Could Samsung’s US ‘Win’ Influence Australia’s High Court?

In what could be a very timely decision for Samsung, Judge Lucy Koh in the United States District Court for the Northern District of California issued orders late on Friday, 2 December 2011, denying an interim injunction in the US patent infringement action which was initiated by Apple on 15 April 2011.

We have obtained a copy of the order, which is available for viewing in Google Docs, or for download as a PDF (2.7 Mb).

The order means that Samsung will be able to continue selling its Galaxy Tab 10.1, Galaxy S 4G, the Infuse 4G and the Droid Charge in the United States, until and unless Apple is ultimately successful at trial in establishing infringement by Samsung of at least one valid claim of the patents which it has asserted in the US proceedings. 

Significantly, despite denying a preliminary injunction at this stage, Judge Koh has indicated her provisional opinion that at least one of the four patents relied upon by Apple in the preliminary application is likely valid and infringed.  If that turns out to be so, then Samsung is potentially looking down the barrel of an expensive damages claim, unless it can settle its disputes with Apple in the meantime.

One ‘news’ item that has emerged from the publication of Judge Koh’s order – despite commercially-sensitive passages being substantially redacted – is the supposed revelation that, contrary to widely-held opinions, Apple is in fact willing to license at least some of its ‘smartphone/tablet’ related patents to its competitors, and has even negotiated with Samsung to do so.  (See, e.g., coverage by The Verge, Apple licensed iOS scrolling patent to Nokia and IBM, offered license to Samsung.)

The reason that this information should not come as any surprise is that (as we will discuss further below)  it was already revealed in Justice Bennett’s interlocutory decision in the Federal Court of Australia, again highlighted by a sea of surrounding redactions.

So, with Apple now denied a preliminary injunction in the US as well as in Australia (albeit on appeal), it seems that the stars may finally be aligning for Samsung.  However, it still faces the hurdle of a Special Leave hearing before the High Court of Australia this Friday (see High Court Grants Apple Further Galaxy Tab Reprieve).  So is it possible that the US decision could have any impact on the outcome here?

RELEVANCE OF US ORDER

On the face of it, Judge Koh’s order in the Northern District of California is f no direct relevance to the Australian case.

For one thing, there is absolutely no correspondence between the patents asserted by Apple in the US proceedings, and those presently asserted in the Australian litigation.  There are four patents in suit in California, three of which are ‘design patents’, which protect only the visual appearance of a product, and not its function.  The equivalent Australian right is a ‘registered design’.  Apple has registered designs in Australia (see Did Stanley Kubrick Invent the iPad2?), but is not asserting them in the ongoing litigation.

The fourth US patent is a ‘utility  patent’, no. 7,469,381, entitled ‘List scrolling and document translation, scaling, and rotation on a touch screen display’, otherwise known as the ‘scroll bounce’ patent.  The Australian equivalent, patent no. 2009200366, has been named by Apple in its main complaint against the Samsung Galaxy Tab 10.1, but was dropped from the interlocutory case.  The patent covers the ‘bounce’ effect which occurs on an Apple iOS device when the user drags a scrolling pane beyond the edge of the page – rather than just stopping dead while the user continues the gesture, the page keeps moving, and then bounces back into place when released.

However, the basic principles regarding the grant of a preliminary injunction are similar in the US and Australia.  This is unsurprising, because an injunction is an equitable remedy and, despite some divergence over the past few hundred years, the principles of equity in both Australia and the US can be traced back to their English origins.

PRELIMINARY INJUNCTIONS: US vs AUSTRALIAN APPROACHES

As Judge Koh rightly stated (quoting the US Supreme Court, starting at page 8, line 20 of her order), ‘[a] preliminary injunction is an extraordinary remedy, never granted as a matter of right’, going on (at the top of page 9) to set out the criteria against which Apple’s application must be tested:

1. some likelihood of success on the merits of the underlying litigation;
2. immediate irreparable harm will result if the relief is not granted;
3. the balance of the hardships to the parties weighs in Apple’s favour; and
4. the public interest is best served by granting the injunctive relief.

With the exception of  a reversal of perspective in the third factor (‘balance of convenience’ in Australia, versus ‘balance of hardships’ in the US), the first three of these reflect essentially the same considerations as have generally been applied in patent cases under the Australian law (see Refusal of Preliminary Injunctions – a Recent Case and Samsung’s ‘Eyes Wide Open’ Sinks Australian Galaxy Tab 10.1 for further details of the Australian approach).

We do not seem to be so concerned with the public interest in Australia, however in its appeal decision last week, the Full Bench of the Australian Federal Court acknowledged that this can be a relevant factor (Samsung Electronics Co. Limited v Apple Inc. [2011] FCAFC 156 at [68]-[69]), although ‘[h]ardship visited upon third persons or the public generally by the grant of an interlocutory injunction will rarely be decisive’.

This is broadly consistent with Judge Koh’s decision, from which it does not appear that public interest is likely to be dispositive in patent cases generally – from a policy perspective, the public interest in the effective running of the patent system (e.g. not allowing a party to get away with infringement of a valid patent) is fairly evenly balanced with the public interest in strong competition in the marketplace.

