New class action: Real victims of Samsung infringement are consumers

By Alison Frankel
February 10, 2014

Once again, we are reminded that defendants underestimate the creativity of the class action bar at their own peril.

Last week, the firms Reese Richman and Halunen & Associates filed quite an interesting class action complaint in federal court in San Francisco. The case asserts that Samsung’s infringement of various Apple patents in its mobile devices – as established in a jury trial in federal court and in a proceeding at the U.S. International Trade Commission – has injured unwitting Samsung mobile device buyers who believed they were purchasing non-infringing products. According to the complaint, the resale market for Samsung devices has been hard-hit by infringement findings against the company; the suit claims that Samsung owners are actually in danger of violating the Tariff Act of 1930 if they attempt to resell infringing tablets and smartphones.

As you may recall, Samsung is on the hook to Apple for more than $900 million in damages after a partial damages retrial in November of its first round of patent infringement claims against Samsung in San Francisco federal court. The purported nationwide consumer class action actually claims far more than that on behalf of Samsung device purchasers. Under one of the suit’s causes of action, the class wants Samsung to repay the entire cost of the infringing mobile devices to the consumers who bought them – or at least the lost value consumers have realized as a result of Samsung’s infringement. Under another theory, class members assert that Samsung must disgorge to them all of its profits from selling infringing devices. That’s a lot of money: According to Apple, Samsung took in $3.5 billion in revenue from the sale of almost 11 million infringing devices.

So what are these theories that give rise to such outsize potential liability? The complaint claims breach of warranty on behalf of Samsung purchasers nationwide, citing state consumer warranty laws. It also claims violations of New York and New Jersey deceptive trade practices laws on behalf of the nationwide class. The New York law, according to the complaint, provides for at least $50 in statutory damages to every purchaser of an infringing device (or, if Apple’s sales tally is correct, $550 million). The New Jersey law allows consumers to seek damages based on arguments that they wouldn’t have bought the devices at all if they’d known of Samsung’s infringement. But that’s not all: The suit also alleges unjust enrichment under California, New York and New Jersey statutes, demanding restitution of the full purchase price of the infringing products. (In addition, the complaint alleges California unfair trade practices laws on behalf of a California-only class.)

Mayer Brown‘s Class Defense Blog, where I first heard about the Samsung consumer suit, points out some of the potential obstacles for consumers claiming damages from the purchase of infringing products, some specific to smart device cases (Did consumers really know or care about infringement claims when they bought tablets and smartphones?) and some the usual class action defenses, such as whether injury and damages can be shown on a nationwide class basis. Mayer Brown’s Archis Parasharami says in the blog post that he’s skeptical judges will buy the theory that infringement harms consumers, but if they do, you can expect a proliferation of such claims. “It is easy to see why plaintiffs’ lawyers might find these kinds of cases attractive,” he wrote. “If the result of a battle between competitors is that a product has been determined to be infringing by a court or agency, that may substantially reduce the work a plaintiffs’ lawyer needs to do to pursue the case. And that lawyer will likely argue that key aspects of liability have already been established before the class action even gets started.”

The firms that filed the Samsung case are veterans of deceptive trade practices class actions. The Reese shop is very active in food mislabeling litigation in the Northern District of California (sometimes dubbed the “Food Court”). The Halunen firm handles more traditional consumer class actions, though I recently wrote about the rejection of its $950,000 fee request in a hair products labeling case against L’Oreal. I emailed name partners Michael Reese and Clayton Halunen, asking to talk about the creative theory of the Samsung case, but didn’t hear back from either of them.

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