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.
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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.