18 November 2013

What’s Up Down Under With Apple and Samsung?

Smart devicesLast week, the Federal Court of Australia quietly published a further interim judgment in the ongoing litigation between Apple and Samsung.  Samsung Electronics Co. Limited v Apple Inc. [2013] FCA 1142 was officially decided in 4 November 2013, however publication was delayed to give the parties an opportunity to review the judgment and request that any confidential information be redacted. 

The new judgment is, I am afraid, not very exciting reading, particularly for the lay-person.  It is a decision on the rather dry subject of whether or not Samsung should be allowed to submit further evidence relating to ongoing negotiations conducted with Apple since the commencement of the litigation.  Any content in the judgment which would have made for interesting reading – such as, for example, the terms of proposed licensing arrangements between Apple and Samsung – has been blacked out.

The answer that the court gave to Samsung, incidentally, is ‘no’.  Samsung has already filed an application for leave to appeal the decision, and a hearing on this application will take place on 21 November 2013.

However, this seems as good an opportunity as any to review the history of the Australian Apple/Samsung litigation, and provide an update on its current status. 

As matters stand right now, it does not seem likely that any judgments will be handed down on substantive issues, such as whether Samsung or Apple infringe any of each other’s patents, or whether those patents are valid, until at least the first half of 2014.  In one of the ongoing matters (to which the latest interim decision relates) there are hearing dates set down for a further 41 days, extending into April next year.  Any judgments that are issued will almost certainly be appealed by at least one of the parties, meaning that any final determination in any of the cases is unlikely until at least the second half of 2014, and possibly not until 2015.

It is worth bearing in mind that all of these cases relate to products which are already superseded.  Indeed, some of the allegedly infringing products – such as Samsung’s original Galaxy Tab 10.1, and Apple’s iPhone 3GS – are now two or more generations old.  And, contrary to what you may read in some sections of the media, no ruling in these cases will extend to newer products merely because they appear to include similar features.  A patentee always bears the burden of proving that infringement is occurring.  A court will not ‘infer’ infringement based on a different product, no matter how similar the two may appear.

Which leaves me wondering still, as I have done before, what exactly is the purpose of all this litigation – in Australia and elsewhere – and why do Apple and Samsung seem unable to reach any kind of workable settlement?

The History in a Nutshell

Apple attracted great attention back in late July 2011 when it sued Samsung to prevent the launch of the original Galaxy Tab 10.1 in Australia, alleging that the tablet infringed a number of Apple’s Australian patents.

The initial rounds of the Australian dispute lasted for nearly six months.  Apple initially won an injunction (which I said it would not get) from Federal Court Justice Annabelle Bennett, only to see that decision overturned on appeal by a full bench of the court, which determined that Justice Bennett had got it wrong.  Apple’s attempt to have the decision reviewed by the High Court of Australia failed, with the country’s top judges unconvinced that there was sufficient reason to believe that the Full Federal Court had made any error.

Even so, Apple had managed to keep the Galaxy Tab 10.1 out of Australia until just days before Christmas, leaving Santa with very few choices, other than the iPad, for those children who had been good enough to deserve a tablet under the tree!

And in those early, heady days, there was a storm of media interest.  Journalists were reporting from the court almost every time there were any developments in the case.  Unknown patent attorney bloggers were receiving early morning calls to speak with breakfast radio announcers.  I think that Australians were secretly (or perhaps not so secretly) proud, or flattered, that the Big Boys had decided to fight a part of their global battle on our turf.

However, by the time the main proceedings got underway (in July 2012), the dispute was too big, too complex, and too long-running to hold the attention of the media or the public.  There are now, in fact, a number of ‘strands’ to the dispute, which are being variously heard separately and concurrently, and by two different judges of the Federal Court – Justices Bennett and Yates.

The different components of the dispute comprise:
  1. whether various Samsung products infringe a number of Apple patents (including, but not limited to, the ‘heuristics’ patent and the ‘touch screen’ patent which were relied upon in the initial injunction application);
  2. whether those Apple patents are valid;
  3. whether various Apple products infringe a number of Samsung’s Standards Essential Patents (SEPs) relating to 3G communications technology;
  4. whether those Samsung patents are valid;
  5. whether Samsung has breached Australia’s competition laws by failing to licence its SEP’s to Apple on Fair, Reasonable and Non-Discriminatory (FRAND) terms; and
  6. a technical question as to whether certain Apple standard patents are invalid because it failed to surrender equivalent innovation patents before they were granted (I shall call this the ‘double-patenting issue’).

