September 22, 2015
On September 17, 2015, in Apple Inc. v. Samsung Electronics Co., Ltd., the Court of Appeals for the Federal Circuit clarified the standards for granting permanent injunctions in patent cases. The decision generated immediate interest because it is another milepost in the long and winding patent litigation between Apple and Samsung. The decision also deserves attention, however, because it will affect the equitable standards for permanent injunctions. Significantly, the Federal Circuit held that a party requesting permanent injunction must show “some connection” between the patented features and any lost sales related to the infringing products, not that the infringement was the sole cause of the lost sales. This holding may make it easier to get an injunction halting sales of multifeatured products—such as cell phones, cars, and microprocessors—that infringe based on one feature or component.
Apple filed suit in 2012, asserting that Samsung infringed five patents related to Apple’s iPhone products. At the district court, Samsung was found to infringe three patents. Following a jury verdict that awarded Apple a total of $119,625,000, Apple moved for a permanent injunction. Apple’s proposed injunction would bar Samsung from making, using, selling, developing, advertising, or importing into the United States software or code capable of implementing the infringing features in its products after a 30-day “sunset period.”
In eBay Inc. v. MercExchange, L.L.C.,the U.S. Supreme Court held that a party seeking a permanent injunction must 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.
Proving irreparable harm under the first factor of this test requires the patentee to show that a causal “nexus” relates the alleged harm to the alleged infringement. The district court denied Apple’s motion, finding that Apple had not shown that it would suffer irreparable harm resulting from Samsung’s infringement. The court reasoned that Apple had failed to prove that the infringing features “drive consumer demand for Samsung’s infringing products.” The court further found that the other factors relevant to the inquiry did not outweigh Apple’s failure to establish irreparable harm.
On appeal, Apple argued first that it should not be required to prove a causal nexus, because its proposed injunction was narrowly tailored to the software or code that implemented the infringing features, and not to the product as a whole. The Federal Circuit rejected this argument, holding that “[w]hether a patentee’s irreparable harm stems from infringement of its patents is entirely independent of the scope of the proposed injunction.” The court reasoned that the causal nexus requirement prevents the patentee from leveraging its patents for competitive gain, beyond the inventive contribution protected by the patent.
Apple argued second that it had suffered irreparable harm based on lost sales of its iPhones and the resulting lost sales through its online services. The court agreed, holding that “in a case involving phones with hundreds of thousands of available features, it was legal error for the district court to effectively require Apple to prove that the infringement was the sole cause of the lost downstream sales” (emphasis added). The court grounded its holding in the idea that the right to exclude should be available to patentees who have lost sales on products that are “many-featured.”
Reviewing the record to apply the required “flexible analysis,” the court noted that the evidence showed Samsung had attempted to copy the features of the iPhone, and the jury had found Samsung liable for willfully infringing at least one of Apple’s asserted patents. Further, users criticized noninfringing alternatives offered by Samsung. Likewise, Apple had heavily emphasized the claimed features in its marketing, and had presented expert analysis showing that users valued the infringing features and were willing to pay more for them. The court found this evidence sufficient to establish actual consumer preferences for the claimed features—that the features “were important to product sales and that customers sought these features in the phones they purchased.” After separately finding that the remaining factors also favored an injunction, the court held that the district court had abused its discretion by denying Apple’s motion for permanent injunction.
In a concurring opinion, Judge Reyna argued that the injury against the right to exclude should be sufficient by itself to establish an irreparable harm, given that the parties were direct competitors with a complicated business relationship. Judge Reyna noted the difficulty in assigning value to Apple’s right to exclude, given that Apple and Samsung are the top competitors in the field, with a variety of means for competing against each other. Alternatively, Judge Reyna argued that the injury to Apple’s reputation as an innovator qualifies as irreparable harm circumstantially proven to be caused by the direct competition between Apple and Samsung, and by Samsung’s attempts to copy the patented features of the iPhone.
In dissent, Chief Judge Prost argued that the claimed features are not used in Apple’s products or are too minor to satisfy the irreparable harm factor. Judge Prost criticized the majority for finding legal error in the district court’s factual analysis. In particular, she argued that the district court properly analyzed the facts under the precedent, which she interpreted to require evidence that (1) a patented feature is one of several features that cause consumers to make their purchasing decisions; (2) inclusion of a patented feature makes a product significantly more desirable; or (3) the absence of a patented feature would make a product significantly less desirable.
The Apple decision can be seen to broaden the types of evidence that may prove irreparable harm under the Federal Circuit’s post-eBay precedent. Prior case law appeared to require evidence sufficient to show that the infringing features of a product were solely or significantly responsible for a patentee’s lost sales. The court’s reasoning may make it easier to obtain injunctions on patents that protect one feature in multifeatured devices such as smartphones, cars, or complicated integrated circuits.
For more information on this decision, please contact Fitch Even attorney David A. Gosse, author of this alert.
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