Monday, March 21, 2016

Supreme Court grants Samsung's petition to review Apple's smartphone design patents case

The Supreme Court of the United States has just published a decision it had already made on Friday (March 18): Samsung's December 2015 petition for writ of certiorari (request for Supreme Court review) in Apple's design patents case has been GRANTED with respect to question 2 (damages). As a result, the Apple v. Samsung damages re-retrial scheduled to begin later this month in the Northern District of California is almost certainly going to be postponed indefinitely, as Apple is seeking unapportioned infringer's profits on all five products still at issue and won't be entitled to that if Samsung prevails in the top U.S. court.

A decision to hear the case is not a decision in any party's favor, but it is substantial headway for Samsung and comes less than a month after the Federal Circuit threw out Apple's entire second California case against Samsung, nixing a $120 million jury award and rendering an injunction decision irrelevant. Samsung's outside lawyers in those cases, from Quinn Emanuel, must be very happy.

Cert petitions are usually long shots. But in this case, I was optimistic from the get-go, and I actually prepared this post here before the scheduled publication of the decision because I believed strongly it was going to play out just this way. I was in great company with my bullish perspective on the petition, as two bloggers who are IP lawyers agreed.

It's not surprising that the damages question, which also ignited far more interest among "friends of the court," fared better than the claim construction question, though the latter one was interesting as well.

Samsung received unusually broadbased support for its petition, which definitely buttressed the electronics giant's claims that the issues in the case--damages (disgorgement of unapportioned infringer's profits) and claim construction (functional elements not to be considered in infringement and validity analysis)--are of concern to the high-tech industry and other parts of the economy, and not just to Samsung only because Apple has already collected half a billion dollars in damages on a questionable basis.

Last month, Samsung reinforced its petition with a reply brief that argued the law of the smartphone should not follow reflexively from the law of the spoon. The Supreme Court may or may not agree that Apple was entitled to unapportioned infringer's profits, and it won't evaluate whether Judge Koh should have instructed the jury on the exclusion of functional elements from its analysis of Apple's infringement and Samsung's invalidity claims. Previously, both Judge Koh and the Federal Circuit had agreed with Apple that the law was, in their opinion, so crystal clear on unapportioned disgorgement that there was no room for any other interpretation. Judge Koh and the Federal Circuit also agreed that there was no requirement to instruct the jury on claim construction the way Samsung proposed. Now, the highest court has agreed with Samsung that there is a need for clarification of how to apply a 19th-century law to 21st-century, multifunctional, high-technology products. That is already, in and of itself, a disagreement with the way Judge Koh and the Federal Circuit had dismissed Samsung's arguments.

Whether this will result in the decision Samsung is fighting for remains to be seen. Without a doubt, the justices will understand the absurdity of unapportioned disgorgement, let alone the theoretical possibility of multiple disgorgements if multiple patent holders each win an unapportioned disgorgement. (In a more conservative theory, the second one might no longer receive an unapportioned disgorgement, but every patent holder would get something and one or more might get an unapportioned disgorgement, which also means that more than a company's entire profits from a product would be wiped out.) Then it depends on statutory interpretation. There are ways such as a reasonable definition of "article of manufacture," in which Samsung can prevail. Apple will have to argue that there is no room for interpretation outside of its own position. Sometimes there are situations in which judges see that a law needs a revision to reflect technological (or, in other fields, societal) change, but believe only Congress has the authority to do something about it. That's the conclusion Apple wants the Supreme Court to reach here.

I'll be following the proceedings in detail, and I'll be talking about statutory interpretation as well as policy considerations in the months ahead. For now, I just want to highlight a very few aspects:

  • One reason Apple wanted to avoid this is because one of its iPhone design patents at issue in the case, the D'677 patent, has been held invalid by the Central Reexamination Division of the United States Patent and Trademark Office in an ongoing reexamination. Should this decision to be affirmed, then it will be harder and harder for Apple to collect the amount of damages originally awarded. It will take years until there is a final, non-appealable decision (presumably, Apple will exhaust all appeals unless it prevails before), but significant interim steps can also have an effect on the infringement proceedings.

  • There was no amicus curiae (friend of the court) who filed a letter oin support of Apple's position. Apple received limited support for its position on damages--nowhere near the level of Samsung's support, but some support--in 2014 before the Federal Circuit. Those amici presumably didn't file a letter this time around because it would have been counterproductive: it would only have shown that there is strong interest in this. Now, at the merits stage, they will become active again.

  • I'm sure Samsung can count on at least the support it received for its petition, and that was already very impressive. But it's possible that now, with the Supreme Court having decided to look at this, even more companies will openly take Samsung's side.

I'm very happy that the Supreme Court will now take a look at an interpretation of the law that would theoretically threaten even a company like Facebook (or little guys--for example, "indie" app developers) with the prospect of losing their entire profits over a single design patent infringement. I'm hopeful that something good will come out of this. And it wouldn't even bad for Apple. Once the shoe is on the other foot, Apple, the most profitable company in the history of this industry, will fight the notion of an unapportioned disgorgement as well. It's just hoping to somehow get leverage over Samsung with its design patents, now that its utility (technical) patents have practically failed to have any non-negligible effect.

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