Apple Scores a Big Jury Verdict Against Samsung, But What About an Injunction?

There are some very good summaries of the Jury verdict, and there is also a lot of speculation about what happens now that the jury found various Samsung patents infringe Apples patents and trade dress. The jury’s verdict form shows how they answered the various IP claims. In summary, all of Apple’s and Samsung’s patents (utility and design) were found valid. However, none of Samsung’s patents were infringed and the vast majority of Apples were. However, the jury form also gives a some indications of what may happen next in this case.

While a lot will be written in the next week on pending appeals and cross appeals, motions for judgement notwithstanding the verdict (JNOV), and other post trial maneuvers, Judge Koh will also have to decide if she will award an injunction preventing future sales and imports of the infringing products. Injunctions are imposed as an equitable remedy by the judge, not the jury. In deciding whether or not to grant an injunction in patent cases, federal judges must apply the eBay factors, named for the 2006 eBay v. MercExchange case in which the Supreme Court clarified the factors that must be weighed. Those factors that a plaintiff must demonstrate include:

(1) that it has suffered an irreparable injury;

(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;

(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and

(4) that the public interest would not be disserved by a permanent injunction.

Since that case, courts have been more reluctant to grant permanent injunctions at the end of a patent trial. One reason cited for the decline in injunctions is that the presumption of irreparable harm is dead. This case is a bit different though.

In addition to the patents infringed, Samsung was found to both infringe and dilute Apples iPhone trade dress (both registered and unregistered). The strength of Apple’s trade dress is in its distinctiveness and Apple’s continued use of it. Trade dress protection is only available so long as the trade dress serves as a source identifier for the product. If another manufacturer can sell goods that infringe or dilute Apple’s trade dress going forward, that would likely do irreparable harm to Apples trade dress rights against other parties.

In this case, there is significant overlap between the design patents and Apple’s trade dress. There is even an arguable overlap between the utility patents and trade dress as the rebounding scroll lists covered by some of the utility patents are part of the look and fee of the various iOS devices. In this unique case, Apple is in a position to argue that failing to provide a permanent injunction would pose an irreparable harm to Apples other intellectual property, namely it’s trade dress.

My personal feeling is that Apple has a better than average chance of obtaining a permanent injunction. Whether the rationale behind it will be based solely on the patents, trade dress, or a combination where the various forms of intellectual property reinforce a showing of irreparable harm will be interesting to see. Keep in mind, that while it isn’t a slam dunk, Judge Koh did show a willingness to impose a preliminary injunction early in the case.

As it stands now, Apple will file its motion and brief on August 29, Samsung will reply on or before September 12 (the rumored launch date of the iPhone 5), and a hearing before Judge Koh will be held on September 20.

UPDATED: Judge Koh, has scheduled the hearing for Decmeber 6.

A Review of the Legal Claims in Apple v. Samsung: Utility Patent Infringement

Friday was the last day of evidence in the Apple v. Samsung case. Closing arguments will likely be on Tuesday week and then the jury will get the case. I posted earlier on the trade dress and design patent claims Apple has made against Samsung in Apple’s complaint. In this post I’ll focus on Apple’s utility patents.

Unlike design patents and trade dress, utility patents protect useful articles and methods. Here is a list of the patents originally asserted by Apple in its Complaint:

With over a year of pretrial motions, hearings, and orders, the list of asserted patents has been whittled down to three: the ‘163, ‘381, and ‘915 patents. These patents relate to various features of the iOS UI including pinch to zoom, rebounding list scrolling, and rebounding scrolling on the home screen, respectively. These patents are not so broad as to block any competing smartphone. If fact, earlier versions of the Android operating system did not include rebounding scrolling and

In preparation for closing arguments, Apple prepared and filed a chart outlining which Samsung devices were accused of infringing Apples various patents.

Samsung is arguing that the patents are not valid because the features claimed were already known when Apple filed its patent applications.

