Again,
here
is a link to the opinion. The appeal involves three patents, including
the one with the "slide to unlock" feature. Judge Moore wrote
the majority opinion, and the key issue on appeal is whether there was a
sufficient "causal nexus" between Samsung's infringement and Apple's
alleged lost sales, i.e., whether the infringement caused Apple to suffer
irreparable harm. Here is the key passage from Judge Moore's opinion (pp.
10-12):
When
a patentee alleges it suffered irreparable harm stemming from lost sales solely
due to a competitor’s infringement, a finding that the competitor’s
infringing features drive consumer demand for its products satisfies the causal
nexus inquiry. In that case, the entirety of the patentee’s alleged harm
weighs in favor of injunctive relief. Such a showing may, however, be nearly
impossible from an evidentiary standpoint when the accused devices have thousands
of features, and thus thousands of other potential causes that must be ruled
out. Nor does the causal nexus requirement demand such a showing. Instead, it
is a flexible analysis, as befits the discretionary nature of the four-factor
test for injunctive relief. We have explained that proving a causal nexus
requires the patentee to show “some connection” between the patented features
and the demand for the infringing products. Apple III, 735 F.3d at
1364./1 Thus, in a case involving phones with hundreds of
thousands of available features, it was legal error for the district court to
effectively require Apple to prove that the infringement was the sole cause of
the lost downstream sales. The district court should have determined whether
the record established that a smartphone feature impacts customers’ purchasing
decisions. Apple III, 735 F.3d at 1364. Though the fact that the
infringing features are not the only cause of the lost sales may well lessen
the weight of any alleged irreparable harm, it does not eliminate it entirely.
To say otherwise would import a categorical rule into this analysis.
/1
As we explained in Apple III, “some connection” between the patented feature
and consumer demand for the products may be shown in “a variety of ways,”
including, for example, “evidence that a patented feature is one of several
features that cause consumers to make their purchasing decisions,” “evidence
that the inclusion of a patented feature makes a product significantly more
desirable,” and “evidence that the absence of a patented feature would make a
product significantly less desirable.” Id. These examples do not delineate or
set a floor on the strength of the connection that must be shown to establish a
causal nexus; rather, they are examples of connections that surpass the minimal
connection necessary to establish a causal nexus. Apple III included a fourth
example to demonstrate a connection that does not establish a causal
nexus—where consumers are only willing “to pay a nominal amount for an
infringing feature.” Id. at 1368 (using example of $10 cup holder in $20,000
car). There is a lot of ground between the examples that satisfy the causal
nexus requirement and the example that does not satisfy this requirement. The
required minimum showing lies somewhere in the middle, as reflected by
the “some connection” language.
Judge
Moore then praises the virtues of property rights and exclusivity (p.12):
The
right to exclude competitors from using one’s property rights is important. And
the right to maintain exclusivity—a hallmark and crucial guarantee of patent
rights deriving from the Constitution itself—is likewise important.
“Exclusivity is closely related to the fundamental nature of patents as
property rights.” Douglas Dynamics, 717 F.3d at 1345. And the need to
protect this exclusivity would certainly be at its highest when the infringer
is one’s fiercest competitor. Essentially barring entire industries of
patentees—like Apple and other innovators of many-featured products—from taking
advantage of these fundamental rights is in direct contravention of the Supreme
Court’s approach in eBay. 547 U.S. at 393 (“[E]xpansive principles
suggesting that injunctive relief could not issue in a broad swath of cases . .
. cannot be squared with the principles of equity adopted by Congress.”).
As
a result, she writes, "The district court thus erred when it required
Apple to prove that the infringing features were the exclusive or predominant
reason why consumers bought Samsung’s products to find irreparable harm,"
and that it "should have considered whether there is 'some connection'
between the patented features and the demand for Samsung’s products," that
is, that it "should have required required Apple to show that the patented
features impact consumers’ decisions to purchase the accused devices"
(p.12). Moreover, Judge Moore writes, "the record here establishes
that these features do influence consumers’ perceptions of and desire for these
products" (p.13), after which she discusses evidence that she believes
indicated that Samsung copied, a matter that on the facts of this case was
relevant to the issue of whether "carriers or users valued those
features" (pp. 13-15). She also notes Apple's expert's "conjoint
study, which established that consumers would not have purchased a Samsung
phone if it lacked the patented features, that they valued these features, and
that they were willing to pay considerably more for a phone that contained
these features" (p.15)--thus perhaps giving a boost to future uses of
conjoint studies in matters relating to patent remedies (a topic I have blogged
about here
and here).
Having
concluded that the irreparable harm factor weighed in Apple's favor, Judge
Moore also concludes that the "inadequate remedy at law" factor does
too (not surprising, since those factors more or less mean the same thing),
given the difficulty in quantifying "the extent of Apple's downstream and
network effect losses" (p.18). The court then agrees with Judge Koh
that the balance of hardships and public interest factors weighed in favor of
Apple. In discussing the public interest factor in particular, Judge
Moore again stresses the value of property rights and exclusivity (p.21):
.
