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No Permanent Injunction for Apple in Samsung Patent Battle


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: December 18, 2012 @ 7:02 pm
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Yesterday, the Judge Koh of the United States District Court for the Northern District of California, San Jose Division, denied Apple’s request for a permanent injunction in their ongoing patent war over smartphones with Samsung. The denial of the injunction will allow Samsung to continue to sell devices found to infringe Apple’s patents.  See Order Denying Motion for Permanent Injunction.

This outcome is becoming all too commonplace ever since the United States Supreme Court issued its terribly damaging, misguided decision in eBay v. MercExchange. See Happy 5th Birthday eBay v. MerchExchange. Up until that decision a permanent injunction was nearly always granted to a victorious patent owner. That, of course, made perfect sense since the rights that are allegedly granted in a U.S. patent include THE RIGHT TO EXCLUDE!  I know it is bad form to yell like that, but it is mind boggling to me still to this day. How can the Justices of the Supreme Court who profess to know everything about everything simply not comprehend something as simple and straight forward as the EXPLICIT TERMS OF THE PATENT GRANT! There I go again. Yelling at those who are so poorly informed as the Supreme Court likely isn’t going to help. It is, however, rather cathartic!

In eBay the Supreme Court determined that the familiar principles of equity as applied to permanent injunctions should apply to disputes arising under the Patent Act, even though the patent right is itself a right to exclude.  The translation: the previously applied bright-line rule that resulted in permanent injunctions being issued as a matter of course was erased.  That makes sense to no one who has thoughtfully considered the issue. Anyone who disagrees with that comment is either (1) not being honest; (2) hasn’t really considered the issues and equities; or (3) has a vested interest that requires them to engage in intellectually dishonest reasoning. The only reason to get a patent is to exclude others.  That is why you pay so much money and why you spend so many years waiting for a patent — to exclude others. And what is an injunction? An injunction is only an order from a district court demanding that the loser (i.e., infringer) cease from ever doing the very thing that the patent says they cannot do.

Yet, the Supreme Court traded the familiar test, the one that is actually grounded in the patent grant established by Congress pursuant to the U.S. Constitution.  Now in order to get an injunction in a patent case the patentee, who has already won, must demonstrate entitlement to an order that would exclude infringement pursuant to the traditional four-factor test for granting injunctions.  Starting late in the morning on May 15, 2006, in order to receive a permanent injunction in a patent litigation the victorious plaintiff needs to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

How can that make sense to anyone? The patentee, who has already won, must establish entitlement to an order to exclude ongoing and future infringement under a four-factor test that balances equities? What good is a patent? Why did the Patent Office even bother reviewing the patent in the first place then? Why do we pretend that there is an exclusive right in the first place? And the most ignorant elements of the anti-patent community have the audacity to refer to a patent as a monopoly? Give me a break! Thanks to eBay  and a Supreme Court that knows enough about patent law to fill a thimble — maybe — patents are no longer an exclusionary right. Patents that are valuable, valid and infringed must be compulsory licensed even to direct competitors! I want to vomit!

The fact that the Supreme Court wants to force a compulsory licensing regime upon the patent system doesn’t and shouldn’t mean that the Federal Circuit should be afraid to stand up for patent owners who prove infringement and at least let those who qualify for a permanent injunction return in a contempt proceeding without needing to go through 5 to 10 years of expensive patent litigation again to ultimately prevail. A patent is a wasting asset and without meaningful exclusion provided to victorious patent owners we have nothing more than a compulsory licensing regime, which is wholly unacceptable if you ask me. Even more unacceptable when the victorious patent owner is a direct competitor.

Truthfully, I think the district court got this decision completely wrong. I can’t imagine even the Supreme Court saying that a direct competitor can’t be prevented from infringing by exclusionary order via permanent injunction. But putting faith in the Supreme Court ultimately getting a patent issue correct is just about as childish as it sounds. Forgive me. I apologize.

