The evolving standard in the US for injunctions in patent cases
March 2016 | EXPERT BRIEFING | INTELLECTUAL PROPERTY
financierworldwide.com
In the US, the Court of Appeals for the Federal Circuit hears appeals in patent cases. Four Federal Circuit decisions in two patent cases involving smart phones and tablet computers that Apple filed against Samsung in April 2011 and February 2012 have generally made injunctions harder to obtain. Further, the appellate court has vacillated in those decisions when describing the evidence necessary to establish an essential element for injunctive relief – irreparable harm.
In Apple I, the Federal Circuit addressed Apple’s appeal from the denial of a preliminary injunction in the 2011 case. In December 2011, the district court determined that Apple failed to establish a connection between the alleged infringement and the alleged irreparable harm. The Federal Circuit called that connection a “causal nexus”. The appellate court concluded that the district court correctly required “a showing of some causal nexus between Samsung’s infringement and the alleged harm to Apple” to prove irreparable harm.
The Federal Circuit justified the causal-nexus requirement by reasoning that “[s]ales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature”. According to the appellate court, “if the patented feature does not drive the demand for the product, sales would be lost even if the offending feature were absent from the accused product”.
In Apple I, the Federal Circuit upheld the district court’s decision that Apple failed to establish a causal nexus between the alleged infringement and the alleged irreparable harm.
In Apple II, the Federal Circuit addressed Samsung’s appeal from the grant of a preliminary injunction in the 2012 case. In July 2012, the district court barred importation and sale of a particular Samsung smart phone because the court determined that Apple demonstrated a causal nexus between the infringement of one asserted patent by that smart phone and Apple’s lost market share. But the Federal Circuit decided otherwise. It said, “it is not enough for the patentee to establish some insubstantial connection”. Instead, the patentee must “show that the infringing feature drives consumer demand for the accused product”. According to the appellate court, the causal-nexus requirement “is not satisfied simply because removing an allegedly infringing component would leave a particular feature, application, or device less valued or inoperable”.
In Apple I and Apple II, the Federal Circuit appeared to impose a stringent evidentiary standard for a causal nexus by requiring proof that the patented feature drives consumer demand. But in Apple III and Apple IV the court retreated from that position.
In Apple III, the Federal Circuit addressed Apple’s appeal from the denial of a permanent injunction in the 2011 case. In August 2012, a jury found that more than 20 Samsung smart phones and tablets infringed one or more patents. The district court denied Apple’s request for a permanent injunction barring importation and sale of all infringing devices because Apple failed to show that the patented features drove consumer demand for the infringing devices.
On appeal, Apple argued that there is no causal-nexus requirement for a permanent injunction. The Federal Circuit rejected that argument because “[t]he reasoning in Apple I and Apple II reflects general tort principles of causation and applies equally to the preliminary and permanent injunction contexts”.
But the appellate court explained that a patentee may establish a causal nexus without evidence that a patented feature is the “sole” or “exclusive” reason for customer purchases. According to the appellate court, a patentee only needs to show “some connection” between a patented feature and consumer demand, and it can do that in “a variety of ways”, e.g., with evidence that “a patented feature is one of several features that cause consumers to make their purchasing decisions”, “the inclusion of a patented feature makes a product significantly more desirable”, or “the absence of a patented feature would make a product significantly less desirable”. Further, the appellate court observed that “there may be circumstances where it is logical and equitable to view patents in the aggregate” when considering a causal nexus, for example, where the patents “all relate to the same technology” or “they combine to make a product significantly more valuable”.
In Apple III, the Federal Circuit decided that the district court gave insufficient weight to survey evidence that consumers would pay fairly significant price premiums for some patented features. Thus, the appellate court returned the case to the district court to permit it to reassess the evidence. After doing so, the district court again decided that Apple failed to establish a causal nexus.
In Apple IV, the Federal Circuit addressed Apple’s appeal from the denial of a permanent injunction in the 2012 case. In May 2014, a jury found that nine Samsung smart phones infringed patents purportedly relating to ease of use, such as a slide-to-unlock feature. Unlike Apple III, however, Apple did not seek a product-based injunction barring importation and sale of all infringing devices but instead sought a feature-based injunction against “software or code capable of implementing the infringing features” in the infringing devices. The district court decided that Apple failed to show that the infringing features drove consumer demand and declined to enter a permanent injunction.
“Inconsistent application of the causal-nexus requirement could occur among trial courts.”
On appeal, Apple argued that there is no causal-nexus requirement when a patentee seeks a feature-based injunction rather than a product-based injunction. The Federal Circuit rejected that argument. But the appellate court clarified that the causal-nexus requirement “just means that there must be proof that the infringement causes the harm”. The appellate court repeated its explanation that establishing a causal nexus merely requires evidence of “some connection” between a patented feature and consumer demand, e.g., evidence that a patented feature “impacts customers’ purchasing decisions”.
In Apple IV, the Federal Circuit determined that Apple demonstrated that firstly “customers wanted, preferred, and would pay extra for” the patented features, and secondly “a patented feature is one of several features that cause consumers to make their purchasing decisions”. Deciding that the district court erred in its analysis, the appellate court returned the case to the district court for reconsideration. The district court then entered a permanent injunction.
But the injunction affected only the Galaxy S3 and earlier smart phones. Samsung has moved several iterations beyond the Galaxy S3 with its new Galaxy S7. Although the injunction that Apple ultimately obtained could be viewed as a hollow victory, the jury awarded Apple $119m as damages for infringement.
To summarise, in Apple I and Apple II, the Federal Circuit required proof that a patented feature drives consumer demand for an accused product to establish irreparable harm. Those decisions generally made injunctions harder to obtain. But the appellate court may have been concerned about difficulties patentees could encounter when attempting to procure the needed evidence. So in Apple III and Apple IV, the court seemed to backtrack by noting that evidence of “some connection” between a patented feature and consumer demand should suffice for a causal nexus. For instance, a patentee may satisfy the causal-nexus requirement by showing that a patented feature somehow “impacts” purchasing decisions.
Under US law, however, the earlier decisions still constitute binding precedent for trial courts to follow. Consequently, inconsistent application of the causal-nexus requirement could occur among trial courts.
Steven M. Amundson is a partner at Frommer Lawrence & Haug LLP. He can be contacted on +1 (212) 588 0800 or by email: samundson@flhlaw.com.
Mr Amundson has been with the firm since 1997. During his career, he has developed a unique skill to blend his technical and legal backgrounds to successfully articulate his client’s position to the courts. A key to his practice is his ability to understand a client’s business and effectively translate that into concepts judges, juries, and appellate courts can understand. His cases have involved disputes over patents in a broad range of technologies encompassing business methods, computers, electronic devices, electromagnetic products, semiconductor fabrication, medical devices, chemicals, and pharmaceuticals (including “blockbuster” prescription drugs).
© Financier Worldwide
