Apple Inc v Samsung Electronics Co. Limited  FCA 1164
In a decision handed down on 13 October 2011, Justice Annabelle Bennett of the Federal Court of Australia granted Apple, Inc an interlocutory injunction preventing Samsung Electronics Co Limited from selling in Australia its flagship 10.1" tablet computer, the Australian Galaxy Tab 10.1. In a close decision, Justice Bennett considers the commercial impact of interlocutory injunctions in fast-moving markets, and reinforces the utility of patents in providing a strategic marketing advantage. This article considers the reasoning behind Justice Bennett's decision, and pulls together some themes that serve as guide to the application in Australia of the principles developed in relation to interlocutory injunctions.
The growing tablet market
Before considering aspects of the Court's decision in this case, it is useful to briefly review the commercial context of Apple's application for an interlocutory injunction.
Portable personal computers having a tablet- or slate-like form factor, which eschew a keyboard and mouse for a touchscreen interface, have recently been popularised by the Apple's iPad. Released in Australia in May 2010, the iPad was immediately more popular than any previous tablet computer, and since its release, Apple has commanded a near-monopoly on tablet devices. iPads have quickly became the de facto default tablet computer.
iPads are increasingly important to Apple
Apple's products which run its iOS operating system (including the iPhone, iPad and iPod Touch), and related products (such as accessories) account for approximately 70% of Apple's revenue (which, for the most recent quarter, was US$28.27 billion). Sales of iPads worldwide increased 165% over the same quarter last year to 11.12 million units, contributing 26% of Apple's revenue. Apple has sold about 40 million iPads on a cumulative basis, and the market for tablet computers is still growing.
iPads, though dominant, are not the only tablets in town
The closest competitors to the iPad are those tablet computers based on Google's Android mobile operating system. Despite the introduction of such tablets from Samsung, Acer, ZTE, Motorola, Asus and Sony, amongst others, confidential sales data provided to the Court in this case indicated that "Apple is an established player with dominant market share and Samsung, along with several other companies, is a relatively new entrant holding a minimal market share".
In January this year, Samsung unveiled its 10.1 inch tablet computer, the Galaxy Tab 10.1. In March, Apple released the second version of the iPad, the iPad 2, which is substantially thinner and faster than the first version of the iPad. Shortly thereafter, Samsung revealed a new, thinner version of the Galaxy Tab 10.1, priced to compete directly with the iPad 2. At the time, Samsung indicated that it was modifying its Galaxy Tab 10.1 to be more competitive with the iPad 2. By many in the technology industry, the Galaxy Tab 10.1 was widely considered to be the closest competitor to the iPad 2 and a flagship product for the tablet version of Android, especially after Google handed out 5,000 free Samsung Galaxy Tab 10.1 tablets to developers at its development conference in May.
The first (thicker) version of the Galaxy Tab 10.1 was re-branded as the Galaxy Tab 10.1v, and was sold in Australia in May. In view of the development of the new (thinner) Galaxy Tab 10.1, stocks were limited.
The tablet war begins
In June 2011, Samsung released the Galaxy Tab 10.1 in the US. On 1 July 2011, Apple sought a preliminary injunction in the US to prevent the sale of the Galaxy Tab 10.1. In late July, Apple instituted proceedings against Samsung for infringement of 13 of its patents, contravention of certain provisions of the Australian Consumer Law, and passing off of Apple's iPad 2. Samsung cross-claimed seeking revocation of some of Apple's patents, and asserted infringement of some of its own patents. Apple also sought an interlocutory injunction to restrain the sale of the Galaxy Tab 10.1 until a final determination. Samsung indicated that the Australian version of the Galaxy Tab 10.1 differed from the US version, and the Court therefore considered this modified version (and not the version released in the US).
The patents in issue
In seeking an interlocutory injunction, Apple only ultimately relied on a subset of its case, being the infringement by Samsung of 4 of its patents. Of those patents, Samsung undertook not to include features of two of those patents, leaving only two patents in issue. The first was Australian Standard Patent No. 2005246219 (the Touch Screen Patent), of which only claim 6 was asserted to be infringed. The second was Australian Standard Patent No. 2007286532 (the Heuristics Patent), of which claim 1 was the primary claim in issue. The Touch Screen Patent related to the construction of a capacitive touch screen, and the Heuristics Patent related to interpreting finger-based gestures on a touch screen.
The legal test for granting an injunction
In determining whether to grant Apple an injunction, Justice Bennett applied the test in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 (at ) (the O'Neill test). The test involves two considerations:
- has the plaintiff (in this case, Apple) made out a prima facie case?
- does the balance of convenience weigh for or against Apple?
