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By Tony Dutra
Smartphones and tablets made by Samsung Electronics Co. infringe valid Apple Inc. patents and an exclusion order barring imports of the devices is warranted, according to a notice issued Aug. 9 by the International Trade Commission (Certain Electronic Digital Media Devices and Components Thereof, Int'l Trade Comm'n, Inv. No. 337-TA-796, 8/9/13).
The commission's announcement--an opinion will be published later--largely affirms the judgments of an ITC administrative law judge that implicated devices sold by Samsung in 2011 when Apple's complaint was filed. Though the commission reversed as to infringement of design patent claims, it upheld the ALJ's findings on graphical interface and hardware patents.
However, the ITC notice said the exclusion order does not apply to models Samsung proposed as “design around” products, which the ALJ determined do not infringe Apple's patents. Details on those models are not part of the ITC's record, and whether they will show any loss of functionality, should Samsung decide to use them as replacements, is unknown.
Complicating the matter even more, in a separate development the same day, in oral argument at the U.S. Court of Appeals for the Federal Circuit, Apple argued that other, newer Samsung phones have the same functionality as those found to infringe, but merely are branded differently (Apple Inc. v. Samsung Electronics Co., Fed. Cir., No. 2013-1129, argued, 8/9/13).
A Section 337 exclusion order from the ITC would give Apple what it failed to get in federal court. Though a jury awarded Apple over $1 billion for Samsung's infringement of other patents than those asserted in the ITC case, Judge Lucy H. Koh was not swayed by arguments that an injunction against the infringing models should be issued. Apple Inc. v. Samsung Electronics Co., No. 5:11-cv-01846-LHK (N.D. Cal. Dec. 17, 2012) (246 TCM, 12/26/12).
The ITC decision also comes less than a week after the Obama administration vetoed an ITC victory by Samsung, reversing a ban on certain Apple iPhones and iPads (151 TCM, 8/6/13). U.S. Trade Representative Michael B. G. Froman effectively told Samsung that its assertion of standard-essential patents must be made in federal district court.
Though the president can step in and reverse the Samsung device ban as well, such an intervention is unlikely. The patents at issue in the instant case are not subject to any agreement between Apple and any other standards development organization.
In any case, Samsung will be able to post a bond to continue to import the models found to infringe during the period of presidential review.
Apple filed this complaint with the ITC, seeking an exclusion order against Samsung phone and tablet imports under Section 337 of the Tariff Act, 19 U.S.C. §1337, based on alleged infringement of graphical interface (U.S. Patent Nos. 7,479,949 and RE41,922), hardware interface (U.S. Patent Nos. 7,863,533; 7,789,697; and 7,912,501), and design (U.S. Patent Nos. D558,757 and D618,678) patents. The ITC instituted the investigation on Aug. 5, 2011. 76 Fed. Reg. 47610.
Administrative Law Judge Thomas B. Pender issued an initial determination on Oct. 24, 2012, finding infringement of claims of at least one patent in each of the three groups by several Samsung phone and tablet models.
The commission reviewed the ID and issued a remand order with respect to certain issues related to the '922 and '501 patents. Pender issued another ID on remand on March 26.
Summarizing the two decisions, Pender's judgments would bar imports of Samsung phones branded as Continuum, Transform, Acclaim, Epic, Indulge, Captivate, Fascinate, and Intercept--though not the Galaxy S II--as well as the Galaxy Tab tablet. However, Pender also considered Samsung's proposed “design around products” and concluded that they would not infringe.
Alexander J. Hadjis and Kristin L. Yohannan of Morrison & Foerster, Washington, D.C., represented Apple. Charles K. Verhoeven of Quinn Emanuel Urquhart & Sullivan, Washington, D.C., represented Samsung.
The primary issue on appeal at the Federal Circuit goes well beyond the smartphone patent wars, touching whether injunctions can ever issue when a patent covers one component of a multi-function device and whether design patents, particularly when they cover an entire product, can work to the patent holder's advantage in the alternative.
In the Aug. 9 oral argument, counsel for Apple and Samsung differed on what evidence is required to justify an injunction when the enjoined product is a device with multiple features and covered by multiple patents.
Though the asserted Apple patents are different, they also cover the three types asserted in the ITC--graphical interface, hardware interface, and design. The problem for Apple to date--which includes a prior trip to the appeals court--has been trying to show that its claimed irreparable harm can be tied to any specific patent or combination of patents.
The Northern District of California interpreted Federal Circuit precedent to require a finding of such a causal nexus, such that a feature or collection of features could be shown to be the driver of consumer demand.
William F. Lee of Wilmer Cutler Pickering Hale and Dorr, Boston, arguing on behalf of Apple, said that even if a causal nexus is implicated in the appeals court's jurisprudence as to a preliminary injunction, there is no such requirement for a permanent injunction. He argued that the standard has been and should be only that, after showing irreparable harm, the patent owner need only show a “connection” to the harm.
Lee suggested that, given a finding of infringement of one feature, the infringer should at least be required to eliminate the feature. He suggested an injunction with a sunset provision: Samsung would have a certain number of months after which it could only sell products without that feature. “If the feature truly is unimportant, then it will be designed out at the end of [the sunset period],” he said. “If it's still there, that tells us in real world terms that it is important, and the [entire] product should have been enjoined.”
“Causal nexus is the law you've established,” Kathleen M. Sullivan of Quinn Emanuel Urquhart & Sullivan, New York, arguing for Samsung, said to Judges Sharon Prost, Kathleen M. O'Malley, and William C. Bryson. But her primary argument was specific to the facts in the lower court's record.
“Here, Apple utterly failed to prove that any patented feature, either singly or in the aggregate, was even a driver of consumer demand, let alone the driver of consumer demand,” she said. She took particular aim at Apple's surveys entered into evidence to show that its design patents made the difference in consumer purchasing decisions.
Apple continues to argue that “design matters,” Sullivan said, but that “is just too broad.” Apple's survey evidence said nothing about the rounded corners covered by the patents but rather only asked consumers if they purchased the iPhone and iPad because of the “design.”
And, responding to a challenge from Lee and from the panel to identify how any multi-function product could ever get an injunction under her theory, Sullivan argued that “it is not impossible to design a consumer survey to decide the causal nexus question.”
“The [asserted] death of injunctions in complex product cases is greatly exaggerated,” she contended.
Text of the order is available at http://pub.bna.com/ptcj/337TA79613Aug9.pdf.
Text of the ALJ's ID is available at http://pub.bna.com/ptcj/337TA796ID13Mar26.pdf.
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