Expert Commentary

Patentees Beware: Trial Win Doesn't Equal Permanent Injunction

In a recent appellate opinion arising from the US District Court for the Northern District of California, inApple, Inc. v. Samsung Elecs. Co. (Case No. 2013–1129), the Federal Circuit both affirmed and vacated the district court’s denial of a permanent injunction. As Judge Prost’s opinion illustrates, while winning at trial does not necessarily entitle a plaintiff to a permanent injunction, the evidentiary burden to reach this result may be slightly different than conventionally thought.

Intellectual Property
January 2014

In April 2011, Apple, Inc., sued Samsung Electronics Company, Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America LLC (collectively, "Samsung") for infringing a raft of patents and diluting its trade dress. The case was tried before a California jury beginning on July 30, 2012, and on August 24, 2012, the jury returned a verdict substantially in favor of Apple. In total, the jury found that 26 Samsung smartphones and tablets infringed one or more of 6 patents, and 6 Samsung smartphones diluted Apple’s registered iPhone trade dress and unregistered iPhone 3G trade dress. This tally reached more than $1 billion in awarded damages.

After trial, Apple moved for a permanent injunction to enjoin Samsung from importing or selling its 26 infringing smartphones and tablets as well as its 6 smartphones found to dilute Apple’s trade dress.

On December 17, 2012, the district court denied Apple’s request for a permanent injunction. On November 18, 2013, the Federal Circuit affirmed the district court’s rulings on the design patents and trade dress, while vacating the rulings on the utility patents.

Points of Emphasis—Causal Nexus and Licensing History

While Judge Prost’s opinion mainly reinforces that post-eBay permanent injunctions are not automatic, the points of error regarding causal nexus and licensing history serve to demonstrate the types of evidence that advocates should bring to bear when advancing or defending against a post-verdict claim in equity. The Federal Circuit began by reiterating that the US Supreme Court has cautioned, “An injunction is a drastic and extraordinary remedy, which should not be granted as a matter of course.” Monsanto Co. v. Geertson Seed Farms, 130 S. Ct. 2743 (2010) (citing Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982)).

A plaintiff 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.” eBay Inc. v. MercExchange LLC, 547 U.S. 388 (2006). As a component of irreparable harm, the plaintiff must make “a showing of some causal nexus between [the] infringing conduct and [the] alleged harm.” Apple, No. 2013–1129, at 18. Applying these standards with respect to the utility patents, the Federal Circuit held that, inter alia, the district court was too exacting on both the causal nexus component for irreparable harm and the appropriate weight to give past licensing practices for adequacy of remedies.

For causation under irreparable harm, Judge Prost found that the patented feature does not have to be the sole reason that one product is purchased over another and irreparable harm can occur across the aggregation of multiple patents. First, the panel found error to the extent that the district court required Apple "to show that one of the patented features is the sole reason consumers purchased Samsung’s products." Id. As Judge Prost reasoned, "Consumer preferences are too complex—and the principles of equity are too flexible—for that to be the correct standard. Indeed, such a rigid standard could, in practice, amount to a categorical rule barring injunctive relief in most cases involving multi-function products, in contravention of eBay." Id. at 19.

To illustrate, according to Judge Prost, that consumers purchase laptops for a variety of reasons other than portability does not necessarily negate the injunctive potential for a patented laptop battery that “lasts significantly longer” if it is “reasonable to conclude that the patented battery is a driver of consumer demand for the laptop.” Id. at 20. As a matter of degree, evidence of surveys demonstrating consumer demand and “that a patented feature significantly increases the price of a product” can establish the requisite causation standard. Id. at 26.

Second, the Federal Circuit held that, while irreparable harm may be viewed "on a patent-by-patent basis," this does not "foreclose viewing the patents in the aggregate.” Id. at 21. Writing for the panel, Judge Prost explained, "[T]here may be circumstances where it is logical and equitable to view patents in the aggregate. For example, it may make sense to view patents in the aggregate where they all relate to the same technology or where they combine to make a product significantly more valuable. To hold otherwise could lead to perverse situations such as a patentee being unable to obtain an injunction against the infringement of multiple patents covering different—but when combined, all—aspects of the same technology, even though the technology as a whole drives demand for the infringing product.” Id.

For inadequacy of legal remedies, the Federal Circuit held that, while “past licensing behavior” is relevant to show that adequate legal remedies are available, this prior conduct alone does not automatically inoculate an equitable order to protect a patentee. As if setting up parameters, Judge Prost explained that past licensing activity alone does not show that a patent is “not priceless”; rather, it is more correct to view the behavior as a “willing[ness] to license ... in some circumstances.” Id. Therefore, the proper inquiry becomes whether prior licensing establishes that licensing among the parties would have occurred under the particular context of the underlying facts giving rise to the lawsuit.

As an issue where factual variances make all the difference, direct competition between the parties may show inadequate legal remedies even with a strong history of third-party licensing. Likewise, even where previous licensing agreements have existed between the parties, adequacy may turn on whether there was ever an offer to license the specific patent or patents at issue. As the appellate court emphasized, the discrete facts for each case should ultimately drive the outcome.

Permanent Injunctions Are Granted through Evidence

While the post-eBay era is less friendly toward obtaining a permanent injunction, as this case demonstrates, the arguments are much more nuanced than perhaps previously thought and require a particular type of evidence to fit the necessary considerations for an injunction. Both proponents and opponents of permanent injunctions should be mindful of the causation standard for irreparable injury. Evidence demonstrating that a patented feature, among others, drives demand may be enough in certain instances. Consumer surveys and the like are helpful to this end. Likewise, where multiple patents are at issue, aggregation is permissible to demonstrate irreparable harm.

Moreover, the legal inquiry when addressing inadequacy of remedies is not whether any licensing occurred in the past, but rather in what context did the past licensing occur if at all. In all events, a client is best served when discovery requests are crafted to address these issues. Given Judge Prost’s reiterations that permanent injunctions are won and lost on the facts, a carefully tailored discovery plan can make all the difference between a successful client outcome and having to explain the converse.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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