This isn’t a necessarily a standard-essential patent issue (and it’s been covered by many others such as IPLaw360 and Groklaw over the past couple days), but as something that could affect how parties enforce standard-essential patent rights in U.S. courts, we thought it’d be worth a quick post. Earlier this week, Apple filed its opening brief in its appeal of Judge Lucy Koh’s decision to deny Apple a permanent injunction against Samsung. In her post-trial decision applying the eBay analysis and denying an injunction, Judge Koh found that Apple failed to demonstrate a “causal nexus” between Samsung’s infringement of Apple’s utility and design patents and the irreparable harm to Apple (e.g., loss of market share and downstream sales). Apple argues in its brief to the Federal Circuit that there was no need for it to demonstrate such a causal nexus, and that even if there is, the evidence does show a nexus between infringement and irreparable harm.
We’ve previously discussed how the Federal Circuit has begun holding patentees to more exacting standards for infringement remedies, both in some of our Patent Alerts (LaserDynamics [damages], Apple-Samsung [injunctions]) and in an article published last month on AllThingsD. In these decisions, the court showed a tendency toward limiting patent holders’ ability to use a patents to extract more than value from defendants or potential licensees than the patent would otherwise be worth (an approach Judge Posner would approve of). In fact, this type of issue is precisely what Apple and many others have claimed is a problem in the standard-setting and standard-essential patent licensing context — where a holder of a patent on a minor component or feature attempts to leverage the threat of an injunction or large royalties to get more than the “intrinsic value” of the patent, it is often deemed hold-up (or at least unreasonable, non-FRAND demands).
But Apple’s design and feature-based patents at issue at not standard-essential or subject to FRAND obligations. Apple’s brief describes Samsung’s infringement as “a classic case for injunctive relief” and appeals to status of patents as property rights that include the statutory right to exclude. Here, Apple competes with Samsung in the market for smartphones and tablets, it has been losing market share since Samsung introduced the infringing products, and the patents at issue cover various aspects of the design and user interface of its products. Apple claims that the causal nexus requirement applied by Judge Koh would make injunctions virtually impossible in certain situations involving high-technology products, violating eBay‘s proscription against categorical rules disfavoring injunctions. In fact, Apple points to numerous cases in the post-eBay years where permanent injunctions have issued where the parties were direct competitors, including a couple recent Fed. Cir. cases (Edwards v. Corevalve, Bosch v. Pylon) that did not mention a need to show a causal nexus between harm and infringement.
Because the causal nexus requirement cited by the district court came in two Federal Circuit cases evaluating preliminary injunctions, Apple presents an interesting argument where it stresses the difference between preliminary and permanent injunctions. Apple argues that courts have greater latitude and discretion in tailoring permanent injunctions, in order to better balance the patentee’s right to exclude with the injunction’s effect on the infringer (and the public). Thus, according to Apple, there’s less (or no) need to show a causal nexus for permanent injunctions — according to Apple, it’s never been required by the Federal Circuit or Supreme Court. Given that both of these courts have applied basically the same standard for issuing preliminary and permanent injunctions (aside from the requirement of a likelihood of success on the merits for preliminary injunctions), however, this may be an uphill battle. But Apple could have a better chance with its fallback arguments that it did in fact satisfy the causal nexus requirement, particularly for its design patents (and this has the added bonus for the Federal Circuit of continuing to be able to hold patentees to the higher causal nexus standard in the future).
When Samsung responds, we can expect it to say that the causal nexus requirement is nothing new, even for permanent injunctions, and that of course Apple would need to show a link between infringement and irreparable harm — if using the infringing feature or design isn’t irreparably harming Apple, it makes no more sense to enjoin Samsung from implementing these features than it does to prevent Samsung from running commercials or locating an office in California. In Samsung’s eyes, it would all be the same — without some connection, there’s no cause and effect justifying an injunction.
It will be very interesting to see how the Federal Circuit comes out here, both substantively and procedurally. Apple has urged the court to take the case up en banc if necessary, which the court may do in order to provide some clarity regarding the causal nexus requirement. Lastly, let’s tie this back to the blog. If the causal nexus requirement stands, it will be very difficult for standard-essential patent owners — even if they have never promised to license their SEPs on RAND terms — to ever be able to get an injunction in U.S. courts.