Apple suffered yet another set back in the Smartphone wars, this time losing its motion for a permanent injunction against Samsung. The district court denied the permanent injunction primarily on the ground that Apple could not show irreparable harm that would result to Apple if an injunction did not issue.
As explained by the district court, "[T]o satisfy the irreparable harm factor in a patent infringement suit, a patentee must establish both of the following requirements: 1) that absent an injunction, it will suffer irreparable harm, and 2) that a sufficiently strong causal nexus relates the alleged harm to the alleged infringement." Apple, Inc. v. Samsung Electronics Co., Ltd., 695 F.3d 1370, 1374 (Fed. Cir. 2012) ("Apple II" ). This test requires a showing that consumers buy the infringing product "because it is equipped with the apparatus claimed in the . . . patent," and not merely because it includes a feature of the type covered by the patent. Id. at 1376."
Apple alleged that it had suffered three kips of irreparable harms as a result of the infringement by Samsung, loss of market share, loss of downstream and future sales and injury to Apple's ecosystem. The district court found that Apple and Samsung compete and continue to compete in the same market and that Apple has lost market share to Samsung. The district court also concluded that Apple had sustained some irreparable harm from the loss of downstream sales, which would encompass any alleged harm to the Apple ecosystem.
After reaching these conclusions, the district court focused on the causal nexus requirement that the Federal Circuit used in the previous Apple appeal. "The Federal Circuit has been quite clear that a showing of harm is not enough; Apple must link any harm it suffers directly to Samsung's infringement. This Court and the Federal Circuit have analyzed this "causal nexus" issue on a patent-by-patent basis. See Apple I, 678 F.3d at 1323-33 (analyzing appropriateness of injunction for each of four patents separately)."
The district court found that Apple could not meet this standard. "However, Apple's evidence does not establish that any of Apple's three design patents covers a particular feature that actually drives consumer demand." The district court noted that "even if design was clearly a driving factor, it would not establish the required nexus. The design of the phones includes elements of all three design patents, as well as a whole host of unprotectable, unpatented features. Apple makes no attempt to prove that any more specific element of the iPhone's design, let alone one covered by one of Apple's design patents, actually drives consumer demand. The Federal Circuit made clear in Apple II that customer demand for a general feature of the type covered by a patent was not sufficient; Apple must instead show that consumers buy the infringing product specifically because it is equipped with the patented feature. 695 F.3d at 1376."
The district court also concluded that Apple's survey evidence was insufficient to show such a nexus. "Finally, Apple has presented evidence from a choice-based conjoint survey conducted by Apple's expert Dr. John Hauser. The survey purports to establish the prices that Samsung consumers would pay for particular patented features, including the '915 patent alone, and all three utility patents together. See PX30. Samsung disputes the validity of the study based on methodology. Opp'n at 13.
"Even if the survey is taken at face value, it does not establish a causal nexus under the standard articulated by the Federal Circuit in Apple II. The parties have submitted competing declarations concerning the applicability of Dr. Hauser's study to the question at hand. See Wind. Decl. in support of Samsung's opposition; Sukumar Decl. in support of Samsung's opposition; Hauser Decl. in support of Apple's reply. The Court agrees with Samsung that evidence of "the price premium over the base price Samsung consumers are willing to pay for the patented features," PX30, is not the same as evidence that consumers will buy a Samsung phone instead of an Apple phone because it contains that feature. See Sukumar Decl. at ¶ 4 (distinguishing between willingness to pay for a feature and consumer demand for a complete product). Apple's only response to this argument is to point to Dr. Hauser's assertion that demand for a product is often defined as consumers' willingness to pay for that product, and thus the concepts of willingness to pay and demand are interchangeable. Hauser Reply Decl. at ¶ 8. However, the survey does not measure willingness to pay for products; it measures willingness to pay for features within a particular product amongst consumers who have already purchased the particular product - in this case, a Samsung phone. It does not address the relationship between demand for a feature and demand for a complex product incorporating that feature and many other features. To establish a causal nexus, Apple would need to show not just that there is demand for the patented features, but that the patented features are important drivers of consumer demand for the infringing products. Apple's survey evidence does not establish that any patented feature drives consumer demand for the entire product."
As a result of Apple's inability to establish a causal nexus between the harm to Apple and the patented features, the district court found that Apple had not satisfied the irreparable harm prong of the test for a permanent injunction.
Finally, in discussing the balance of hardships it is worth noting that the district court stated "This case is simply not comparable to i4i or to Edwards, the Federal Circuit's most recent case discussing permanent injunctions in the patent context. In i4i, the plaintiff was a very small company whose business depended on its patented product, and the defendant was a large company of whose business, the infringing product was but a small part. Thus, the defendant's infringing product "significantly change[d] the relevant market. . . forcing i4i to change its business strategy." 598 F.3d at 862. Without an injunction, there was simply no way for the plaintiff to continue to compete. Here, Samsung may have cut into Apple's customer base somewhat, but there is no suggestion that Samsung will wipe out Apple's customer base, or force Apple out of the business of making smartphones. The present case involves lost sales - not a lost ability to be a viable market participant. Edwards involved a patent that was much more central to the infringing product than the patents at issue here; there was no doubt that the patented technology in that case was a central force driving sales of the infringing product. 699 F.3d at 1308 (describing a prosthetic heart valve implanted by use of a collapsible stent, and a patent for the necessary collapsible stent). If the patents at issue here were similarly essential to the core of Samsung's products, the Court might see things differently."
Apple, Inc. v. Samsung Electronics Co., LTD., Case No. 11-CV-01846-LHK (N.D. Cal. Dec. 17, 2012)