Wednesday, November 20, 2013

Apple v. Samsung – Part III: Shouldn’t a Different Set of Rules Apply to Design Patent Injunctions?

Apple v. Samsung is truly the design patent case that keeps on giving, and Monday’s Federal Circuit decision is no different. This time, Apple asked the Court to review Judge Koh’s decision denying Apple’s request for a permanent injunction against future infringement of Apple’s patents. In a unanimous decision, Judges Prost, Bryson, and O’Malley affirmed the district court’s decision with respect to Apple’s design patents, but vacated and remanded for further consideration with respect to Apple’s utility patents.

Essentially, the Federal Circuit found that there was no evidence of a “causal nexus” between Samsung’s infringement of Apple’s design patents and Apple’s established loss of market share to Samsung. See Apple v. Samsung III, at 12 (“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. Thus, a likelihood of irreparable harm cannot be shown if sales would be lost regardless of the infringing conduct.”). According to the Court, Apple's loss of market share may have occurred because of several unrelated and perfectly legal reasons having nothing to do with Apple’s design patents. As such, the court reasoned that irreparable harm could not be shown as a result of future infringement by Samsung. According to the Federal Circuit, the causal nexus requirement “reflects general tort principles of causation.” Id. at 13 (emphasis added).

However, Apple v. Samsung III may be more noteworthy for what it failed to discuss. For example, it is unclear whether the “causal nexus” requirement makes sense in the context of design patents, where Apple already has an equitable remedy for disgorgement of Samsung’s illicit profits for any ongoing or future design patent infringement. In reality, Apple already has a de facto injunction against further infringement by Samsung because it would be entitled to recoup all of Samsung’s profits for any such design patent infringement, even without proving any actual harm or damage to Apple. Yet, the Federal Circuit never addressed this significant difference between utility and design patents in Apple III. Indeed, the disgorgement remedy for design patent infringement is an exception to the very “tort principles of causation” referenced by the court.

In the author’s opinion, the built-in equitable remedy for disgorgement of profits from design patent infringement should impact the permanent injunction analysis for design patents. The equitable remedy of disgorgement exists because Congress has determined that harm and causation should be presumed when a party infringes a design patent. This equitable principal of design patent law should inform the court’s analysis when considering a permanent injunction against further design patent infringement.

Apple does not appear to have argued that design patents should not be subject to a causal nexus requirement because of the unique disgorgement remedy for design patent infringement. However, the court made one statement that offered a glimpse into its possible position on this line of reasoning. Apple argued that the “causal nexus” requirement should only apply to a motion for a preliminary injunction so as not to vitiate a patent owner’s right to exclude others from practicing the patent. In response the Federal Circuit quoted the Supreme Court’s decision in eBay, reasoning that “the creation of a right is distinct from the provision of remedies for violations of that right.” Id. at 17 (eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392 (2006)). However, this admonishment does not explain the failure to address the impact of the disgorgement remedy on the injunction analysis. Presumably, the creation of an equitable remedy, such as disgorgement, would be highly relevant to the application of another equitable remedy for the same violation, such as an injunction.

Just add this to the growing list of questions for Apple and Samsung’s attorneys during this week’s design patent conference at Suffolk University School of Law.

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