. . the public generally does not benefit when that competition comes at the
expense of a patentee’s investment-backed property right. To conclude otherwise
would suggest that this factor weighs against an injunction in every case, when
the opposite is generally true. We base this conclusion not only on the Patent
Act’s statutory right to exclude, which derives from the Constitution, but also
on the importance of the patent system in encouraging innovation. Injunctions
are vital to this system. As a result, the public interest nearly always weighs
in favor of protecting property rights in the absence of countervailing
factors, especially when the patentee practices his inventions.
The
result is a remand that presumably will result in an injunction conditioned (as
Apple proposed) on Samsung having 30 days to design around the patents at
issue.
If
Judge Moore's opinion ultimately carries the day (I imagine there may be a
request for rehearing en banc or a cert petition, and if so I don't know what
to predict), this could signal to the district courts that at least some of the
judges on the Federal Circuit are eager to reinvigorate injunctive relief,
which at present is granted about 75% of the time to the prevailing patent
owner. All the more so given Judge Reyna's concurring opinion, in which
he writes (pp. 4-5):
Though
we read eBay to overrule our presumption of irreparable injury, we cautioned
that courts should not necessarily “ignore the fundamental nature of patents as
property rights granting the owner the right to exclude.” Robert Bosch LLC
v. Pylon Mfg. Corp., 659 F.3d 1142, 1149 (Fed Cir. 2011). Yet our recent
cases have done precisely that, ignoring the right to exclude in determining
whether to issue an injunction. . . .
I
believe that this recent trend extends eBay too far. Infringement on the
right to exclude is, in my view, an “injury” that is sometimes irreparable. An
“injury” is not limited to tangible violations but rather encompasses
“violation[s] of another's legal right, for which the law provides a remedy; a
wrong or injustice.”
There
is no reason to treat patent rights differently.
Actually,
I can think of reasons why it might be desirable to treat patents differently,
the principal one being their utilitarian nature: they are a means to an
end, and thus the law of remedies for their infringement should turn
exclusively on economic factors, among them the risk (or not) of holdup and the
ability (or not) of the courts to adequately preserve the patent incentive by
awarding compensatory damages. In other words, I'd rather see the discussion
turn (as it often does in antitrust law) on economics than on formalistic
invocations of the sanctity of property. (To be fair, Judge Reyna isn't
making a purely formalistic argument--see his opinion at pp. 6-7, for
example--but I am concerned about how all of this constitutional and
property-based rhetoric is going to be used in the future. And Judge
Reyna, unlike Judge Moore who does not reach this issue, would find that Apple
was threatened with injury to its reputation as an innovator, even without any
empirical evidence to substantiate this, see pp. 10-18 of his concurrence.)
Judge
Prost's strongly worded dissent seems consistent with her previous
pronouncements on the "causal nexus" issue in previous litigation
between these parties. Here's her opening salvo (pp. 1-2):
This
is not a close case. One of the Apple patents at issue covers a spelling
correction feature not used by Apple. Two other patents relate to minor
features (two out of many thousands) in Apple’s iPhone—linking a phone number
in a document to a dialer, and unlocking the screen. Apple alleged that it
would suffer irreparable harm from lost sales because of Samsung’s patent
infringement. For support, Apple relied on a consumer survey as direct
evidence, and its allegations of “copying” as circumstantial evidence. The
district court rejected both evidentiary bases. On the record of this case,
showing clear error in the district court’s factual findings is daunting, if
not impossible.
She
also disputes the majority's findings on the issues of carrier and user
preferences and copying as not being supported by the evidence (pp. 7-12).
Again,
we'll see what happens, but I wonder if this case will be taken as a signal to
the district courts to be more willing to grant injunctions in cases involving
component patents, that is, patents that make up but one feature of a product
that may embody many more patented and unpatented technologies. Perhaps,
if as Samsung asserted at oral argument it can easily design around the patents
in suit and at present only sells one product that incorporates any of them
(majority op. pp. 5, 20), it would have made more sense to resolve the case on
narrower grounds rather than making sweeping claims about the wonders of
injunctive relief; but so it goes.
One
other thing I would note as well: some previous descriptions of the
"causal nexus" requirement might have led one to think that
injunctions would rarely issue in cases in which the patent owner cannot
demonstrate that the patented feature at issue sufficiently "drives the
demand" for the product to satisfy the entire market value rule (though
even Judge Prost has stated that that is not necessarily the case, see
discussion on this blog here).
In any event, the majority opinion here seems to dispel any such notion.
Finally,
I must confess that I called this one wrong: I thought the Federal
Circuit would affirm. See here.
