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Causal Nexus Required Between Accused Infringement and Alleged Harm to Warrant a Grant of Preliminary Injunction

12-1105
May 14, 2012

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Last Month at the Federal Circuit - June 2012

Judges: Bryson (author), Prost, O'Malley (concurring-in-part and dissenting-in-part)

[Appealed from: N.D. Cal., Judge Koh]

In Apple, Inc. v. Samsung Electronics Co., No. 12-1105 (Fed. Cir. May 14, 2012), the Federal Circuit affirmed the district court’s denial of a preliminary injunction with respect to three of four patents that Apple, Inc. (“Apple”) asserted against Samsung Electronics Co., Ltd. (“Samsung”). With respect to the fourth patent, the Federal Circuit remanded that portion of the district court’s order for further proceedings.

Apple owns several design and utility patents pertaining to smartphones and tablet computers. U.S. Design Patent Nos. D593,087 (“the D’087 patent”) and D618,677 (“the D’677 patent”) are directed to designs that Apple contended are embodied by its iPhone product. Apple also owns U.S. Design Patent No. D504,889 (“the D’889 patent”), which is directed to the design of a tablet computer. Apple contended that its iPad product embodies the design of the D’889 patent.

Apple also owns U.S. Patent No. 7,469,381 (“the ’381 patent”), directed to a software feature known as the “bounce-back” feature, which is found on both of Apple’s iPhone and iPad. The bounce-back feature is activated when the user scrolls through a document displayed on a device and attempts to scroll past the end of the document. An area beyond the visible part of the document will be displayed, and once the user input ceases (i.e., when the user lifts the finger used to scroll), the previously visible part of the document “bounces back” into view.

Apple claimed that two of Samsung’s smartphones, the Galaxy S 4G and the Infuse 4G, infringed the D’087 and the D’677 patents. Apple also alleged that Samsung’s Galaxy 10.1 tablet infringed the D’889 patent, and that all three devices infringed the ’381 patent. Apple moved for a preliminary injunction to block the importation into and sale within the United States of the accused Samsung devices.

The district court denied Apple’s motion with respect to each of the accused devices and all four asserted patents. As to the claims based on the D’087 and D’889 patents, the district court denied relief on the ground that Apple had failed to show a likelihood of success on the merits with respect to validity and infringement. As to the claims based on the D’677 and ’381 patents, the district court denied relief on the ground that Apple had failed to show that it would likely suffer irreparable harm from Samsung’s continuing infringement.

With respect to the D’677 patent, the district court held that with respect to the irreparable harm prong of granting a preliminary injunction, Apple failed to show a nexus between the likely infringement of the patented design and Apple’s claims of lost market share and brand dilution. The Federal Circuit affirmed the district court’s determination that a showing of some causal nexus between Samsung’s infringement and the alleged harm to Apple was required as part of the showing of irreparable harm. Even though Apple asserted a loss of market share, the Court reasoned that “[i]f 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.” Slip op. at 17.

The Federal Circuit indicated that Apple’s reliance on i4i Limited Partnership v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), aff’d, 131 S. Ct. 2238 (2011), was misplaced to show that no nexus was required for a preliminary injunction to issue. The Court noted that the narrow injunction was upheld in i4i only to protect the patented product from obsolescence by its inclusion within Word, and that here, the district court found that the alleged acts of infringement do not threaten to have any such dramatic effects on the market generally or on Apple’s share of that market.

The Court then affirmed the district court’s determination that Apple had not demonstrated a showing of nexus between the infringing conduct and the alleged harm. While the district court found some evidence that design had some effect on smartphone sales, there was considerable evidence indicating that design was not a determinative factor of consumer decision-making. The Court remarked that “[a] mere showing that Apple might lose some insubstantial market share as a result of Samsung’s infringement is not enough [to demonstrate irreparable harm].” Id. at 18. The Court also rejected Apple’s contention that the district court categorically rejected Apple’s design dilution and brand dilution theories of irreparable harm. The district court noted that Apple only offered conclusory statements and theoretical arguments in support of those theories, and therefore dismissed them for lack of evidence.