What is notable is that Judge Koh’s approach to weighing up these factors was far closer to that of the Full Bench of the Australian Federal Court on appeal than to that of Justice Bennett at first instance.  For each of the four patents, she assessed likelihood of infringement, likelihood of invalidity, and likelihood of irreparable harm to Apple (along with the public interest, which was not dispositive in any instance).  In particular, Judge Koh was bound to follow the authority of the Court of Appeals for the Federal Circuit (cited at page 37, lines 11-15), according to which:

[The] rule regarding whether a preliminary injunction should be granted or denied is that the trial court should weigh and measure each of the four factors against the other factors and against the magnitude of the relief requested.  Under this rule, no one factor, taken individually, is necessarily dispositive.

Similar statements are to be found in the decision of the full court in Australia (particularly at [59]-[74]), including (at [67]):

The question of whether there is a serious question or a prima facie case should not be considered in isolation from the balance of convenience. The apparent strength of the parties’ substantive cases will often be an important consideration to be weighed in the balance.

This contrasts with the less flexible approach followed at first instance, whereby having determined whether or not Apple had ‘a probability’ of success, Justice Bennett took no further account of the strength of that probability when weighing up the remaining factors.

SO WHAT?

Australia is not the United States, and our law is not theirs.  Any common roots date back over 300 years, and US District Court decisions certainly have no precedential weight in the High Court of Australia.

However, courts in all countries – and particularly across common law countries – are generally aware of developments of the law elsewhere and, especially when circumstances such as market conditions and underlying policy considerations are similar, may find the reasoning of foreign courts to be somewhat persuasive.  The most notable recent examples of Australian courts citing US judgments with approval in patent cases are those relating to patentable subject matter, such as Grant v Commissioner of Patents [2006] FCAFC 120, at [24]: ‘While the development of US patent law is derived from the Constitution of the United States rather than the Statute of Monopolies … the policy behind the two provisions is the same.’

There is no good reason to suppose that Australian courts should adopt a less-flexible approach to determination of whether or not to grant a preliminary injunction than their US counterparts.

Additionally, the Full Court found that Apple had not, in any event established a likelihood that it would succeed in either of its infringement claims at trial.  Considering this factual finding by three out of the four Federal Court judges who have considered the evidence, even a slightly less flexible analysis is unlikely to result in the grant of an injunction.

APPLE’S WILLINGNESS TO LICENSE

The ‘revelation’ in the US District Court order that Apple is willing to license at least some of its patents to competitors might, on the face of it, appear to assist Samsung.  In particular, if Apple has been willing in the past to put a price on its patents, in terms of royalties, then it may be argued that damages, in the form of reasonable royalties, would be adequate compensation in the event of a final finding of infringement.

Judge Koh appeared to think so, finding (at page 64, lines 14-15) that ‘[w]hile not dispositive, this fact does weigh in Samsung’s favor.’

However, this is not new information in the Australian case.  The same issue, and evidence, was canvassed before Justice Bennett, who dismissed its relevance in relation to the broader question of whether damages would be an adequate remedy:

185. Mr Lutton says that Apple Inc’s core message in the Negotiations was that Samsung Electronics Co Limited was copying Apple Inc’s products and that this ‘had to stop’. The Negotiations concerned Apple’s intellectual property more broadly and was not limited to its patents or the US equivalents of the Interlocutory Patents. Mr Lutton says that, as Samsung Electronics Co Limited was a valued partner of Apple Inc and as coexistence in the consumer electronics market was important to Apple, Apple Inc was willing to discuss the concept of possible licences. However, he emphasises that such discussion was part of the broader discussion of a framework by which Samsung Electronics Co Limited could continue to sell its products with some elements of Apple Inc’s intellectual property, such as some “lower level patents”, available to them but would cease copying the features and functionality of Apple Inc’s products, and the iPad in particular.

186. [Redacted]

187. [Redacted]

188. The content of the Presentations, relied upon by Samsung, is put into context by Mr Lutton’s evidence. In light of Mr Lutton’s evidence as a whole, I do not accept that Apple was prepared to, or accepted that, Samsung could pay a licence fee for the Australian Galaxy Tab 10.1 in its present form, and with its present functionalities. Accordingly, I am not prepared to draw an inference from the Negotiations or the Presentations that Apple considers or considered damages to be an adequate remedy for the Apple Harm.

CONCLUSION

The timing of the US order is fortuitous for Samsung since, if it is in any way influential upon the Australian High Court, it must be of greater benefit to Samsung than to Apple.

The flexible approach taken in the US is closer to that laid out by the Full Federal Court on appeal than the approach taken by Justice Bennett at first instance.  Higher courts tend to favour greater flexibility, since individual cases can differ markedly in their facts and surrounding circumstances, and rigid rule-driven approaches tend not to adapt well to a broad range of different situations.

There is, however, one significant difference in the circumstances between Australia and the US, namely that the Samsung products are already on the market in the US, such that denying an injunction maintains the status quo in that jurisdiction, whereas in Australia it is the grant of an injunction that does so.

Weighing against this is the fact, which the full bench found to be significant, that a preliminary injunction in this case has the effect of final relief, since it will effectively prevent the launch of the Galaxy Tab 10.1 in Australia before it is already superseded.

Overall, we think it unlikely that there is anything in the judgment of the Full Court that the High Court will wish to take up, and we expect that Apple’s application for Special Leave will be denied.  However, we have long since given up trying to make firm predictions of the twists and turns in this dispute!

Tags: Appeal, Apple-v-Samsung, Australia, Interlocutory injunction, US