an example of true innovation at the time related to much more fundamental technology than anything at issue between Apple and Samsung (at least the patent in that Motorola case might have been important if a more powerful claim had survived, which it should have in Judge Reyna's dissenting opinion).

This appeal is unlikely to give Apple strategic leverage. Also, I'd like to point you to this IPWatchDog post on why a recent Supreme Court ruling should (adversely) affect the design patent-related part of Apple's first Samsung case. The related Federal Circuit hearing took place three months ago, so a ruling could come down anytime. There's a third Apple-Samsung appeal pending before the Federal Circuit. In that one, Apple is trying to get a more favorable outcome than at last year's trial while Samsung (which could easily live with last year's result) is also trying to improve its position. Samsung will file its appellate brief any moment now (its counsel announced this at yesterday's hearing).

Is it really in Apple's interest to get appellate decisions in those cases? I don't think so. I have said before that Apple should rather settle before a decision (on design patents, for instance) comes down. Based on how yesterday's hearing went, I think a settlement makes even more sense for Apple. Every time it is denied an injunction, things get harder the next time. Apple should look past the Samsung dispute (as it has in all other jurisdictions than the United States) and focus on matters such as its royalties fight with Ericsson, where there's a key issue (the proper royalty base) that can have far more impact on Apple's bottom line over the next five years or more than the remaining issues it has to sort out with Samsung at this stage.

For now, Apple is doing extremely well despite Android's huge worldwide market share. Should this change, then it may have to try again to obtain injunctions. And then it may have a stronger case for irreparable harm than it has in the current climate.

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