Injunction for Patent Infringement in the Smartphone War

Posted on Oct 28, 2015 in Articles

This article originally appeared in The Legal Intelligencer on October 28, 2015.

The standard for granting an injunction in a patent infringement case may have changed last month in Apple v. Samsung Electronics, No. 2014-1802 (Fed. Cir. September 17, 2015) (Apple IV). In this important decision, the U.S. Court of Appeals for the Federal Circuit carefully evaluated the landmark U.S. Supreme Court case eBay v. MercExchange LLC, 547 U.S. 388 (2006), and made it easier for plaintiffs to obtain an injunction for patent infringement.

Last month’s Federal Circuit decision is one in a long line of cases commonly known as the “smartphone war” in which the two smartphone industry leaders, Apple and Samsung, have been battling over several of Apple’s patents. Other decisions in this lengthy conflict have awarded Apple substantial damages for infringement by Samsung’s smartphone products. Last month’s Federal Circuit decision, however, addressed the issue of injunction, and widened the door for future patent holders to obtain injunctive relief.

Apple’s patents in suit covered only a few of the many features that have made the iPhone a best seller. Apple’s patented “slide to unlock” feature, whereby a user slides his finger from left to right on the screen in order to start using the iPhone, is considered by Apple to be at the “core” of the iPhone user experience. Apple’s patented data-structure detection enables a telephone number in a text message to be used for directly initiating a telephone call. Apple’s patented word correction feature was adopted by Samsung (according to the Federal Circuit’s opinion) after unfavorable feedback from consumers regarding Samsung’s earlier word correction software. Apple sought an injunction based on Samsung including these three features in its products.

Following the monetary verdict, Apple moved for a permanent injunction to prevent Samsung from importing into the United States software relating to the above three patented features. Furthermore, Apple included a 30-day “sunset period” in its request, during which Samsung could design around Apple’s patent claims before the injunction would come into effect. The district court refused to award the injunction because it concluded that Apple had not suffered irreparable harm. Apple appealed.

Prior to 2006, patent holders enjoyed a presumptive entitlement to an injunctive award. That changed in 2006 when eBay was decided. The eBay case established four criteria to be evaluated by the courts in determining whether to grant injunctive relief. The four criteria that the plaintiff must demonstrate are:

• The plaintiff has suffered an irreparable injury.
• Remedies available at law are inadequate to compensate the plaintiff for the injury sustained.
• A remedy in equity is warranted considering the balance of hardships between the plaintiff and defendant.
• The public interest would not be disserved by a permanent injunction.
• The Apple IV Federal Circuit court evaluated each of the above issues.

The first factor, demonstrating irreparable injury, is accomplished by providing proof that a “causal nexus relates the alleged harm to the alleged infringement,” according to Apple v. Samsung Electronics, 695 F.3d 1370 (Fed. Cir. 2012). Of significant importance to proving this factor, stated the Federal Circuit, is showing “some connection” between the patented features and the demand for the infringing product. “Some connection,” however, is a phrase that can be difficult to define. Adding to the complexity of this issue is the fact that Samsung has thousands of desirable features in the products for which Apple seeks an injunction, and Apple has patents on only three of those features. The court thus gave examples of how a plaintiff could show “some connection”:

• “Evidence that a patented feature is one of several features that cause consumers to make their purchasing decisions.
• Evidence that the inclusion of a patented feature makes a product significantly more desirable.
• Evidence that the absence of a patented feature would make a product significantly less desirable.”
• The district court was thus mistaken, explained the Federal Circuit, when the district court “required Apple to show that the infringing features were the reason why consumers purchased the accused products.” Rather, the lower court should have required Apple to show that the infringing features were “important” to customers when they were making phone purchases. As Apple had shown that the features relating to infringement “were important to customers when they were examining their phone choices,” the Federal Circuit concluded that Apple had established irreparable harm.

The second factor, showing that remedies available at law are inadequate, can be difficult to quantify because of the effect of patent infringement on downstream sales, namely lost sales subsequent to and because of the patent infringement. The court provided examples of downstream sales such as “sales of accessories, computers, software applications, and future smartphones and tablets.” The lower court ruled in Samsung’s favor because it determined that Apple had not established irreparable harm. Since the Federal Circuit determined that irreparable harm had occurred, it concluded that the district court had erred on the issue of whether “remedies available at law, such as monetary damages, are inadequate to compensate for the irreparable harm suffered by the patentee.” Thus, the Federal Circuit concluded that this factor weighed in favor of granting Apple an injunction.

With regard to the balance of hardships, the third factor, the Federal Circuit concluded that Samsung would “suffer relatively little harm” from Apple’s injunction. That conclusion was reached because the injunction targeted specific features in Samsung’s products, included a 30-day sunset provision, and because Samsung “repeatedly told the jury that designing around the asserted claims of the three patents at issue would be easy and fast.” By contrast, without an injunction, Apple would have to “compete against its own patented invention … [which] places a substantial hardship on [Apple],” the court said. Hence, the Federal Circuit ruled that the third factor weighed in favor of Apple.

Finally, with regard to the public interest, the fourth factor, Apple sought a narrow feature-based injunction, and the evidence of record showed that Samsung could remove Apple’s patented features from Samsung’s products without product recalls or disrupting customers’ use of their products. In view of the public interest in protecting patents, the Federal Circuit ruled that this factor weighed in favor of Apple.

The Federal Circuit vacated the district court’s decision to deny the injunction, and remanded for further consideration consistent with the opinion. This might not be the end of the story. Samsung recently petitioned the Federal Circuit to rehear the case en banc. If the court agrees, it will need to consider the jurisprudence that frowns upon granting injunctions when infringing features are but a small percentage of the infringer’s product.

In eBay for example, Justice Anthony Kennedy (in a concurring opinion) acknowledged the importance of injunctive relief, but he also had a cautionary note: “An industry has developed in which firms use patents … primarily for obtaining licensing fees. For these firms, an injunction … can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the invention. When the patented invention is but a small component of the product the companies seek to produce … an injunction may not serve the public interest.”

Even in Apple IV, Federal Circuit Chief Judge Sharon Prost dissented for a variety of reasons, including her position that the majority’s “some connection” standard was an incorrect basis for determining whether injunctive relief was proper. Prost argued that the proper standard is “the patentee must rather show that the infringing feature drives consumer demand for the accused product,” citing the 2012 Apple opinion.

In Samsung’s petition for en banc rehearing, Samsung argued that the majority’s reliance on a “some connection” standard to create a causal nexus to irreparable harm could include an “insignificant connection” and if an “‘insignificant’ connection suffices to create a causal nexus to irreparable harm, the panel majority’s approach would give rise to an injunction in virtually any case involving a competitor’s infringement of a patented feature.”

For the time being, Apple IV appears to have made it easier for patent owners to obtain injunctive relief, or at least easier to prove the “irreparable harm” element for obtaining such relief. Time will tell the true impact of this decision.

– by Lawrence Ashery