Baker Hostetler Patent Watch: Apple, Inc. v. Samsung Elecs. Co.

Alerts / May 14, 2012

[D]elay in bringing an infringement action and seeking a preliminary injunction are factors that could suggest that the patentee is not irreparably harmed by the infringement.

On May 14, 2012, in Apple, Inc. v. Samsung Elecs. Co., the U.S. Court of Appeals for the Federal Circuit (Bryson,* Prost, O'Malley) affirmed-in-part, vacated-in-part and remanded the district court's denial of a preliminary injunction with respect to U.S. Design Patents No. D593,087, No. D618,677, and No. D504,889, and U.S. Patent No. 7,469,381, which related to smartphones and tablet computers. The Federal Circuit stated:

"A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." The decision to grant or deny a preliminary injunction lies within the sound discretion of the district court, and we will not reverse its judgment absent an abuse of that discretion. . . .

The district court held that the design claimed in the D'677 patent was not anticipated or rendered obvious by the prior art. On appeal, Samsung has not made a persuasive case that the district court's conclusion was incorrect. With respect to irreparable harm, however, the district court found that Apple had not shown that it was likely to suffer irreparable injury in the absence of an injunction. The court based its ruling mainly on Apple's failure to show that there was a nexus between the likely infringement of the patented design and Apple's claims of lost market share and brand dilution. On appeal, Apple challenges that ruling on two grounds. First, it contends that it need not show a nexus in order to establish irreparable injury. Second, it contends that even if consumer motives are relevant to the irreparable harm inquiry, the evidence shows that there was a nexus between the asserted infringement and the market injury to Apple.

We hold that the district court was correct to require a showing of some causal nexus between Samsung's infringement and the alleged harm to Apple as part of the showing of irreparable harm. To show irreparable harm, it is necessary to show that the infringement caused harm in the first place. Sales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature. 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. . . .

Apple contends that even if some showing of nexus is required between the infringing conduct and the alleged harm, it made such a showing. The district court, however, considered the evidence presented by both parties, including survey evidence, and found that while there was evidence that design had some effect on smartphone sales, there was considerable countervailing evidence indicating that it was not a determinative factor in consumer decisionmaking. Weighing the evidence, the district court concluded that it did not clearly show that Samsung's allegedly infringing design was responsible for Apple's lost sales; at most, it showed that the alleged infringement caused an insignificant amount of lost sales.

A mere showing that Apple might lose some insubstantial market share as a result of Samsung's infringement is not enough. As the Supreme Court has pointed out, a party seeking injunctive relief must make "a clear showing" that it is at risk of irreparable harm, which entails showing "a likelihood of substantial and immediate irreparable injury." Given our deferential standard of review, we are not prepared to overturn the district court's finding that Apple failed to satisfy its burden of establishing the likelihood of irreparable harm.

Apple argues that the district court erroneously ruled that erosion of a distinctive design could never serve as the basis for a finding of irreparable harm. The district court remarked that "if the introduction of a design-patent-infringing product were sufficient to establish the erosion of design 'distinctiveness,' and therefore irreparable harm, an injunction would presumably issue in every case in which a defendant introduced an infringing product into the market." Contrary to Apple's contention, however, that observation does not reflect a wholesale rejection of design dilution as a theory of irreparable harm, which we agree would have been improper. Instead, the district court went on to note that "Apple has not articulated a theory as to how erosion of 'design distinctiveness' leads to irreparable harm in this case," and that Apple had offered only "conclusory statements and theoretical arguments" in support of its theory. Without "concrete evidence to support its argument," the district court ruled, "Apple has not yet established that this harm to its reputation for innovation is likely to occur." As to Apple's "brand dilution" argument, the district court found that, even assuming "brand dilution" could arise from design patent infringement, "Apple has not demonstrated that brand dilution is likely to occur." The district court's opinion thus makes clear that it did not categorically reject Apple's "design erosion" and "brand dilution" theories, but instead rejected those theories for lack of evidence at this stage of the proceedings.

