Saturday, October 8, 2016

Majority of Federal Circuit sides with Apple against Samsung: impact assessment, next steps

Only a few days prior to the long-awaited Supreme Court hearing on design patent damages (Tuesday, October 11), there's some surprise #appsung news. For the second time this year, Apple's world-class legal team achieved a turnaround that any litigator would be proud of for the rest of his life. In January, the Federal Circuit finally granted Apple an injunction against certain Samsung devices. While useless in practical terms, Apple managed to shift the goalposts in its favor even thought he hearing hadn't gone well for it. Then, a month later, a three-judge Federal Circuit panel threw out Apple's second California case against Samsung, but now the full court (11 judges) overturned the panel with an 8-3 majority decision (PDF), thereby reinstating Apple's $119 million (roughly 5% of what it originally sought) spring 2014 verdict.

Two surprise turnarounds within nine months of each other are stunning. But this is a dispute between companies, not the legal equivalent of the Olympic Games. So what is this good for?

Enforcement of patents-in-suit won't affect Samsung's U.S. sales

The three patents are the "quick links" patent (which expired earlier this year), the slide-to-unlock patent (which even several Samsung devices at issue in this case weren't accused of infringing and which has lost relevance in the age of Touch ID), and the autocomplete patent, which never appeared to be a high-priority patent-in-suit in this case.

At this stage (who knows what new information will surface over time) there's no reason to assume that any Samsung device will have to be modified (beyond what has already been done) as a result of Apple's two Federal Circuit wins.

Implications for damages

This litigation is now about money (and reputation). The Federal Circuit has remanded the case to California for a determination on willfulness. This could result in willfulness enhancements (triple damages). It's possible that this means more money for Apple but I doubt there will be much impact, if any. Willfulness has an objective and a subjective dimension. The objective dimension appears hard to establish, given that a Federal Circuit panel (even though overruled later) found Apple had no case.

However, Apple might seek supplemental damages for the roughly two years between the cutoff date for the spring 2014 trial and the expiration of the "quick links" patent (which amounted for the bulk of the damages award, so it's the only one worth thinking about in this context). There would likely be an argument over whether or not Samsung continued to "infringe."

I must admit that I haven't been able to figure out from the en banc opinion what actually happened to the damages-related parts of Samsung's appeal. Samsung had argued, especially with a focus on the "quick links" patent, that the district court prevented it from presenting important evidence about real-world deals such as Apple's license deals with Nokia and HTC. The Federal Circuit panel never reached those parts of Samsung's appeal because it threw out the case on the merits ("In light of these holdings, we need not address the other issues on this appeal."). I tried to find a reference to those evidentiary issues in the en banc opinion but couldn't find any. If you've been more successful in this regard, please let me know via my contact form...

Maybe I overlooked something. Or maybe someone else did.

Unusual procedural events

Apple's rehearing petition had been pending for more than half a year and I had already started wondering why there was silence on the docket, and then the Federal Circuit rendered an en banc opinion instead of first granting the petition, then getting some more briefing, holding a rehearing, and finally deciding.

As at least one of the dissents notes, this is unusual.

What's also unusual is that the eight judges who were not on the panel (the three on the panel stayed firm and wrote their dissenting opinions) had to actually disagree with the panel on several issues in order to arrive at this complete reversal of fortunes with respect to Apple's offensive case.

The primary reason I had been initially (before things started taking unusually long) skeptical about Apple's petition for rehearing was that I thought a unanimous panel decision by a panel that was not an outlier -- in fact, it was pretty representative of the composition of the court as a whole, with frequently defendant-friendly Chief Judge Prost on one side of the spectrum and previously Apple-friendy Circuit Judge Reyna on the other end -- was less likely to be overruled than an outlier position or a 2-1 majority ruling.

While there are differences between the approaches of Federal Circuit judges, I wouldn't have thought that eight non-panel judges would totally agree that the three panel judges got everything (except the part about Samsung's offensive counterclaims) wrong. This is just a highly unusual discrepancy.

The combination of all of this is strange, but there really isn't anything there that would give rise to conspiracy theories like Bill Clinton's tarmac meeting with the Attorney General.

What one could imagine (and I'm not saying this is something I necessarily believe to be the case, but it would be plausible) is that somehow the eight non-panel judges' agreement was made easier by some circuit judges wanting to settle accounts with, or weaken, the Chief Judge. Previously, Chief Judge Rader was somewhere between the Federal Circuit mainstream and the "radical" pro-right-holder wing. Chief Judge Prost isn't always defendant-friendly but certainly in a completely different part of the spectrum of positions. It could be that various Federal Circuit judges feel she doesn't really represent them. She's not their boss in a strict sense anyway, but chief judges often get to speak for their court and it could be that there is a disconnect between her and some old-school patent radicals.