A Review of the Legal Claims in Apple v. Samsung: Design Patent Infringement

Today should be the last day of evidence in the Apple v. Samsung case. Closing arguments will likely be on Tuesday next week and then the jury will get the case. I posted earlier on the trade dress claims Apple has against Samsung that are in Apple’s complaint. In this post I’ll focus on Apple’s three asserted design patents related to the iPhone.

Design patents protect the appearance of an article rather than the functional features. Here is a table with the design patents and their titles:

Design Patent Table from Apple’s complaint

When looking at a design patent, the solid lines show what is claimed and protected. Broken lines provide context but don’t limit the patent. So, while the D677 patent shows the iPhone 4, only the front screen area is in solid lines, so the side buttons and other features don’t restrict the scope of the patent. Similarly, the D790 patent claims the GUI. Only the icons and rectangular touch screen limit the scope of the patent. Below is a table comparing the Samsung Galaxy to these three patents:

Apple’s design patent comparison to Samsung’s Galaxy from Apple’s complaint

Samsung is attacking the validity of these design patents by trying to show that phones with the claimed design elements were publicly known prior to the filing of the applications that issued as these patents. Samsung can also avoid liability if they convince the jury that the design features are functional rather than aesthetic.

One thing Samsung won’t be able to rely on is an argument that they independently developed their own design. In copyright cases a defendant can avoid a claim of infringement if they came up with the material without any reference to the copyrighted material. That is because copyright law protects against, as the name suggests, copying. Patent law, however, doesn’t allow for a defense of independent development.

From what I’ve read so far, Samsung isn’t spending much time arguing that their designs are not similar to Apple’s, but are attacking the validity of the design patents. The jury will get to decide that issue.

Legislation Limiting Certain Design Patents Hits the House: The PARTS Act

I recently wrote on the power of design patents but now they are under attack, at least in one industry. Reps. Darrell Issa (R-CA) and Zoe Lofgren (D-CA) introduced a bill to be known as the PARTS Act to the House on February 2, 2012 and it had a subcommittee hearing on August 1. Gene Quinn of ipwatchdog.com does a good job of connecting the dots from the witnesses at the subcommittee hearing to vehicle insurance trade groups. The bill would retroactively remove design patent protection for automotive replacement parts. This isn’t about engine components, but rather body panels and interior components that are designed for not just a function but an aesthetic.

With respect to a design patent that claims a component part of a motor vehicle as originally manufactured —

(A) it shall not be an act of infringement of such design patent to make or offer to sell within the United States, or import into the United States, any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent if the purpose of such article of manufacture is for the repair of a motor vehicle so as to restore such vehicle to its appearance as originally manufactured; and

(B) after the expiration of a period of 30 months beginning on the first day on which any such component part is first offered to the public for sale as part of a motor vehicle in any country, it shall not be an act of infringement of such design patent to use or sell within the United States any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent if the purpose of such article of manufacture is for the repair of a motor vehicle so as to restore such vehicle to its appearance as originally manufactured.

While these patents can protect the appearance of a particular model, automotive companies and their suppliers also pursue design patents on these components to protect their position in the replacement part market. While they could pursue protection on the entire vehicle appearance, typical body repairs involve only one or two body panels. Accordingly, it’s advantageous to obtain a design patent on each new panel design independent of the others.

Under current law, a design patent may be obtained that will have a 14 year term from the date of issue. That effectively covers the life of many cars. The result of the bill would be a wholesale devaluing (really an elimination of value) for design patents already issued in this area. Replacement parts manufacturers would be able to immediately start producing and marketing exact copies of the OEM panels. Two and a half years after the first offer for sale of a vehicle having the patented part, anyone could sell or use the copies.

While this could conceivably reduce repair costs (a boon to car insurance companies) it will also reduce the return on investments in new vehicle design and body styles. There are pros and cons to the concept of trying to increase competition in a particular market, but immediately devaluing design patents is not the way to promote competition in the area.

Like the SHIELD Act, the PARTS Act targets a specific industry and aims to weaken patents in those industries. It seems that efforts to weaken intellectual property protection in the United States are moving away from comprehensive changes and are instead being applied to specific industries.

