Canada: Apple vs. Samsung: Intellectual Property Injunctions As A Strategic Tool

Last Updated: October 17 2012
Article by Neil Kathol and Laura MacFarlane

The ongoing Apple and Samsung patent infringement lawsuits can only be described as a global war for dominance in the smartphone and mobile computing marketplace. Apple and Samsung are engaged in lawsuits worldwide, including in the U.S., U.K., Germany, Australia, France, Italy, Japan and South Korea.

This is not the first nor the last time that titans of industry used intellectual property (IP) claims to secure marketplace dominance. In the 1990s, Apple sued Microsoft Corporation to prevent Microsoft and HP from using visual graphical user interface elements that were similar to those found in the Mac operating systems. Apple lost that battle. Even further back in history, a 1911 case pitted George Selden, a patent holder for an early motor car, against Henry Ford in Columbia Motor Car Co. v. C.A. Duerr & Co. Normally, plaintiffs in IP litigation seek an injunction at the outset, before the actual trial. This preliminary order is called an interlocutory injunction. Seldon sought but was denied an interlocutory injunction. In the trial, Ford was found not to have infringed Selden's patent, and of course Ford's company went on to become synonymous with mass produced automobiles in the United States.

The difference between a permanent injunction and an interlocutory injunction is that an interlocutory injunction is obtained before the merits of the claim are determined at trial. A permanent injunction is issued after trial. While permanent injunctions can be difficult to obtain, interlocutory injunctions (also called "preliminary injunctions") are even more difficult; the bar is higher, since the court must balance the claims of each party before there is a chance to present evidence at a full trial.

In litigation such as the Apple-Samsung battle, each side may win a few skirmishes in different jurisdictions. These wins and losses will ultimately factor into any settlement negotiations. The negotiating position in the boardroom will of course be informed by how many courtroom victories are scored, and in particular, whether any interlocutory or preliminary injunctions are imposed by the Courts. Intellectual property injunctions are court orders that prevent something from happening, such as the importation and sale of infringing products, or the manufacture of specific articles, or the use of particular trade-marks or copyrights. An injunction preventing the sale of a key product – such as those blocking sales of Samsung's popular Galaxy Tab – can have a devastating impact on a company. However, it is important to remember that injunctions before trial (interlocutory or preliminary injunctions) are easily threatened, but can be difficult to obtain. In the Apple- Samsung litigation, Apple is still attempting to enforce its patents by obtaining additional injunction orders from the US courts. Further, in the US, success at trial is not a guarantee that a permanent injunction will be granted. Rather such a remedy is discretionary and determined on a case-by-case basis.

A recent decision in Canada illustrates the issues for smaller businesses who are confronting intellectual property infringement issues, and considering injunctions as a strategic tool. In Automated Tank Manufacturing (ATM) v Miller, the court reviewed a preliminary injunction application dealing with the use of proprietary, confidential information about certain intellectual property for manufacturing oilfield tanks. The court reviewed the three-part test that applies to pre-trial injunctions. To obtain an interlocutory or preliminary injunction, an applicant has to clear these three hurdles:

1. First, what is the strength of the applicant's case? The general rule is that a party seeking an injunction must demonstrate a "serious issue" – in other words, a claim that is not "frivolous or vexatious". That has been, in most cases, the easiest of the hurdles to clear.

2. Next, the court asks: Will the applicant suffer "irreparable harm" if the injunction is not issued? "Irreparable harm" means that, if an injunction is not granted, the applicant would suffer a loss that cannot be compensated for by the payment of monetary damages. If the loss or damage to the applicant can be settled with a payment, then the injunction won't be granted.

Irreparable harm can be especially difficult to prove in patent infringement cases because damages arising from loss of sales is not generally considered to be irreparable harm. Courts will stubbornly insist such damages can be proven, assessed and awarded at trial even if some speculation is required in assessing them. Something "special" must be placed into issue with clear, convincing and supported evidence to back it up (persuasive speculation will not suffice).

3. Lastly, does the balance of convenience favour the granting of the injunction? Here, the judge has to weigh the risk of harm to the plaintiff if the injunction is not granted before trial, against the risk of harm the defendant is likely to suffer if the injunction is granted. It's a determination of which of the two sides will suffer more harm from the decision – either granting or refusing the injunction – in light of the fact that this order will be granted before a decision on the merits of the case at trial. Where the factors weighing for each party in the balance of convenience test are evenly balanced, the Court will generally preserve the status quo. If one party's case is disproportionately stronger than the other's, this factor may be permitted to tip the balance of convenience in that party's favour.

A preliminary injunction is a powerful tool in negotiation strategy. If ATM had succeeded in obtaining a preliminary injunction, it may have negotiated a favourable settlement with the other side. In this case, the applicant did not succeed in convincing the court of "irreparable harm" and so the balance of convenience weighed in favour of the defendant. The injunction was not granted. At trial, the plaintiff does not have to prove these difficult "irreparable harm" and "balance of convenience" elements since liability will have been determined by the end of the trial. The only issue (in Canada) will be whether the infringing activity is continuing and if so, very likely the Court will enjoin it. Thus, proceeding as quickly as possible to trial is often a strong option.

When reviewing your options in the face of intellectual property infringement by a competitor, consider the strategic advantages and merits of pursuing injunctive relief.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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