Current Status

The various strands of the dispute between Apple and Samsung have been divided up into a number of different matters in the New South Wales Division of the Federal Court of Australia.  Without being present in court, or requesting copies of court documents (at potentially great expense), it is difficult to know exactly which issues are to be decided in each matter, but my best ‘guess’ is the following.
  1. NSD1243/2011 is the original case commenced by Apple, in which Samsung lodged its cross-claim for infringement.  This matter has been heard by Justice Bennett, while two further matters – NSD308/2013 and NSD310/2013 – have been heard by Justice Yates.  I presume that the issues of infringement and validity of Apple’s and Samsung’s patents have been divided up between the two judges in some sensible manner, with the two new matters being created for Justice Yates’ portion of the dispute.
  2. NSD709/2012 is the case filed by Samsung in relation to the double-patenting issue.  This matter has been heard by Justice Bennett.
  3. NSD315/2013 is the FRAND/competition case, from which the latest judgment arises, and which is being heard also by Justice Bennett.
It appears that hearings in NSD1243/2011 (Justice Bennett) concluded on 14 June 2013, after 97 hearing days over 2012 and 2013, not including the 2011 interlocutory hearings and appeal, and numerous further appearances for directions, case management and so forth.

It appears also that hearings in NSD308/2013 and NSD310/2013 (Justice Yates) were conducted largely concurrently with each other, and both concluded on 12 June 2013.  However, many of the hearing dates and locations were also concurrent with NSD1243/2011.  That is, Justices Bennett and Yates presumably sat together much of the time, hearing evidence and arguments that may have been pertinent to multiple issues in the dispute.

The double-patenting case, NSD709/2012, was also heard in the course of the main hearings, and concluded on 31 May 2013.

Judgment has been reserved in all of the above matters and I expect, considering the manner in which they were heard, that all of the decisions will be handed down together.  I doubt, however, that this will happen before the conclusion of hearings in the FRAND/competition matter.  So far this case has had 17 hearing days, with a further 41 dates reserved between now and April 2014.

Conclusion

At this stage it appears that hearings have concluded in relation to infringement and validity of Apple and Samsung’s patents, and in relation to the double-patenting issue.

A hearing is ongoing in relation to the question of whether Samsung has breached Australian competition law by failing to reach an agreement with Apple to licence 3G SEPs on FRAND terms.  Currently, hearing dates are scheduled through until April 2014, although Samsung’s appeal of Justice Bennett’s rejection of its application to file further evidence could result in additional delays.

In the very early stages of this litigation, there was talk of proceeding to a full trial within days or weeks, with a view to a final judgment being handed down within months.  At the time I called this suggestion ‘ludicrous’.  Now, after nearly two-and-a-half years, more than 100 days of hearings, and still no judgment on the merits of any of the principal issues in the dispute, it seems that was a pretty good call!

Even when final judgments are actually issued, the question of what it is all for will still remain.  Samsung may be ordered to pay damages to Apple in respect of some relatively small number of early Australian sales of certain products.  Apple may be ordered to pay royalties for use of Samsung’s 3G SEPs, and Samsung may be ordered to set an appropriate FRAND rate for those royalties.  Samsung may be barred from selling products it no longer sells anyway, or to refrain from selling products with specific patented features that it has long since replaced with workarounds.  And both companies will still have new products, and new patents, giving them the option of starting up again with a whole new barrage of claims and counter-claims.

Ultimately, all this must end with some form of settlement.  None of the litigation currently taking place between Apple and Samsung, in Australia or anywhere else, appears to be making the slightest bit of difference to the market position of either company.  I imagine that both companies have spent in excess of A$3 million so far on their Australian litigation, which would be a drop in the ocean of what they are spending globally on the dispute. 

If Apple could have obtained early injunctions, and kept significant Samsung products off the market for any substantial period of time, I might think that it had gained some benefit.  As it is, however, both companies have expended huge amounts of time, money and energy on litigation that is ultimately unlikely to result in anything other than a further exchange of money in the form of agreed or court-ordered damages and/or royalties.  And that is an outcome they could have arrived at much earlier, if only they had the will to do so. 

Apple has valuable IP rights, but at some point it will need to accept that it will extract more of that value by licensing them to its competitors than it will by enforcing them in court.

Image Copyright (c) 123RF Stock Photos

No comments:

Post a Comment