30 September 2011

Apple and Samsung Talk Possible ‘Deal’ as Hearing Again Adjourned

Tablets attending the Federal Court in Sydney
The hearing in Apple’s case seeking a preliminary injunction barring release of Samsung’s Galaxy Tab 10.1 in Australia has again been adjourned – this time until 10.15am on Tuesday, 4 October 2011 (Monday being a public holiday in Sydney).

Time ran out for the parties to complete their arguments today, as the judge and participants in the highly-publicised Federal Court proceedings were forced to vacate Court no. 1, on the 21st level of the courts building (shown right), to make way for a moot – a mock court hearing for law students!

Justice Bennett had been expected to deliver a ruling next week, which is likely to determine whether the Samsung Galaxy Tab 10.1 tablet will be available in Australia in time for Christmas, or whether the kids will all be getting iPads!

Yet in a surprise development at around 3.30pm it seems there was suddenly talk in the court of a possible deal between the parties which might allow Samsung to get the Galaxy Tab onto the Australian market, in some form, ahead of a final ruling.  If Apple and Samsung were to reach such an agreement, there would be no need for Justice Bennett to rule on the preliminary injunction.

However, the sudden talk of a deal did not prevent the hearing from continuing today.  When Apple's lawyers suggested a break in proceedings, to enable them to take instruction from their client, Justice Bennett decided to proceed with hearing the rest of the evidence first.  No doubt she wanted to ensure that there would be no need for a return to the courtroom next week if a deal could not be struck.  Unfortunately, time was against her all the same.

HEARING ALREADY EXTENDED TO A THIRD DAY

The hearing – originally scheduled for two days this week, but extended into a third – commenced at high-noon, earlier than the 2.15pm start set at the close of proceedings yesterday.  As previously reported (see Apple and Samsung Return to Court With ‘Eyes Wide Open’ and Apple v Samsung Hearing to Continue…), Apple is trying to persuade the court to grant a preliminary injunction barring Samsung from launching the Galaxy Tab 10.1 in Australia, at least until a final decision can be made as to whether or not the device infringes up to 13 patents originally identified in Apple’s complaint.  (Although the number of patents asserted at this preliminary stage had been reduced to only two by early in yesterday’s proceedings.)

Samsung, for its part, has argued that its modified Australian version of the Galaxy Tab 10.1 does not infringe Apple’s patents which are – so Samsung asserts in a cross-claim – in any event invalid.

To recap briefly, the key questions which Justice Bennett will have to mull over, if the parties do not come up with a deal in the meantime, are:
  1. whether Apple has sufficiently established a probability that the court will find its patents to have been infringed at trial, and/or whether Samsung has established that the patents are likely to be found invalid;
  2. whether Apple will be disadvantaged if no preliminary injunction is awarded, to an extent that any compensation awarded at trial would be inadequate; and
  3. whether other factors relevant to the ‘balance of convenience’ (i.e. the relative impact of the preliminary decision upon the parties) favour the grant of a preliminary injunction.

BALANCE OF CONVENIENCE

Justice Bennett opened proceedings by asking lawyers for both Apple and Samsung  to summarise their ‘balance of convenience’ statements, explaining how each party believes it, and the other, would be affected by the grant (or otherwise) of a preliminary injunction.

The 'balance of convenience' refers to the relative consequences of an 'error' at the interlocutory stage (i.e. either wrongly granting an injunction, or wrongly denying an injunction).

A wrongly granted injunction does significant harm to Samsung, keeping its product off the market until a final resolution.  Samsung needs to establish that, although the court can order Apple to pay compensation to Samsung in this situation, it will be very difficult, or impossible, to determine a fair amount.

A wrongly denied injunction does harm to Apple.  It will potentially lose sales to Samsung, until the case is decided and a permanent injunction granted.  Again, the court can order Samsung to compensate Apple for this, and Apple therefore needs to show that financial compensation would not be adequate because of some irreparable, long-term, consequence of the Galaxy sales (such as the conversion of consumers to ‘Android people’, as Apple argued yesterday).
Timetable for Full Trial
The speed with which the matter can be brought to a full trial, which was raised repeatedly in yesterday’s sessions, almost immediately arose once again.  As we indicated in our previous report, this issue could be critical in determining whether an injunction is granted, because if an early date can be set, then it is more likely that Justice Bennett will decide in favour of Apple and grant an injunction.

The difficulty for Samsung is that if Justice Bennett – who is known to be a proponent of improving the speed and efficiency of Federal Court proceedings – is not persuaded that the company is genuinely unable to be ready for trial until 2012, she may grant an injunction so as to provide an incentive for Samsung to move more quickly.  In discussions with Samsung’s lawyers, she appeared unconvinced that a later trial date would be necessary, suggesting that major companies such as Apple and Samsung, with similar litigation ongoing in a number of jurisdictions, should have appropriate expert witnesses ‘at their fingertips’.

Counsel for Samsung, Mr Neil Murray, retorted that ‘even multinational companies don't have guns for hire ready to be rolled out’.  Whether or not this is true, the further issue is that in proceedings relating to the validity of Australian patents, the experts must normally have experience of the the state of knowledge in Australia.  Thus there is no guarantee that any expert evidence prepared for use in overseas proceedings would be of any use to Samsung in Australia.

However, the timing of a full trial undoubtedly has a significant effect on the ‘balance of convenience’ issue.  Indeed, the level of interest shown in this issue by Justice Bennett suggests that it may be decisive, or at least strongly influential, in her decision next week.
Is Apple Picking on Samsung?
A further issue discussed today was the existence of earlier products with feature similar to those which Apple is contesting in relation to the Galaxy Tab 10.1, and the fact that Apple has not previously taken similar action.  Apple’s position appears to be that, although such products might include infringing features, they were not worth pursuing because of their relative lack of commercial success. 

Samsung’s answer, nonetheless, is that a ‘singling out’ of its products places its relationships with telecommunications providers in jeopardy.  The implication is presumably that the impact of even a temporary injunction could be greater than might initially appear to be the case, if it affects Samsung’s ability to reach agreements with telecommunications providers to support its tablet.

SAMSUNG ‘READY TO LAUNCH’

In the course of cross-examination, Samsung Australia's Vice-President of telecommunications, Tyler McGee, indicated that Samsung would be ready to launch a product to the Australian market within seven days of a (favourable) ruling.  However, this is based on the assumption that no further modifications are required to avoid infringement of Apple’s patents.  Mr McGee was unable to advise how much additional time may be required if it proves necessary to remove further features.

However, if a deal is struck between the parties, it seems quite likely to involve removal of features such as the ‘zoom bounce’ and ‘selective rejection’ algorithms.  Presumably, Samsung’s reasoning would be that it can initially bring to market a less feature-rich version of the Galaxy Tab 10.1, reserving the possibility of restoring functions that are ultimately shown to be non-infringing by way of a later software update.

With a long weekend in which to consider their respective positions, and discuss a possible compromise, it seems plausible that when Apple and Samsung’s lawyers return to court on Tuesday morning it may be with a deal in hand, ready for the court’s approval, rather than to continue with their arguments, evidence and submissions.
Acknowledgment
Patentology is indebted to WSJ reporters David Fickling and Ross Kelly for their live-blogging from the courtroom this afternoon.

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