In September, the Federal Circuit vacated Judge Koh's order denying Apple an injunction against Samsung in the case involving the "slide to unlock" patent (see my blog post, here). Today, the court issued an order denying Samsung's petition for rehearing en banc, but withdrew the previous opinions and replaced them with these, which according to the order make the following changes:
Samsung’s petition for rehearing is granted by a majority of the panel for the limited purpose of modifying the previously filed majority opinion. Page 17 of the original opinion reads: “Apple did not establish that that these features were the exclusive or significant driver of customer demand, which certainly would have weighed more heavily in its favor. We conclude that this factor weighs in favor of granting Apple’s injunction.” The corrected opinion reads:
Apple did not establish that these features were the exclusive driver of customer demand, which certainly would have weighed more heavily in its favor. Apple did, however, show that “a patented feature is one of several features that cause consumers to make their purchasing decisions.” Apple III, 735 F.3d at 1364. We conclude that this factor weighs in favor of granting Apple’s injunction.The dissenting opinion was also amended. Samsung’s petition is denied in all other respects.
Today is a busy day for me--I have this webinar coming up in a few hours, among other matters--but I'll try to find some time later today to see in what respects Judge Prost amended her dissenting opinion, and report back.
Update: As far as I can tell, all of the changes to Judge Prost's dissenting point are in Part B (pages 5-7 of the dissent). Perhaps the most important passage is this:
Perhaps recognizing its error, the majority reissued its opinion in this case to remove the implication that even an insignificant connection might be enough to satisfy the causal nexus requirement.2/ While this change is a more accurate reflection of our law, it does not obviate the central problem with the majority’s conclusion in this case. As we stated in Apple III, “[t]he question becomes one of degree, to be evaluated by the district court.” Apple III, 695 F.3d at 1368. Here, the district court weighed the evidence and found it lacking. Injunction Order at *13 (“[T]he weight of the evidence shows that Apple’s conjoint study fails to demonstrate that the features claimed in the ’647, ’721, and ’172 patents drive consumer demand for Samsung’s infringing products.”). The majority identifies no basis for overturning this finding with its conclusion—unsupported by the record—that “Apple did, however, show that ‘a patented feature is one of several features that cause consumers to make their purchasing decisions.’” Majority Op. at 17 (quoting Apple III, 735 F.3d at 1364).
2/The majority’s original opinion stated that: “Apple did not establish that that [sic] these features were the exclusive or significant driver of customer demand, which certainly would have weighed more heavily in its favor.” Apple Inc. v. Samsung Elecs. Co., 801 F.3d 1352, 1363 (Fed. Cir. 2015), vacated, Order (Fed. Cir. Dec. 16, 2015) (emphasis added). The majority’s reissued opinion removes the words “or significant” from this sentence. Majority Op. at 17.
This decision seems to me to illustrate a basic problem with the causal nexus requirement. On a basic property rights analysis, an injunction is desirable whenever damages are difficult to quantify, as Judge Reyna emphasizes, but it is undesirable when it will allow the property owner to extract more than the value of the property itself, in particular due to the potential for hold up. The initial rationale for the causal nexus requirement, set out in Apple II and emphasized by Judge Prost is that “Requiring a showing of nexus is necessary to prevent undue leverage wielded by patents on minor features.” This suggests that the causal nexus requirement is intended as a proxy for holdup. But it is a very poor proxy. It is true that where the infringer has invested substantial sunk costs in the product, and the patented technology is only one small component that does not drive demand, then there is potential for undue leverage. That seems to be the intuition behind the causal nexus requirement. But that is not a sufficient condition for holdup, as this case illustrates. No matter how large the sunk costs invested in the product, if the cost of designing around are low, then there is minimal potential for holdup, whether or not the patented feature drives demand for the product. On the other side of the balance, damages are likely to be difficult to quantify precisely when the patents at issue are relatively minor components of a complex product. That aspect of the causal nexus requirement seems to me to be contrary to the basic property rights analysis.
ReplyDeleteIn this case, damages are difficult to quantify and the potential for holdup is minimal, so the injunction should have been granted. At the same time, Judge Prost’s analysis of the causal nexus requirement in light of the evidence is compelling and I think Judge Prost is right to say that the majority has watered down the causal nexus requirement – but unlike Judge Prost, I think that’s a good thing.
I think you're right--when the design around cost is low, the potential for holdup is minimized, so the benefits of an injunction probably outweigh the cost. Causal nexus is a very imprecise proxy for the economically relevant considerations.
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