Bill in the House Would Make Losing Patent Owners Pay Some Litigation Costs

Reps. Peter DeFazio (D-OR) and Jason Chaffetz (R-UT), have introduced the “Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act.” The bill, if passed, would award attorney’s fees and costs to the winning putative infringer if the judge finds that the patent owner “did not have a reasonable likelihood of succeeding…” The bill is limited to patents related to computer hardware and software.

There are a few things I want to point out. First, despite the statement (reported by arstechnica.com) from Rep. Chaffetz that “A single lawsuit, which may easily cost over $1 million if it goes to trial, can spell the end of a tech startup and the jobs that it could have created,” this bill will likely not affect cases that go to trial. While not congruent with the standard for summary judgement or a Rule 12(b)(6) motion, I don’t think many cases that make it to trial would fit the standard set out in the SHIELD Act.

Second, the bill does not address the situation of an accused infringer who loses a case in which they did not have a reasonable likelihood of succeeding. This puts a disincentive on patent owners, especially small business patent owners (many of whom are technology startups), who would otherwise want to defend their intellectual property. At the same time, it encourages infringers to drag their feet, avoid settlement, and force the patent owner to rack up legal fees even if the infringer has a strong feeling they may lose on summary judgement.

Many technology startups chose to use patents to protect their ideas. Those patents are only useful if they can be enforced and this one-sided legislation will make it harder for small businesses to do so. It may also impact their value to potential suitors who may chose to emulate the technology rather than acquire it.

A better approach would be to impose a “loser pays” system across all patent cases (or even all cases brought in federal court). Whatever is done, it should be done across the board to apply to all technology areas.

As the bill stands, I doubt it will impact the behavior of patent trolls. Defendants will still settle because the mere hope of recovering their defense costs won’t offset the potential downside of not settling. The suits that will be deterred are those brought by innovative startups who now will have to fear paying the accused infringer’s costs should the startup lose. Those costs could break a small company and the fear of paying them will keep small businesses from asserting valid patents.

Apple v. Samsung: Independent Development is Not a Defense

There has been a lot of coverage of the Apple v. Samsung case going on. I’ve posted on the value of design patents that this litigation highlights. One topic is that of the public release of excluded evidence by Samsung’s lawyers. Some tech blogs have taken issue with the ruling saying Samsung should be able to show evidence that the design was their own idea.

This misses a critical point. Independent development is not a defense to patent infringement. Even if you never saw the design or the patent you are accused of infringing, that will not protect you. This is true even in you came up with the idea first.

Unless an earlier developed design fits into a statutory category of prior art (such as a printed publication, patent, article for sale, etc.) then its existence is irrelevant to validity and infringement. This surprises some people and it is different than other areas of intellectual property law.

For example, trade secret law protects against misappropriation; copyright law protects from copying. In these areas, a defendant can avoid liability by demonstrating independent development. I’m sure the attorney’s for Samsung were well aware of this, and it will be interesting to see what Judge Koh does in response to the public statements and release of evidence that was deemed irrelevant.

Apple v. Samsung: The Power of Design Patents

Design patents are often maligned as limited in their usefulness. Many clients want to obtain one or more utility patents for their new products but don’t think of the potential power of design patents. In the United States, design patents are used to protect the aesthetic aspects of a product. That may sound narrow or easy for competitors to design around, but that may not always be the case.

Apple’s design patents for the iPhone are an extreme example of the potential power of design patents. It should be noted that nearly 80% of Apple’s damages claim is based on design patent infringement.

Like any other patent, Apple can (and has) also assert infringement in the International Trade Commission. The result of a finding of infringement in the ITC is not damages, but rather an exclusion order that is enforced by customs who prevent the infringing devices from being imported. In the electronics (and many other industries) where production is done offshore, this is a heavy hammer to wield that effectively excludes the infringing products from one of the larges consumer markets in the world.

Because ITC proceedings are streamlined, they are considerably less expensive than litigation. This makes them available to a broader range of patent owners, including smaller companies.

Update —

The Federal Circuit has again held that patent licensing companies can utilize the ITC. There is a requirement that their be potential damage to “domestic industry” and licensing satisfies that requirement.