The truth is that a permanent injunction is nothing more than a device through which the district court would retain jurisdiction of a case in the event that the loser, who was adjudicated to infringe a valid patent, continues to ignore the exclusive rights of the patentee. Absent a permanent injunction Apple will have to sue Samsung all over again if they decide to continue to infringe. A pretty good deal for Samsung really. They infringe, take their chances and if they lose they only pay a reasonable royalty anyway and have no threat of being stopped via permanent injunction. Why not just choose infringement? That is what efficient infringement is all about and one of the reasons that patent rights are on the decline in the U.S., particularly with respect to high-tech gadgets we all want so badly. Too many innovations in the devices apparently means innovators have to deal with infringement and can’t stop it.

But for crying out loud a patent is a right to exclude! Which part of this exactly is confusing? Sometimes I feel like I’m in the middle of a bad dream, or a Monty Python skit, or both!

Anyway, for those who aren’t already so turned off that you want to actually read this nonsense, here is the conclusion from the district court’s order denying the permanent injunction:

Weighing all of the factors, the Court concludes that the principles of equity do not support the issuance of an injunction here. First and most importantly, Apple has not been able to link the harms it has suffered to Samsung’s infringement of any of Apple’s six utility and design patents that the jury found infringed by Samsung products in this case. The fact that Apple may have lost  customers and downstream sales to Samsung is not enough to justify an injunction. Apple must have lost these sales because Samsung infringed Apple’s patents. Apple has simply not been able to make this showing. Though this is a case where the “plaintiff practices its invention and is a direct market competitor,” Edwards Lifesciences, 699 F.3d at 1315, it is not a case where the patented inventions are central to the infringing product. Without the required causal nexus, the parties’ status as direct competitors simply does not justify an injunction.Further, the Court has found that neither the inadequacy of money damages nor the public interest favors an injunction here, for either patent infringement or trade dress dilution. Regarding trade dress dilution specifically, as explained above, the case for an injunction is especially weak, because there are no diluting products still available, even without an injunction.

Finally, this Court has previously noted the relevance to the present situation of Justice

Kennedy’s observation in eBay:

“When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”

547 U.S. at 396-97. The phones at issue in this case contain a broad range of features, only a small fraction of which are covered by Apple’s patents. Though Apple does have some interest in retaining certain features as exclusive to Apple, it does not follow that entire products must be forever banned from the market because they incorporate, among their myriad features, a few narrow protected functions. Especially given the lack of causal nexus, the fact that none of the patented features is core to the functionality of the accused products makes an injunction particularly inappropriate here.

This case is simply not comparable to i4i or to Edwards, the Federal Circuit’s most recent case discussing permanent injunctions in the patent context. In i4i, the plaintiff was a very small company whose business depended on its patented product, and the defendant was a large company of whose business, the infringing product was but a small part. Thus, the defendant’s infringing product “significantly change[d] the relevant market. . . forcing i4i to change its business strategy.” 598 F.3d at 862. Without an injunction, there was simply no way for the plaintiff to continue to compete. Here, Samsung may have cut into Apple’s customer base somewhat, but there is no suggestion that Samsung will wipe out Apple’s customer base, or force Apple out of the business of making smartphones. The present case involves lost sales – not a lost ability to be a viable market participant. Edwards involved a patent that was much more central to the infringing product than the patents at issue here; there was no doubt that the patented technology in that case was a central force driving sales of the infringing product. 699 F.3d at 1308 (describing a prosthetic heart valve implanted by use of a collapsible stent, and a patent for the necessary collapsible stent). If the patents at issue here were similarly essential to the core of Samsung’s products, the Court might see things differently.

In sum, to the limited extent that Apple has been able to show that any of its harms were caused by Samsung’s illegal conduct (in this case, only trade dress dilution), Apple has not established that the equities support an injunction. Accordingly, Apple’s motion for a permanent injunction is DENIED.

The words of the Piano Man seem particularly fitting: “And so it goes, and so it goes, and so will you soon I suppose.” After all, if competitors can’t be enjoined from competing what is the point of a patent?

Tip to Dennis Crouch at PatentlyO for first posting about this case earlier today and to MaxDrei, one of our regular commenters, who brought this to my attention.

