United States: Permanent Injunction’s Causal Nexus Requirement Does Not Require That Patented Feature Be The Sole Reason For Consumer Demand

In Apple Inc. v. Samsung Electronics Co., No. 13-1129 (Fed. Cir. Nov. 18, 2013), the Federal Circuit affirmed the district court's denial of permanent injunctive relief with respect to Apple Inc.'s ("Apple") design patents and trade dress, but vacated the denial of permanent injunctive relief with respect to Apple's utility patents and remanded for further proceedings.

Apple sued Samsung Electronics Company, Ltd. ("Samsung") for infringement of several Apple patents and dilution of Apple's trade dress.  A jury found that twenty-six Samsung smartphones and tablets infringed one or more of six Apple patents, and that six Samsung smartphones diluted Apple's registered iPhone trade dress and unregistered iPhone 3G trade dress.  After trial, Apple moved for a permanent injunction to enjoin Samsung from importing or selling its infringing smartphones and tablets, or any other product not more than colorably different from an infringing product.  Apple also sought to enjoin Samsung from selling its smartphones found to dilute Apple's trade dress.  The district court denied Apple's requests, and Apple appealed.

"[R]ather than show that a patented feature is the exclusive reason for consumer demand, Apple must show some connection between the patented feature and demand for Samsung's products."  Slip op. at 19.

On appeal, the Federal Circuit first addressed the district court's denial of injunctive relief with respect to Apple's design and utility patents, looking to the factors enumerated in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).  With regard to irreparable harm, the Court first rejected Apple's argument that the district court erroneously adopted a causal nexus requirement in the permanent injunction context, but "agree[d] with Apple that certain of the standards arguably articulated by the district court go too far."  Slip op. at 18.  Specifically, the Court held that the district court erred to the extent it required Apple to "show that a patented feature is the exclusive reason for consumer demand," holding instead that "Apple must show some connection between the patented feature and demand for Samsung's products."  Id. at 19.  The Court also disagreed with the district court's wholesale rejection of Apple's attempt to aggregate patents for purposes of analyzing irreparable harm.

Turning to Apple's alternative argument that any reasonable causal nexus requirement was satisfied, the Federal Circuit disagreed with respect to the design patents but agreed with respect to the utility patents.  For the design patents, the Court agreed with the district court that evidence showing the importance of a general feature of the type covered by a patent is typically insufficient to establish a causal nexus.  The Court also agreed with the district court that "isolated, anecdotal statements about single design elements do not establish that Apple's broader patented designs are drivers of consumer demand."  Id. at 23.  The Court thus found no abuse of discretion in the district court's conclusion that Apple failed to establish a causal nexus.

Regarding the utility patents, the Court held that the district court erred in rejecting as irrelevant Apple's survey evidence that "consumers would be willing to pay fairly significant price premiums for the features claimed in Apple's utility patents."  Id. at 26.  The Court thus vacated the district court's determination that Apple failed to show a causal nexus with respect to its utility patents and remanded for further proceedings.

The Court then addressed the other three eBay factors with respect to Apple's utility patents.  First, the Court concluded that the district court erred in finding that the factor for the inadequacy of legal remedies favored Samsung.  The district court based its decision on Apple's past licensing behavior and Samsung's undisputed ability to pay any monetary judgment.  The Court, however, noted that "a defendant's ability to pay a judgment does not defeat a claim that an award of damages would be an inadequate remedy."  Id. at 29.  Regarding the past licensing behavior, the Court reasoned that while the district court did not err in considering such evidence, it nonetheless "erred by ending its analysis upon concluding that the asserted patents are not 'priceless' and that Samsung is not 'off limits' as a licensing partner."  Id. at 30.  The Court further explained that the district court should have considered relevant differences between Apple's past licensing practices and the current situation, rather than hinting at a categorical rule that Apple's willingness to license its patents precluded injunctive relief.  The Court thus vacated the district court's finding with respect to this factor and remanded for further consideration.

Regarding the balance of hardships, the Court found no clear error of judgment or error of law in the district court's analysis, and thus affirmed the district court's finding that this factor was neutral.  Finally, regarding public interest, the Court stated that it "[saw] no problem with the district court's decision . . . to consider the scope of Apple's requested injunction relative to the scope of the patented features and the prospect that an injunction would have the effect of depriving the public of access to a large number of non-infringing features."  Id. at 35-36.  The Court thus concluded that Apple failed to show that the district court abused its discretion in concluding that the public interest weighs against the grant of an injunction.

In the last part of the opinion, the Court addressed Apple's request to enjoin Samsung's trade dress dilution.  The Court noted that the undisputed evidence showed that Samsung had stopped selling the products found to dilute Apple's trade dress, and there was no evidence suggesting Samsung would resume selling them.  The Court concluded that, "[u]nder these circumstances, we cannot say that the district court abused its discretion in denying Apple's request for an injunction."  Id. at 40.  The Court thus affirmed the district court's denial of an injunction against Samsung's trade dress dilution.

Judges:  Prost (author), Bryson, O'Malley

[Appealed from N.D. Cal., Judge Koh]

This article previously appeared in Last Month at the Federal Circuit, December 2013.

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