After it just became publicly-known that Apple itself had disclosed confidential licensing terms with respect to which it wanted Samsung sanctioned, Apple has to deal with another setback in its litigation with its most important competitor. Early (shortly after midnight) on Thursday, Judge Lucy Koh of the United States District Court for the Northern District of California somewhat surprisingly denied a renewed motion for a permanent injunction against Samsung that Apple had filed in December about a month after an appeals court had remanded a previously-denied injunction bid to the district court. After the partly-successful appeal, things actually looked reasonably good for Apple. The appeals court had not directed the district court to enter an injunction, but it had revived Apple's bid, which the same judge had originally denied in December 2012 following the "billion-dollar verdict". The appeals court affirmed the denial of an injunction over Apple's asserted design patents, but determined that the asserted software patents warranted further analysis.
Things looked even better for Apple after Judge Koh denied a Samsung request to conduct additional discovery and scheduled an injunction hearing for late January.
Apple can appeal today's decision if it identifies a basis for another review by the Federal Circuit. But Samsung will now also appeal the underlying liability issues: shortly after the injunction denial, Judge Koh handed down a final judgment in this case, on which basis both parties can appeal any unfavorable parts. The final judgment restates a total damages amount in this case (pre-appeal) of $929 million (after a partial retrial took place last November). Apple's previous appeal related only to the denial of a permanent injunction, not to infringement, validity or damages issues.
The patents at issue in that case (this is still the first Apple v. Samsung case filed in that district and worldwide) are not nearly as important as the question of what the standard for an injunction is when one of the participants in a "two-horse race" has been held by a jury (right or wrong) to infringe its rival's patents. Apple and Samsung have another patent trial coming up in San Jose, starting at the end of this month and lasting 14 days. Another fight over injunctive relief will break out if the jury identifies any infringement of a valid patent in that second California case. But Judge Koh feels that Samsung's competition is, for the most part, lawful, and Apple cannot obtain an injunction only because it is harmed by lawful forms of competition. That will be a problem for Apple in the second California case as well.
Ater the Federal Circuit ruling, Samsung had stated publicly that "[t]he remand concerns a very narrow scope of evidence presented by Apple". That piece of evidence was a survey by MIT professor John Hauser, an expert witness hired by Apple, according to which consumers would pay certain premiums for the multi-touch features covered by the asserted software patents. The Federal Circuit seemed rather favorably impressed with that survey at the appellate hearing in August, which is why I thought this was likely going to be enough for Apple to win a sales ban, but Samsung accurately predicted that it would be able to avoid an injunction: Judge Koh has now "conclude[d] that the [Hauser] survey results fail to show the 'requisite causal nexus' between Samsung's infringement and Apple's claimed irreparable harm". These are Judge Koh's concerns about the ability of the Hauser survey to justify a sales ban:
"First, Dr. Hauser's survey does not provide a way to directly compare consumers' willingness to pay for particular features to the overall value of the infringing devices. In other words, Dr. Hauser's survey measures the market demand for the patented features in a vacuum, without relation to the actual price or value of the devices. [...] If Dr. Hauser's willingness to pay estimates related to actual smartphone and tablet prices, the combined price premiums for just six of the hundreds of feature sets in the devices would very likely be less than the price of the devices. However, Dr. Hauser's results indicate that, given a base smartphone costing $199, consumers would be willing to pay $621 for the same smartphone with all six of the tested features at the highest levels."
"Of the price premium results in Dr. Hauser’s smartphone and tablet surveys, substantial portions are attributable to features other than the patented features. [...] [A] multitude of other survey evidence not prepared for the purpose of litigation indicates that numerous features that were not tested—such as battery life, MP3 player functionality, operating system, text messaging options, GPS, and processor speed—are highly important to consumers."
"Samsung has raised a host of arguments based on the survey's presentation that challenge the persuasiveness of Dr. Hauser's survey evidence. [...] [A]t least two aspects of Dr. Hauser’s survey presentation further obscure the degree to which the patented features contribute to the demand of the patented features. [...] The Court finds Dr. Hauser’s survey results are undermined because the survey appears to have failed to adequately account for noninfringing alternatives to the patented features. [...] Dr. Hauser did not remind respondents that those noninfringing alternatives could replace the patented features. [...] Similarly, the survey highlights the patented features using various attention-drawing graphic effects. For example, the touchscreen features are centrally located on the product choice screen. [...] In addition, the patented features, by virtue of receiving more description than the other tested features, occupy more screen space than the other features. [...] The survey also appears to have inflated the relative value of the patented features by giving much more information to respondents about the patented features than consumers in the marketplace have about those features."
The one respect in which Apple has clearly made progress post-appeal (but which was not outcome-determinative here because of Judge Koh's negative opinion of the Hauser survey) is the question of whether any licensing offers it made to Samsung in settlement negotiations or licenses it actually granted to other players such as HTC weigh strongly against its pursuit of injunctive relief. Judge Koh now notes that the anti-cloning provision in the HTC settlement (and which, according to Apple, was part of any of its proposals to Samsung) makes a key difference. She also recognizes the following: "Were the Court to find that the parties’ recent settlement discussions disfavor entering an injunction, future patentees would be much less likely to engage in negotiations while litigation is pending." But in this wider context, she also says the following, which is negative for Apple also with a view to the second California litigation:
"Apple, in other words, cannot obtain a permanent injunction merely because Samsung's lawful competition impacts Apple in a way that monetary damages cannot remedy. To award an injunction to Apple in these circumstances would ignore the Federal Circuit’s warning that a patentee may not ''leverage its patent for competitive gain beyond that which the inventive contribution and value of the patent warrant.''"
And while not as devastating as the previous passage, it's not good news for Apple that Judge Koh feels "the public interest slightly favors Samsung".
Finally, here's the order:
14-03-06 Order Denying Apple's Renewed Motion for Permanent Injunction Against Samsung by Florian Mueller
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