Prospects for a second Apple-Samsung Supreme court case

I haven't been able to find a Samsung statement on this yet. I guess Samsung's lawyers are now completely focused on the design patents case. So is Apple. But I'm not going to wait for the parties before I me share my thoughts as to the prospects for a Supreme Court appeal in this context here:

  • It's clear that the three panel judges phrased their dissents (which I like very much) with the objective to encourage, and provide ammunition for, a further appeal. Dissenting opinions always contain statements that can be viewed as invitations for an appeal but in this case the indications are unusually clear.

  • I would be disappointed if Samsung gave up, but I also want to be realistic: a further appeal here would be harder than last time. Psychologically, the Supreme Court might just not have an appetite for yet another #appsung case. But what makes this here a significant challenge for Samsung's lawyers (which are at the same level as their colleagues representing Apple) is that it won't be easy to set the right priorities. It's not just about where the en banc might be demeed to have made mistakes. Before the Supreme Court looks at the merits, it evaluates whether the issues presented warrant certiorari. And to achieve that, Samsung will also want to get broadbased support from amici curiae, as it did in the design patent case.

    The Holy Grail is an issue, or set of issues, that the Supreme Court will be willing to look at, that various stakeholders will encourage the Supreme Court to rule on, and where the Supreme Court will likely reverse the appellate opinion.

  • The dissenting judges point out that a full-bench review is not meant to just overrule a panel because of merely another opinion on an issue. It takes more than that. And they believe the court would have benefited from a rehearing (instead of handing down a written decision right away).

    The standard for a full court overruling an appellate panel is a potential issue to be reviewed here. I just don't know how attractive an issue that is for the Supreme Court and for potential amici. The fact that a decision came down without another hearing appears to me (unless there's some very interesting precedent that I don't know) to be something that wouldn't likely get traction, but even if it did, it simply wouldn't help: Samsung's lawyers would just be banging their head against an eight-judge wall then, to no avail.

  • On the substantive side, two of the patents (autocomplete, slide-to-unlock) raise questions about the weight to be given to secondary indicia of nonobviousness and the evidentiary standards for invalidation. Circuit Judge Dyk (one of the most experienced ones) explained in his dissent:

    "[T]he majority lowers the bar for nonobviousness by refusing to take account of the trivial nature of the two claimed inventions. With respect to the '721 patent, the slide to unlock feature was known in the prior art (Neonode) and the only innovation is an image associated with the sliding gesture from fixed starting to ending points. [...] With respect to the '172 patent, the autocorrect feature was known in the prior art (Robinson), and the only innovation is displaying contemporaneously the text to be autocorrected. [...] Such text displays have long been known in the prior art (though not specifically in connection with autocorrect display).

    Treating such minimal advances over the prior art as nonobvious is contrary to KSR, where the Supreme Court confirmed that the obviousness doctrine is designed to ensure that “the results of ordinary innovation are not the subject of exclusive rights under the patent laws."

    I could easily picture some great amici siding with Samsung on obviousness and it might be reasonably interesting to the Supreme Court. But it would not help Samsung with respect to where most of the money is in this case: the "quick links" patent. Samsung could, of course, raise any number of issues. But it would be an economically undesirable outcome for Samsung if the petition was granted with respect to obviousness and rejected with respect to the "quick links" patent.

  • The focus must be on the "quick links" patent (I believe Samsung should even focus on it exclusively but that's their call), one issue raised by the dissenting opinions is that Apple and Samsung agreed, during this litigation, on a certain claim construction, and at least one dissenting opinion says the majority didn't really respect that agreement between the parties. What I find more interesting is that the majority argues an Android library for identifying phone numbers etc. in an email or other text document constitues a "separate" server because it runs in a different memory location. Chief Judge Prost explains very well why that doesn't make sense and actually vitiates an important claim limitation:

    "The majority asserts that, in light of the specification, a program that is 'structurally separate,' without more, satisfies the “‘separate’ requirement.' [...] We did not so cabin the word 'separate' in our Motorola construction. Because no two program routines may physically occupy the same memory at the same time (i.e., any two separate program routines are, by definition, separate in storage), the majority’s interpretation effectively and erroneously reads 'separate' out of our construction. Relatedly, the majority also fails to give effect to the requirement under our construction that the routine is a server routine, not any piece of code. That is significant because we relied in Motorola on the plain meaning of 'server,' which entailed a client-server relationship."

    If Samsung's attorneys found a way to raise this kind of issue in a general, certworthy form by presenting a question that the Supreme Court may very well decide to review, then that would seem the most promising approach to me based on what I know today, only about 24 hours after finding out about the Federal Circuit decision.

There should be a cert petition. I think it would have a very positive effect (not thinking specifically of this case but with a view to other patent litigation) if it was granted. And in that case, I think the panel decision should be reinstated. But now Samsung's lawyers have to design a strategy, which was much clearer to see in the design patents context than it is here.

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