The district court based its finding as to irreparable harm in part on Apple's delay in seeking preliminary injunctive relief against Samsung's smartphones. Apple objects -- and we agree -- that the district court should not have faulted Apple for not filing suit as early as 2007, since Apple's design patents had not issued as of that date. Nonetheless, it was reasonable for the district court to consider the issue of delay and to find that Apple had not proceeded as quickly as it could have in seeking preliminary injunctive relief. The district court correctly noted that delay in bringing an infringement action and seeking a preliminary injunction are factors that could suggest that the patentee is not irreparably harmed by the infringement. While the district court rejected the "extreme" position that Apple's failure to seek a preliminary injunction against Samsung's first generation of infringing products precludes it from ever seeking preliminary injunctive relief, the court looked to Apple's "overall diligence in seeking a preliminary injunction," and concluded that, on balance, Apple's "delay in diligently pursuing its infringement claim against Samsung tips in Samsung's favor." We decline Apple's invitation to reject the district court's "delay" analysis altogether, and based on the district court's conclusions as to the nexus and delay factors, we uphold the court's finding that Apple failed to show that it was likely to suffer irreparable harm in the absence of a preliminary injunction. . . .

In addressing the D'889 patent, the tablet computer design patent, the district court concluded that Apple had shown that it was likely to suffer irreparable harm from Samsung's alleged infringement. However, the court denied injunctive relief because it found that Apple had failed to establish a likelihood of success on the merits. In particular, it found that Samsung had raised a substantial question as to the validity of the D'889 patent. We sustain the court's finding of a likelihood of irreparable harm, but we hold that the court erred in its analysis of the validity issue.
With respect to irreparable harm, the district court considered the relevant factors, properly weighed them, and concluded that Apple had shown that it was likely to suffer irreparable harm from the sales of Samsung's infringing tablets. The factors included the relative market share of Apple and Samsung and the absence of other competitors in the relevant market. The court also determined, based on evidence submitted by the parties, that design mattered more to customers in making tablet purchases, which helped Apple establish the requisite nexus. The fact that Apple had claimed all views of the patented device and the fact that it was prompt in asserting its patent rights were also properly accorded weight by the court. Given our deferential standard of review, we cannot say that the court abused its discretion when it found that Apple demonstrated a likelihood of irreparable harm. We disagree with the district court, however, in its conclusion that Apple had failed to show that it was likely to succeed on the merits. The district court concluded that the validity of the D'889 patent was subject to a substantial challenge based on two prior art references: the 1994 Fidler reference and the TC1000 tablet. . . .

In addressing a claim of obviousness in a design patent, "the ultimate inquiry . . . is whether the claimed design would have been obvious to a designer of ordinary skill who designs articles of the type involved." To determine whether "one of ordinary skill would have combined teachings of the prior art to create the same overall visual appearance as the claimed design," the finder of fact must employ a two-step process. First, "one must find a single reference, 'a something in existence, the design characteristics of which are basically the same as the claimed design.'" Second, "other references may be used to modify [the primary reference] to create a design that has the same overall visual appearance as the claimed design." However, the "secondary references may only be used to modify the primary reference if they are 'so related to the primary reference that the appearance of certain ornamental features in one would suggest the application of those features to the other.'"

Because the district court found that there is a substantial question as to the validity of the D'889 patent, it did not make any findings with regard to the remaining two questions bearing on whether to issue a preliminary injunction -- the balance of hardships and the public interest. The court conducted a detailed assessment of the balance of hardships with respect to the D'677 and '381 patents after finding that they were likely to survive a validity challenge. With respect to the D'889 patent, however, the district court has not determined the extent to which Samsung would be harmed if the sales of Galaxy Tab 10.1 were enjoined, and how the potential harm to Samsung resulting from entering an injunction compares to the potential harm to Apple should the district court deny interim relief. Nor has the district court evaluated the public interest at stake with respect to the sales of Samsung's Galaxy Tab 10.1. Because the district court has not yet weighed the balance of hardships to the parties and the public interest factors, we do not have a sufficient basis for concluding that the failure to enter an injunction was an abuse of discretion.

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