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Posted in: Apple, Companies We Follow, Gene Quinn, IP News, IPWatchdog.com Articles, Patent Litigation, Patents, Smartphones

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

 


12 comments
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  1. Gene,

    With all due respect, the problem with eBay is not the Opinion of the Court (written by Justice Thomas) which actually bothered to analyze 35 USC 283 and squarely relies upon the language in that section which says injunctions “may issue.” In fact, Thomas’ opinion is fairly balanced in also criticizing the district court which had denied the injunction in eBay as adopting “expansive principles suggesting that injunctive relief could not issue in a broad swath of cases,” including those where the patent holder offered to license the patent or did not practice the patented invention, as well as the tension of the district court’s ruling with the Supreme Court’s 1908 decision in Continental Paper Bag Company v. Eastern Paper Bag Company that rejected the “categorical” proposition that “a court of equity has no jurisdiction to grant injunctive relief to a patent holder who has unreasonably declined to use” the patented invention.

    The problem lies with Kennedy’s bizarre concurring opinion in eBay which you’ve duly noted that Judge Koh relied upon. What is particularly distressing about Justice Kennedy’s concurring opinion is the following comments he makes about injunctive relief in the context of patents on “business methods”:

    “[I]njunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.”

    Please understand that I agree with you that eBay has created some real difficulties for patentees getting permanent injunctions. I just want to provide some perspective as where the “real problem” lies in eBay, i.e., Kennedy’s concurring opinion. These unfortunate remarks in Justice Kennedy’s concurring opinion in the eBay case are what are causing the mischief with regard to the grant of permanent injunctions in patent infringement disputes. That was shown by the first case I saw applying eBay, namely z4 Technologies, Inc. v. Microsoft Corp. (E.D. Tex. 2006) where the District Court for the Eastern District of Texas denied a motion for entry of a permanent injunction after two patents were determined by a jury to be willfully infringed. In considering the second factor (adequacy of remedies available at law) in applying injunctions, the Eastern District of Texas noted that Justice Kennedy in eBay had “instructed courts to be cognizant of the nature of the patent being enforced and the economic function of the patent holder when applying the equitable factors.”

  2. The right to exclude can also be satisfied by a design-around, which Samsung has already done in this case. in general, an injunction is the equivalent of an immediate death penalty for the infringing product or company – appropriate in some but certainly not all cases. The punishment should fit the crime.

  3. EG-

    I don’t know. I suppose.

    Like so many potentially harmful Supreme Court cases, eBay has been made worse by application in the district courts and Federal Circuit. Courts no longer seem to take into consideration that nature of the patent grant itself when weighing equities.

    I don’t mind using 4 factors if that overwhelmingly leads to injunctions, which is the way it should be given that a patent is a right to exclude. But using 4 factors to eviscerate a patent is ridiculous in my humble opinion.

    Still fuming!

    -Gene

  4. Gene,

    I hear you but 35 USC 283 does read as follows: “The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.”

    At least Thomas in eBay bothered to actually read and actually construe (reasonably in my opinion) what the language of the patent injunction statute says. By contrast, SCOTUS simply gives “lip service” to what 35 USC 101 (e.g., Bilski and Mayo) and 35 USC 103 (e.g., KSR International) says.

  5. Gene, you may get some comfort in J. Rader’s opinion issued today in Presidio Components v. American Technical Ceramics.

  6. The fact that an injunction is not granted for patent infringement does NOT necessarily mean that an infringer can continue infringing and make money doing so. Damages for continued post-trial infringement [that is not an easy "design around"] can be enhanced damages up to treble damages for willful infringement, making all such sales “loss sales.”

    Futhermore, even before eBay, in cases involving huge competitive markets like this, if a permanent injunction was being granted, the patent owner should properly be required to post a huge bond to cover the huge damages to the enjoined defendent if the infringement decision is reversed on appeal. Or, a stay of the injunction for the appeal, as in eBay itself.

