In smartphone wars, Apple stalks the elusive injunction

January 18, 2013

If ownership of a valid patent can’t help you stop a competitor from selling products that incorporate your proprietary technology, then — according to an extraordinary new filing by Apple — there’s something seriously wrong with the patent system.

Apple has asked the Federal Circuit Court of Appeals to bypass standard operating procedures and commit the entire court, rather than a three-judge panel, to reviewing its bid for a post-trial injunction barring the sale of Samsung devices that have been found to infringe Apple patents. U.S. District Judge Lucy Koh of San Jose, California, who presided over the trial of Apple’s claims against Samsung last summer, refused last month to grant Apple a permanent injunction, citing the Federal Circuit’s October 2012 ruling in yet another Apple case against Samsung. Though Apple has already petitioned for en banc review of that ruling, which involved a pretrial injunction, its new motion argues that the standard for injunctions is even more important when a patent holder has already gone through trial and established the illegal conduct of its competitor. The entire Federal Circuit, Apple contends, must clarify whether the appeals court really intended to contradict its own and U.S. Supreme Court precedent and make it “all but impossible” to obtain a permanent injunction in a smart-device case.

The brief includes an unusually blunt discussion of how injunction motions shape patent litigation — and why they’re such a powerful weapon for patent holders. “The injunction standard defines a patentee’s rights as against a competitor and affects numerous strategic decisions in a patent case, including whether to file, what patents to assert, what discovery requests to make, what consumer survey questions to ask, what issues to put to a damages expert, what questions to ask at depositions, what patent claims to advance at trial, and whether and when to settle,” wrote Apple’s lawyers at Wilmer Cutler Pickering Hale and Dorr and Morrison & Foerster. If the Federal Circuit takes away the possibility of a permanent injunction, Apple argued, that leaves patent holders only with the chance to obtain money damages, which their competitors will come to consider just a cost of doing business. “If that is indeed the law,” Apple’s brief said, in language that sounds like an overt challenge to the Federal Circuit, “patent rights will be greatly diminished in value.”

The standard Apple finds so troubling, as established in that October 2012 ruling by a three-judge Federal Circuit panel, requires that in order to prove their irreparable harm from their competitors’ infringement, patent holders must establish a “causal nexus,” showing that consumer demand for the competitor’s product is driven by the supposedly infringing features. Though the appeals court’s decision addressed a pretrial ruling by Koh, the opinion endorsed the reasoning of 7th Circuit Judge Richard Posner from his stint as the trial judge in a smartphone case between Apple and Motorola. Posner’s decision to dismiss the entire case centered on perceived flaws in the damages theories espoused by both Apple and Motorola, but he also raised concern about granting an injunction based on a minor feature in a device that incorporates hundreds of patents. (Posner said as well that standard essential patents should never be the basis of injunctions — a view that has gained increasing currency since the judge’s ruling.)

In the context of the smart-device wars, the Federal Circuit’s causal nexus opinion was hugely important — a potential “signal (of) the end of the injunction as a weapon,” wrote Indiana University law professor Lea Shaver in a Washington & Lee law review article this fall. At least one federal judge, U.S. Magistrate Paul Grewal of San Jose, has since expressed doubt about a standard that requires patent holders to show a causal nexus in order to establish irreparable harm. (“That strict standard appears to move into the irreparable harm analysis a consideration better suited for the equitable factors of balance of hardships and public interest,” Grewal wrote in a ruling earlier this month that actually granted a permanent injunction to Brocade Communications.)

Apple’s new brief argues that it’s time for the entire Federal Circuit to revisit the panel opinion so patent holders know where they stand. As I mentioned above, the Federal Circuit set out the causal nexus rule in a case involving a preliminary injunction, which left some doubt (at least according to Apple) about whether the same standard would apply to permanent injunctions. Judge Koh took for granted the applicability of the rule when she denied Apple’s post-trial injunction request. Apple hadn’t established that its patents were central to Samsung’s devices or that they drove consumers to buy the competing products, Koh said. “Neither statements about broad categories, nor evidence of copying, nor the (consumer) survey provides sufficiently strong evidence of causation,” she wrote. “Without a causal nexus, this court cannot conclude that the irreparable harm supports entry of an injunction.”

Since Apple has already asked for en banc review of the panel ruling on preliminary injunctions, its new brief suggests that the court take up the causal nexus standard for both preliminary and permanent injunctions at the same time. Until it does, it will be “essentially impossible for a patentee to halt a direct competitor’s deliberate and successful copying of the patentee’s innovative designs and features for use in competing products,” Apple’s brief said.

Samsung, represented in the Apple litigation by Quinn Emanuel Urquhart & Sullivan, has opposed Apple’s petition for en banc review of the original causal nexus panel decision and it’s a certainty that it will argue against the straight-to-en-banc appeal of the post-trial injunction denial as well.

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