The Federal Circuit affirmed that it was reasonable for the district court to consider Apple’s delay in filing an infringement action as a factor, suggesting that the patentee is not irreparably harmed by the infringement. However, the Federal Circuit rejected the district court’s notion that Apple should be faulted for not filing suit as early as 2007, before Apple’s design patents had even issued. Further, while rejecting the district court’s ruling on validity of the D’087 patent, the Court stated that because the irreparable harm analysis was identical for both the D’087 and D’677 smartphone patents, the district court did not abuse its discretion when it refused to enjoin Samsung smartphones for infringing the D’087 patent.

The Federal Circuit also upheld the district court’s denial of a preliminary injunction with respect to the ’381 patent because Apple failed to demonstrate that consumer purchasing decisions were based on the presence of the bounce-back feature. The Court reemphasized that “the district court was correct to require a nexus between infringement of the patent and some market-based injury, be it as a result of consumer preference or some other kind of causal link.” Id. at 24. Apple relied on evidence that Samsung employees themselves believed that Samsung needed the bounce-back feature to compete with Apple. While the Court noted that this internal evidence was relevant to the issue of nexus between the patent and market harm, it was not dispositive. The Court stated that “the relevant inquiry focuses on the objective reasons as to why the patentee lost sales, not on the infringer’s subjective beliefs as to why it gained them (or would be likely to gain them).” Id.

With respect to the D’889 patent directed to tablet computer designs, the district court concluded that Apple had shown it was likely to suffer irreparable harm from Samsung’s alleged infringement. The district court considered the relative market share of Apple and Samsung and the absence of competitors in the tablet market. The district court also correctly considered evidence that design mattered more to customers in making tablet purchases, which helped Apple establish the requisite nexus between the infringing conduct and the alleged harm.

Even though the district court found irreparable harm with respect to the D’889 patent, the district court still denied a preliminary injunction, concluding that Apple had failed to show a likelihood of success on the merits. The district court found that the D’889 patent was obvious over a 1994 Fidler Tablet (“the Fidler tablet”) in view of a Hewlett-Packard Compaq Tablet TC1000.

The Federal Circuit, however, concluded that “[a] side-by-side comparison of [the D’889 patent and the Fidler tablet] shows substantial differences in the overall visual appearance between the patented design and the Fidler reference.” Id. at 28. Among other differences noted, the Federal Circuit reasoned that, because the Fidler tablet was not symmetrical and because the frame of the Fidler tablet created a different impression from the “unframed” design of the D’889 patent, the district court erred in looking to the Fidler tablet as a primary reference against the D’889 patent. The Federal Circuit concluded that the district court’s error was to “view the various designs from too high a level of abstraction.” Id. at 30-31. Instead, the Federal Circuit held that “[r]ather than looking to the general concept of a tablet, the district court should have focused on the distinctive visual appearances of the reference and the claimed design.” Id. at 31 (internal quotation marks omitted).

After overturning the district court’s validity determination with respect to the D’889 patent, the Federal Circuit vacated the district court’s order and remanded for further proceedings to weigh two unconsidered questions bearing on whether to issue a preliminary injunction—the balance of hardships and the public interest. Thus, the Court affirmed the district court’s denial of a preliminary injunction for the D’087, D’677, and ’381 patents, vacated the order denying an injunction with respect to the D’889 patent, and remanded the case to the district court for further proceedings on that portion of Apple’s motion for preliminary injunctive relief.

Judge O’Malley concurred with respect to the majority’s decision to affirm the denial of preliminary injunctive relief with respect to the D’087, D’677, and ’381 patents. While also agreeing with the majority’s validity analysis of the D’889 patent, Judge O’Malley dissented from the majority’s decision to remand the matter for further proceedings. Judge O’Malley believed that remand would cause unnecessary delay, and that the district court’s decision, in its entirety, reveals that all of the conditions for preliminary injunctive relief were satisfied with respect to the D’889 patent.

Summary authored by Jameson Q. Ma, student associate at Finnegan.