In Response to Hyperbole: Apple and the “Andriod Killer” Patent

There has been a lot of discussion of a patent issued to Apple last week. U.S. Patent 8,223,134, issued to Apple on July 17, 2012, and has been called everything from an “Android Killer” to something all other smartphone makers should fear. This patent relates to the the user interface of various iOS devices. However, many people don’t realize how the exclusionary power of a patent is defined. Only the claims, those numbered paragraphs at the end of the patent, define what is protected.

Some have characterized the claims of the ‘134 patent a overly broad, but take a look at the broadest device claim:

A portable multifunction device, comprising:

a touch screen display;

one or more processors;

memory; and

one or more programs,

wherein the one or more programs are stored in the memory and configured to be executed by the one or more processors,

the one or more programs including instructions for: displaying a portion of an electronic document on the touch screen display, wherein the displayed portion of the electronic document has a vertical position in the electronic document;

displaying a vertical bar on top of the displayed portion of the electronic document, the vertical bar displayed proximate to a vertical edge of the displayed portion of the electronic document,

wherein: the vertical bar has a vertical position on top of the displayed portion of the electronic document that corresponds to the vertical position in the electronic document of the displayed portion of the electronic document; and

the vertical bar is not a scroll bar;

detecting a movement of an object in a direction on the displayed portion of the electronic document;

in response to detecting the movement: scrolling the electronic document displayed on the touch screen display in the direction of movement of the object so that a new portion of the electronic document is displayed,

moving the vertical bar to a new vertical position such that the new vertical position corresponds to the vertical position in the electronic document of the displayed new portion of the electronic document, and

maintaining the vertical bar proximate to the vertical edge of the displayed portion of the electronic document; and

in response to a predetermined condition being met, ceasing to display the vertical bar while continuing to display the displayed portion of the electronic document, wherein the displayed portion of the electronic document has a vertical extent that is less than a vertical extent of the electronic document.

The claims are actually fairly narrowly tailored to cover the iPhone and other devices non-scroll bar on list and document displays. The vertical bar must not be a scroll bar; it mus be imposed over the image being displayed; it must change its position as the image is moved vertically by the user (who must be moving the image via natural scrolling); the vertical bar must stop being displayed, i.e., after a preset time with no movement on the screen. All of these conditions must be met by another device’s UI before it can infringe this claim. Omitting any of them will avoid literal infringement.

I realize it’s not as exciting as claiming that the patent will shut down all competition in smartphones, but it won’t.

I personally think this shows the value of patents in this area. What Apple has done with these claims is to provide itself with some protection against direct copying of these features of its UI. Other companies still have a lot of room to develop competing systems and devices, even better ones. These patents help prevent knockoffs from eliminating the incentive to create while still leaving the door open to new competition. In the end, consumers win.

Should You Assign Your IP to a Holding Company?

When you have a piece of intellectual property, like a patent, it’s a good idea to make sure it’s clear who owns it. Under U.S. law, inventions are owned by their inventors unless there is an agreement to the contrary.  That usually means that the inventor executes an assignment of the ownership rights in the patent to their employer or other entity.

Some entities have set up holding companies that hold the intellectual property of the parent entity.  This is done for a variety of reasons, including simplified portfolio management, tax planning, and others, but there is a cost. In some cases, damages from an infringement suit brought on behalf of an IP holding company may be limited to the “reasonable royalty” minimum, and not include lost profits. That’s because the patent owner (the holding company) doesn’t generate a profit and thus had not profits to lose.

The question, though, has come up anew with the recent news that Qualcomm is spinning off some of its R&D functions into a new company. It’s important, though, to keep in mind the wide array or pros and cons to using an IP holding company. Whether you will practice the patent, intend to license it, if it embodies standard-essential technology, and your competitive position in the market that the technology relates to all impact the decision.

As with assigning any corporate asset, it isn’t a clear cut decision and will require good advice from a variety of professionals. In the case of patents assignments, consulting with a patent attorney may be as important, or even more so, than consulting with a tax planner.

