Saturday, July 29, 2017

Samsung another step closer to design patent damages retrial: Judge Koh finds no waiver

Judge Lucy Koh of the United States District Court for the Northern District of California, who has been presiding over Apple v. Samsung since the Carter presidency (or not long thereafter, it feels) and recently positioned herself as a Judge Posner-like thought leader on standard-essential patent abuse, entered an order Friday evening local time that could very well (but won't necessarily) lead to another "AppSung" retrial (this post continues below the document):

17-07-28 Apple v. Samsung No Waiver of AOM Issue by Florian Mueller on Scribd

In April, Judge Koh had ordered the two perennial litigants to explain why Samsung had (as Apple claimed) or had not (as Samsung argued) waived the "article of manufacture" issue, which is central to any further determination of design patent damages in this case since the Supreme Court had overruled both the Federal Circuit and Judge Koh on that one. So the court is now dealing with the fallout of the first Apple v. Samsung matter that had made it to the top U.S. court while the Department of Justice is determining what positions to take on three issues raised in connection with the second Apple v. Samsung case.

I really like the structure and clarity of Judge Koh's analysis in her latest order because she simply declined to conflate procedures and merits. The court is now cracking one nut at a time, and the first nut was only waiver. However, in at least one context (footnote 5) the order goes beyond what was strictly necessary to arrive at a no-waiver finding and declares cases cited by Apple to be inapposite to the question of whether Apple was entitled to a disgorgement of profits on Samsung's entire phones.

As I had written on more than one occasion, it appeared unlikely that, in a dispute where both parties have spent enormous resources and generally pursued a throw-in-the-kitchen-sink approach, Samsung would not have said or produced anything that one could reasonably deem to have been sufficient to preserve the "article of manufacture" issue. The order now explains the chronology of this case, and as I had also said before, Samsung had not emphasized the article-of-manufacture question that much in the beginning, but over time that question got more and more attention.

What helped Samsung here was that it had proposed a jury instruction that explicitly raised the issue. There were also other references, though Samsung's earlier arguments in the case were apportionment-centric, and apportionment didn't get traction at any of the three levels (district court, appeals court, SCOTUS). Still, some of the arguments and especially some of the evidence related to apportionment can also be used in the article-of-manufacture context.

After succeeding with an extremely strong, "slam dunk" cert petition, after avoiding that the DoJ would have sided with Apple on statutory interpretation, after winning reversal, after persuading the Federal Circuit to remand the case to California, and after avoiding "sudden death" on remand, Samsung has cleared another hurdle. But that one still wasn't the final one.

Judge Koh now wants the parties to propose a test for identifying the relevant article of manufacture--a question with respect to which the Supreme Court previously didn't feel it got much help from the parties, but that was because the name of the game was to win (Samsung) or avoid (Apple) reversal, not to solve the whole problem. The second and third questions raised in the order relate to burden of proof. In my reaction to the Supreme Court decision I had already said that, while it's obvious the Supreme Court didn't need and especially didn't want to do it, it would really have been helpful if that one could have been clarified at that stage. Whoever will lose the next round is going to appeal the test Judge Koh will adopt and/or the decision she makes on the burden of proof...

Judge Koh's order leaves the door open to a finding on her part that she had previously been right for the wrong reasons. She may find that, based on the evidence in the record, those entire Samsung phones were the correct article of manufacture, so that even under the Supreme Court's statutory interpretation, the outcome would be the same as before. In that case, there wouldn't be another trial (unless there was another successful appeal). That would be an unfortunate outcome and lead to even more litigation over design patents (though future sophisticated defendants would obviously build their article-of-manufacture argument from the get-go).

The parties have until Tuesday to propose a briefing schedule, and a case management conference will be held on Wednesday.

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