Apple v Samsung Down Under – 2011 Redux

The opening gambit in the Australian arm of the global dispute between Apple and Samsung finally drew to a close earlier this month, neatly typing up a few loose ends in what must surely be the biggest Australian patent story in recent memory. The stage is now set for the main event – full trials on infringement and validity of various Apple and Samsung patents – during the course of next year.

A review of the story so far is therefore timely, as the Australian courts close down for an extended break over the holiday season, before getting back into full swing for the new year in February 2012.

THE END OF THE BEGINNING

On 9 December 2011, the High Court of Australia refused Apple's request for special leave to appeal from a decision of a Full Bench of the Federal Court denying a preliminary injunction against the launch of the Galaxy Tab 10.1. (Article: Breaking: High Court Rejects Apple Appeal Bid.)

In what turned out to be a temporary win for Apple, an injunction had originally been granted by a single judge of the Federal Court, pending a full trial in relation to Apple’s claims of patent infringement. (Article: Samsung’s ‘Eyes Wide Open’ Sinks Australian Galaxy Tab 10.1.)

Samsung’s tablet is now on sale in Australia, just barely in time for Christmas, and four months after the originally-planned launch in mid-August.

There is, at present, no date set down for the main infringement case to be heard. However, Samsung has a counter-suit pending against Apple's iPhone 4S, and other 3G devices, which is presently scheduled to be heard during March and April next year. (Article: Samsung Drops Injunction Demands, Grabs Reins in Apple Dispute.)

THE ORIGINAL DECISION TO GRANT AN INJUNCTION

The tussle over whether or not a preliminary injunction was appropriate in this case is an important one for rights owners and accused infringers in Australia. The grant of interim relief, pending a full trial, is a contentious issue. On the one hand, patent cases can take a long time to resolve, during which period the sale of allegedly infringing products may be very damaging to the patentee. On the other hand, patent cases are generally very complex and evidence-intensive, making it notoriously difficult for a court to guess at the likely outcome at a preliminary stage, without the benefit of all relevant facts and information.

A problem widely perceived with the initial decision in this case was that it set a low threshold for grant of a preliminary injunction. The trial judge, Justice Annabelle Bennett, was willing to accept that Apple had put forward a plausible argument that it could succeed in the final proceedings, and that this was sufficient to overcome the threshold issue, even though Samsung had put forward an at least equally plausible non-infringement argument of its own.

Having crossed the threshold, Justice Bennett went on to consider the ‘balance of convenience’, which involves weighing up the relative impact of an interim injunction upon each party. In doing so, she found that the considerations were almost evenly-balanced. Significantly, it was accepted by the court, as well as by both Apple and Samsung, that it would be difficult to compensate either party adequately by an award of damages, due to the distinct ‘ecosystems’ in which the Apple and Samsung devices operate. In particular, the loss to Apple by the sale of an Android-based Samsung device is not limited to the potential loss of an iPad sale. There are ongoing losses of business through Apple’s iTunes and Apps Stores, as well as the likelihood that the Samsung customer will become an ‘Android person’ (as one of Apple’s lawyers put it in the original hearing), and therefore continue to prefer Android devices over Apple iOS devices in the longer term. The same, of course, applies to a significant degree in reverse, although Samsung is not the sole supplier of Android-based devices and content.

According to Justice Bennett, two factors in particular appeared to tip the balance slightly in Apple’s favour. Firstly, Apple had apparently shown a greater willingness to proceed with an early trial than Samsung. The judge considered this important, because it was accepted by both sides that the life cycle of the Galaxy Tab would be relatively short, such that a preliminary injunction might well amount to final relief, in the sense that it would effectively ensure that the product was never launched, even if Samsung were ultimately to prevail.

Secondly, Apple relied on two patents in its preliminary case, each of which might independently be infringed by Samsung, which the judge saw as increasing Apple’s prospects of success overall.

PRELIMINARY INJUNCTIONS: THE CORRECT PRINCIPLES

On appeal, a Full bench of three judges of the Federal Court unanimously overturned the initial decision. The court found, in particular, that the primary judge had been wrong to consider the threshold test in isolation from the balance of convenience considerations. (Article: Samsung v Apple – A Closer Look at the Appeal Decision.)

As the High Court put it, when denying Apple’s subsequent application for leave to appeal to the ultimate authority, ‘the governing consideration is that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted by the plaintiff and the practical consequences likely to flow from the grant of interlocutory relief’. In other words, it is not enough to establish only that the patentee has a plausible case. It is also necessary to consider all of the relevant circumstances, and consequences of the decision, which will determine just how convincing that plausible case must be.