Reverse Payments in Generic Pharma Litigation Held Presumtively Anti-Competitive

The Third Circuit has held that reverse payments in settlement of Orange Book litigation are presumptively illegal.

Reverse payments in settlements of pharmaceutical patent cases have been controversial for some time. Under the Hatch-Waxman Act, a generic manufacturer can get approval for the generic form of a name-brand drub using a streamlined process that relies on data originally submitted by the name-brand manufacturer. The generic manufacturer makes a certification to the FDA that their product doesn’t infringe the patent claims that supposedly cover the drug either because the patent in invalid or the generic version falls outside the scope of the patent claims. The making of the certification itself is an act of patent infringement that can prompt a lawsuit. These patents are listed in the FDA’s Orange Book and these types of cases are often referred to as “Orange Book litigation.”

The goal of Hatch-Waxman was to streamline the approval process for generic drugs and increase their availability on the market. The generic manufacturer could piggyback on the name-brand’s data and avoid costly studies, and the name-brand could bring an immediate suit to defend its patents without waiting for the generic to enter the market. However, the unique situation this created also lead to a new form of settlement that includes a “reverse payment” to the accused infringer.

Reverse payments are those from the patent holder, to the infringer, made in exchange for the infringer’s agreement to not enter the market. The idea of reverse payments can be unsettling because of the apparent anti-competitive effects. Some view the arrangements as a way for a brand-name manufacturer to keep a lock on the market without having to defend the validity of its patent in court. Logically, the reverse payment would only be made if the expected profits resulting from maintaining its position as the only provider of a drug exceeds the size of the reverse payment.

However, there is a less cynical view of the reverse payment arrangement. Consider a piece of property to which doesn’t have a clean title. For example, a neighbor may claim an easement, or allege adverse possession of a part of the property. The property owner may choose to pay the neighbor (also a putative trespasser) in exchange for the neighbor abandoning its claim to any of the property.

In the case of Orange Book litigation, the patent owner has a piece of property, but its meets and bounds may be in question. The accused infringer may claim the patent is invalid or that their formulation isn’t covered by the claims. This is akin to a cloud on the title. The patent owner has a strong incentive to clean the title by removing the challenges to validity and scope. This can be done through litigation, however, litigation always carries the risk of loss. Settlements, including reverse payment arrangements, can be a reasonable way for the parties to price the risk of litigation.

This doesn’t mean that reverse payments can’t be abused. This is a result of the way Hatch-Waxman excludes third party generic manufactures from the market for the drug to give the first generic an incentive to initiate the process. A patent owner can collude with the generic manufacturer to create a prohibition on third party generic manufactures when the parties both believe the patent to be either invalid or not infringed. However, when such an arrangement should be illegal can be difficult to determine.

Since there is always a risk that a patent will be held invalid or its claims not infringed, the patent owner will always have some concern about it. How certain must the patent owner be that the patent is invalid or not infringed? 50%? 80%? 90%? Should the likelihood of invalidity or non-infringement be measure subjectively from the patent owners perspective, or objectively? At what point would you simply be forced to litigate all of the issues to know if the settlement is legal?

To deal with this, courts have generally applied a “scope of the patent” test. The test looks to see if the agreement extends the exclusive rights of the patent owner beyond what they are entitled to under the patent. Of course, the point of a settlement is to avoid litigating the issues of validity and infringement, and in the review, these are generally assumed.  The result is that no reverse payment arrangements have been found to be antitrust violations under the test.

Enter the Third Circuit. This week in In Re: K-Dur Antitrust Litigation, the court held that reverse payment settlements between a patent holder and generic pharmaceutical manufacturer are presumptively anti-competitive. This presumption can be overcome by showing that either the payment was not for the purpose of delaying market entry by the generic manufacturer or that the agreement offers some pro-competitive benefit.

This analysis is called a “quick-look rule of reason analysis” and is familiar to antitrust scholars and practitioners. However, it could have significant affects on the generic/name-brand dichotomy in the pharmaceutical industry. In any event, this creates a very clear circuit split involving mutually exclusive antitrust tests for reverse payment settlements and sets up an interesting opportunity for the Supreme Court to weigh in on the issue.