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Using Injunctions To Gain Market Share: What's The Harm?

Jun 26, 2012
Jeffri A. Kaminski

Even in technology areas where the product lifecycle is short the injunction can be a formidable weapon

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One of the most powerful tools available to patent owners is the injunction. An injunction can remove competitive products from the marketplace and greatly increase a patent owner's market share. Even in technology areas where the product lifecycle is short, such as in consumer electronics, the injunction can be a formidable weapon. The Federal Circuit more clearly defined the factors that must be shown in order for an injunction to issue in its May 14, 2012 decision in Apple v. Samsung.

Apple has been unsuccessful so far in its quest to obtain an injunction against Samsung's tablet and smartphone products. On July 1, 2011, Apple brought suit against Samsung, accusing Samsung's Infuse 4G, Galaxy S 4G, Droid Charge and Galaxy Tab 10.1 products of variously infringing three design patents and one utility patent. Apple requested a preliminary injunction stopping Samsung's infringement. The case was brought in the Northern District of California and assigned to Judge Lucy Koh. Judge Koh issued a 65-page order that stated Apple has not shown that it would suffer irreparable harm unless the Samsung products were removed from the market.

Samsung was found to have likely infringed two of the asserted design patents that related to the appearance of tablet computers. One of these two patents was found likely to be valid. Samsung presented evidence that the other of the two design patents was an obvious variation of prior art designs and was successful in raising a serious question as to its validity. Judge Koh also found that all of the accused Samsung products likely infringed the utility patent and that the utility patent was likely valid.

Nonetheless, Judge Koh did not order any injunction. She noted in her order that a preliminary injunction is an "extraordinary remedy" and that Apple had failed to meet the irreparable harm requirement to be entitled to a preliminary injunction. "It is not clear that an injunction on Samsung's accused products would prevent Apple from being irreparably harmed. Indeed, given the evidence Samsung presented, it seems likely that a major beneficiary of an injunction would be other smartphone manufacturers."

As to the utility patent, Judge Koh found that Apple failed to establish a link between loss of market share, customers, or goodwill and the infringement. There must be a causal connection between the infringement and the harm suffered in order to meet the irreparable harm requirement. Although Apple practices the patent and competes in the marketplace with Samsung, the patented technology is not a core functionality of the Samsung products. Moreover, the patent at issue is just one of many patents utilized in the Samsung products. These facts weigh against a finding of irreparable harm. However, Judge Koh found that the other factors, likelihood of success, balance of hardships, and public interest, favor Apple.

Apple appealed to the Federal Circuit. On appeal, Apple argued that in order to get the injunction that it is not necessary to show a relationship between Samsung's infringement and harm to Apple, such as loss of customers. Apple's position is that it is enough to show likelihood of infringement and that Apple is likely to be harmed. The Federal Circuit panel seemed skeptical of Apple's position. Judge Bryson used an example of a car manufacturer to illustrate his concern. Would Ford be able to stop the sales of Chrysler cars if Chrysler had copied the design of a cup holder? Under Apple's analysis that would be the case. "Can that possibly be right?" Judge Bryson asked. It cannot be enough to simply show a loss of customers. Ford may have lost the customers to Chrysler because of neat ads or a new kind of engine. Judge Prost offered that there must be some evidence of a link between the harm, such as lost customers, and the infringement. The loss of customers may have been for reasons totally different from the infringement.

In its May 14 decision, the Federal Circuit stated that "[t]o show irreparable harm, it is necessary to show that the infringement caused harm in the first place." There must be a relationship between the infringement and "some market-based injury."

On oral argument, the Federal Circuit and the parties also grappled with what evidence would be sufficient to show the link between the infringement and harm. One of the challenges facing Apple is that a combination of elements go into the customer's purchasing decision. Thus, one patented feature is not likely to be a deciding factor. Would it be sufficient to show a survey of which features or combination of features are important to consumers? This issue was touched on in a footnote in the decision. The Federal Circuit noted that proof of what drives a consumer's purchasing decision, such as survey evidence, is not a prerequisite to a finding of irreparable harm. Left unsaid was what evidence would suffice to show irreparable harm, and more importantly, how to link that harm to the infringement of the patent. Companies facing the prospect of an injunction would be well-served to closely analyze this requirement for an injunction.

Jeffri Kaminski focuses on protecting and enforcing his client’s intellectual property rights. He has experience in all aspects of patent prosecution, litigation and licensing. He works primarily in the computer hardware, software, Internet, wireless and telecommunications fields.

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