There is, in the words of High Court Chief Justice French during oral argument, ‘an interaction … between the assessment of the strength of the case and the strength of the balance of convenience.’ (The transcript of the High Court hearing is available as Apple Inc & Anor v Samsung Electronics Co. Limited & Anor [2011] HCATrans 341.)

In this context, the Full Federal Court found that Apple’s case was simply not strong enough, especially when weighed against the plausibility of Samsung’s contrary arguments, to justify the grant of a preliminary injunction in the circumstances.

Furthermore, the Full Court found that the willingness, or otherwise, of Samsung to proceed with an early trial – for reasons which were not fully known to the trial judge – was an irrelevant consideration. This was echoed in the hearing before the High Court, in which Justice Gummow described talk of a ‘final hearing’ as ‘an incantation’, on the basis that it is plainly apparent from the behaviour of both parties that any ‘final’ decision would itself be appealed, and then the appeal decision most likely again brought up before the High Court.

The High Court denied Apple leave to appeal, on the basis that it had demonstrated insufficient prospects of success in showing any error on the part of the Full Federal Court. This effective approval by the High Court means that the decision of the Full Federal Court represents an authoritative statement of the law in Australia as to the approach to be taken when considering the grant of interlocutory injunctions in patent cases

SIGNIFICANCE FOR ALL AUSTRALIAN RIGHTS HOLDERS

The significance of the decision for rights holders, and accused infringers, in Australia therefore goes well beyond the relatively high level of public (and media) interest in the Apple/Samsung dispute. It will have an ongoing impact on intellectual property rights enforcement and litigation strategy for the foreseeable future.

In particular, rights holders must understand that it is not easy to obtain preliminary relief in Australia. In weighing up the interests of the parties to patent litigation, as well as the general public interest in ensuring that competition is not restricted without good justification, this is no doubt the correct outcome. An interim injunction barring a competitive product from the market prior to a full trial on the merits – particularly in litigation as complex and fact-intensive as that involving the infringement and validity of patents – is an extraordinary remedy, and should only be granted in exceptional circumstances. While it may be difficult to determine appropriate damages in complex circumstances, this does not alter the fact that when private litigants come to court seeking a decision in a commercial dispute, some form of financial compensation will almost always be an available remedy following a full trial.

A patent holder considering enforcement action in Australia needs to take into account the unlikelihood of preliminary relief in formulating a strategy. In many cases it is probable that time, money and energy would be better expended on building a strong case for the main trial, or on pursuing alternative resolution to a dispute, such as licensing or other agreements.

In this preliminary skirmish, Apple scored a substantial win with the initial grant of an injunction. Although this has ultimately been overturned, Samsung’s Galaxy Tab 10.1 has been effectively excluded from the market for four months, and almost missed the Christmas shopping period altogether. However, it is probable that this strategy could be successful only once, and future litigants in comparable circumstances are unlikely to be so fortunate. Federal Court judges are now bound by the rules of precedent to follow the Full Federal Court decision, and will be significantly more reluctant to grant preliminary injunctions in future cases.

WHERE TO FROM HERE?

As noted above, Samsung’s infringement case against Apple is currently set down for a hearing some time during the period from 7 March 2012 to 27 April 2012.

However, a Directions Hearing was held before Justice Bennett on 20 December 2011 and, based upon the orders that have been issued (available from the Commonwealth Courts Portal), it seems that nothing is yet set in stone, and the saga may have a few twists and turns still to come.

Apple has apparently applied for the currently-scheduled hearing dates to be vacated, and is seemingly no longer so interested in bringing the matter to trial so soon, although Justice Bennett was unwilling to consider this application at this stage. At the same time, it looks like Apple is pressing to have an expedited hearing date set down in its infringement claim against the Galaxy Tab 10.1. There have been some extensions in previously-set due dates for filing of evidence and other documents, and the matter is now scheduled for a further Directions Hearing on 3 February 2012, at which time the final timetable for the trials is likely to become more clear.

We have every expectation that we will be following this case throughout 2012. Taking into account the likelihood that any judgment will be appealed, barring a settlement (which surely must become a real possibility at some point in this costly global dispute) we do not see any prospect of a final disposition in the foreseeable future.

Tags: Apple-v-Samsung, Australia, Litigation, Smartphone wars