Wednesday, September 5, 2012

Apple v. Samsung – I

In April 2011, Apple Inc. sued Samsung Electronics Co. Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America, LLC before the Northern District Court of California. The suit was a composite one for infringement of Apple's trade dress, trademarks, and utility and design patents by Samsung’s Galaxy cell phones and computer tablets.

Apple alleged that Samsung’s smart phones, the Galaxy S 4G and the Infuse 4G, infringed its design patents D593087 and D618677. Apple also alleged that Samsung’s Galaxy Tab 10.1 tablet infringed its design patent D504889.

It was also alleged that all of the above-mentioned devices of Samsung and the Droid Charge infringed Apple’s utility patent 7469381 which claims the “bounce-back” feature.

On July 1, 2011, Apple sought an interim injunction from the District Court to prevent importation and sale of the allegedly infringing devices in USA. This was denied by the District Court by an order dated December 2, 2011.

The interim injunction was denied on the ground that Apple could not establish likelihood of success on merits with respect to D’087 and D’889 patents. According to the District Court, a Japanese patent 1241638 cited by Samsung raised substantial questions about the validity of Apple’s D’087 patent. Specifically, the District Court held that the D’087 patent of Apple and the Japanese patent cited by Samsung had similar edges and rounded corners, a bezel, a similarly shaped speaker, and similar proportions of screen and border.

With respect to D’899, the District Court held that although Samsung’s Galaxy Tablet 10.1 would appear substantially the same as Apple’s iPad to ordinary observers, there were substantial questions of validity against the patent in light of the prototype tablet developed in 1994 by Roger Fidler.

 As for the other design patent D’677, the District Court took the view that the Japanese patent did not pose any challenge to it. The District Court in fact observed that Apple’s and Samsung’s products would appear substantially the same to an ordinary observer and that Samsung’s products were likely to infringe the D’677 patent. Despite observing this, the District Court held that Apple had not established irreparable harm. The Court rejected Apple’s contention that Samsung’s sale of the infringing product would irreparably dilute its brand during the pendency of the suit.

What is important is that the District Court acknowledged the following:
1. that Apple and Samsung were direct competitors who were vying for the attention of new purchasers of smart phones;
2. that the initial purchase of a smart phone had long-term effects on downstream purchases such as purchase of accessories and digital applications.;
3. that such downstream losses are difficult to calculate and hence could support a finding of irreparable harm.

Despite having acknowledged the above, the District Court held that Apple had failed to establish the nexus between Samsung’s infringing conduct and loss in Apple’s market share. The reason for this is, according to the District Court, although product design was at least one of the factors which influenced purchase of smart phones, there was evidence which showed that it was functional novelty as opposed to design considerations which held greater sway over purchasing decisions.

This reason, combined with Apple’s delay in seeking an interim injunction, resulted in denial of interim injunction to Apple with respect to D’677. Apple had apparently alleged in its suit that Samsung had been infringing its designs and trade dress since 2007. Therefore, lack of legal action until April 2011 and failure to seek an interim injunction until July 2011 had undermined Apple’s claim of urgency and irreparable harm.

Again, with respect to Apple’s utility patent ‘381 which claims the bounce-back feature, the Court was of the view that Apple failed to establish irreparable harm despite there being no substantial questions with respect to the patent’s validity. The Court held that Apple “failed to establish a relationship between any alleged loss of market share, customers, or goodwill, and the infringement of the 381 patent”.

The important take-away from the District Court’s decision is the Court’s emphasis on establishment of irreparable harm by the right owner to justify the grant of interim injunction in cases of design and patent infringement. The Court’s take that, despite prima facie infringement of design other factors negated irreparable harm, may have the effect of eroding the stand-alone character of infringement of designs.

Simply put, in determining irreparable harm, if Courts were to hold that although a registered design had been infringed, design in itself did not play a great role in purchasing decisions of customers, it undermines the grant of a design right because the same reason could be applied to a host of predominantly functional products. The issue of irreparable harm, at least with respect to designs, must be assessed with respect to dilution of the association of a certain design feature with a particular player, as opposed to the role played by design in influencing a customer’s overall decision to buy.

The object of grant of a design right is to help a manufacturer of a product distinguish himself from his peers. That does not mean the design must be the sole or the most prominent factor in influencing a customer’s choice. Its limited purpose is to ensure that a customer notices a player’s product and identifies the unique design feature with that player. Therefore, one does not agree with the District Court’s approach to irreparable harm.

That said, Indian decisions, except for trademarks (Ramdev Food products and Fedders North American), do not throw much light on the establishment of irreparable harm. Analysis, typically, is restricted to prima facie establishment of validity and infringement. That sense of urgency which a claimant is expected to show by proving irreparable harm, seems to be almost absent in the adjudication of IP matters. May be it is time we developed our jurisprudence on this issue.

In the next post, I shall discuss the Federal Court’s decision in Apple’s appeal on the issue of interim injunction. 

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