  7. Gene-

    I agree wholeheartedly with your assessment of how this will detract from the value of patents in general, and not just IT and Business Method patents. I can appreciate the well considered opinions expressed above in certain cases, like IT especially, where there might be dozens of patented features in any particular device or software.

    In the vast majority of infringement scenarios, though, the logic of their decisions does not really make any sense. For small entities and independents, failing to get injunctive relief even after they have won an expensive infringement suit in many cases will result in them being driven out of business by larger entities gaming flawed court decisions.

    Even if they are able to force compulsory licensing, the profits from that will be a small fraction of what they might otherwise have earned in profits from their own products. Interpretation the law in such a broad stroke manner seems to be very unwise and ignorant of the real world results of their actions in my opinion. Hobble small businesses, and they and the new jobs that they might have otherwise created might very well be gone before too many years go by.

    Stan~

  8. Paul-

    How many times is willful infringement found? There can always be rather insignificant work arounds claimed. At least with a permanent injunction the patentee doesn’t have to start from scratch with a brand new lawsuit. All a permanent injunction really does is continue to vest the district court with ready-made authority to prevent future infringement. If infringement is of a different magnitude then a new case would be ordered. If it were the same claims on the same events then summary contempt proceedings could happen, or something in between like what happened in the TiVo/Dish case.

    With respect to your statement about the posting of a huge bond, I think you are exaggerating a bit. If Apple wasn’t willing to post any bond pending appeal that might have been required they wouldn’t have asked for the permanent injunction in the first place. They also certainly wouldn’t post any bond in cash, and it seems unfathomable that this case would end in any other way than with a settlement. Thus, there is not going to be one party paying any other party a boat of money absent an agreement that ends all litigation. Thus, typing up a relatively modest amount of money in Apple terms (even if it were in the hundreds of millions) would hardly be a bad move given the leverage it would have given Apple to force a more favorable settlement.

    Now, given that competitors cannot stop competitors from competing even with a patent the shift in the balance of negotiating power is overwhelmingly toward the infringer – Samsung. Thus, Judge Koh clearly got this wrong under the 4 factors test. There is no way the 4 factors test should produce a superior negotiating position for the losing party, who is an infringer that competes.

    -Gene

  9. Paul-

    Thanks for the heads up. Indeed that is a VERY good decision. I will write about it tomorrow!

    I love where he starts: “Of course the axiomatic remedy for trespass on property rights is removal of the trespasser.” And then: “Direct competition in the same market is certainly one factor suggesting strongly the potential for irreparable harm without enforcement of the right to exclude.”

    Apple should be preparing their motion for reconsideration in like of Presidio Components!

    Stay tuned for more tomorrow.

    -Gene

  10. Re my above comment that absence of an injuction in a patent infringment decision does NOT mean that subsequent [post-trial] infringement is going to be profitable for the losing defendent.
    It is not valid to compare the odds of patent owners gettng up to treble damages awards for willful infringement BEFORE a patent trial decison to the odds for getting such awards for infringement AFTER a trial decision. Before trial a defendant can now in many cases avoid such willful infringment enhanced damages by arguing that they did not know about the patent, had reasons to think they did not infringe the patent, or had reasons to think the patent was invalid or uninforcable. ALL of those defenses to willful are GONE for a defendant that has lost a patent infringement suit, and gone for good after losing an appeal.
    Furthermore, defendants arguing for trivial “work-arounds” that do not actually avoid infringement of utility patents are not surprisingly often treated harshly by D.C. judges who thought they got that patent case off their docket for good.

    But in the case of DESIGN patents, as here, many of them are easily and quickly re-designed around by minor ornamental appearance changes because that is all that design patents ever cover!

  11. Posted my article on Presidio earlier today at:

    http://www.ipwatchdog.com/2012/12/20/cafc-sanity-on-permanent-injunctions-a-twisted-sister-moment/id=31855/

    Thanks to Paul Ackerman for the heads up on the case.

    -Gene

  12. [...] NOTE: The decision denying Apple’s permanent injunction was recently followed by the CAFC decision in Presidio that tilts the pendulum back toward the [...]

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