As will become apparent, these two limbs are not completely conceptually distinct.
Does Apple have a prima facie case?
According to the High Court in O'Neill, a party seeking an injunction need only show that there is a probability that they will ultimately be successful at trial. It need not be more probable than not that the party will succeed, it must merely be sufficiently probable to justify preservation of the status quo by granting the injunction.
Relevance of potential patent invalidity
In applying the first limb of the O'Neill test, the Court considered whether Apple had some likelihood of successfully showing that its patent claims have been infringed by Samsung. As indicated above, Samsung sought revocation of Apple's patents. Samsung contended that by putting the validity of Apple's patents in issue, Apple needed to show the Court some evidence of the validity of the claims asserted against Samsung, beyond the mere fact that the patents were granted. Justice Bennett did not accept this view, and instead placed a substantial amount of weight on the fact that the patents in issue had been granted, after examination and the possibility of opposition. Samsung argued that the mere grant of a patent is not strong evidence of its validity because the Patent Office acts as a mere coarse filter, and will only reject patents if it is practically certain that they are invalid. However, this was rejected. The Court held that a granted patent is prima facie evidence of validity, and that accordingly, a party seeking an injunction will have a prima facie case unless the evidence of invalidity is so strong as to lead to the conclusion that the party does not have a probability of success in the ultimate trial.
To show a prima facie case, Apple needed to show that there was a probability that its patents are valid, and that there was also a probability that they would be infringed. According to the reasoning of the Court in this case, the first hurdle (that is, that its patents are valid) is not a difficult one to overcome, in view of the weight the Court placed on the presumption of validity accorded to a patent on its grant.
Evidence on validity and infringement
Touch screen patent
The issue of infringement of claim 6 the Touch Screen Patent was a matter of construction. The claim is directed to a touch panel, and requires a first layer and a second layer to be "disposed on two sides of an optically transmissive member". Samsung submitted that the claim requires the first and second layers be applied directly to a single optically transmissive member. Apple contended that this feature only required that there be two layers, one positioned on either side of a transmissive member, where the transmissive member may consist of more than one transmissive layer, and where there may be intermediate layers between the first or second layer and the transmissive member (such that the first and second layer need not be applied directly to the transmissive member).
Apple pointed to a drawing in the specification which showed a transmissive member consisting of more than one layer to support its broader view of the claim, and further contended that, in any event, the Australian Galaxy Tab 10.1 falls within Samsung's narrow interpretation of the claim.
The Court held that Apple made out a prima facie case for infringement because, if Apple's construction of the claim were to be accepted, claim 6 would be infringed by the Australian Galaxy Tab 10.1. That is, Apple only needed to show a probability of success contingent upon its interpretation of the claim being accepted, and that its interpretation was not implausible.
Samsung's evidence on invalidity relied on two prior art documents. In relation to both documents, Samsung and Apple disagreed on what was disclosed in the documents. The Court found that there was inadequate evidence on the interpretation to be given to the prior art documents, and that both parties made cogent submissions. However, despite Samsung establishing a prima facie case for invalidity of claim 6, this was not sufficient to show that Apple did not have a prima facie case for infringement. It appears from the reasoning of the Court that it is sufficient for Apple to have had a reasonable argument that the prior art documents did not disclose the relevant feature.
The Heuristics Patent
Samsung did not rely on its contended invalidity of this patent, instead relying on an argument that the Australian Galaxy Tab 10.1 would not infringe claim 1. In many respects, the arguments relating to the Heuristics Patent reduced to arguments about the proper construction to be given to the claim.
The claim was for a computer-implemented method for determining whether a swipe on the screen corresponded to a screen scrolling command, or a screen translation command. The determination was expressed as being "based on an angle of movement of the one or more finger contacts with respect to the touch screen display."
Although the claim was directed to a computer-implemented method, Apple argued that the claim was to a strategy for responding to imprecise gestures, and not a claim to a computer program or the manner in which software is implemented, and that the invention is an interaction "on an intuitive basis" between the person manipulating the touch screen and an angle gesture. Further, Apple submitted that "the Heuristics Patent and claim 1 are directed towards the context of gestures being interpreted; the software mechanism, as opposed to the command, is irrelevant to the claim." If the Patent Office examining this patent took a similar view as to the breadth of the claim, it is likely that Apple would have faced sustained objections to this claim on the basis that it does not recite patentable subject matter.
Samsung contended that because the claim expressed the determination of the relevant command as being "based on an angle of movement", it necessarily required a determination of the angle through which the finger was swiped. The Australian Galaxy Tab 10.1 uses a mechanism that does not involve the calculation of an angle.
The Court ultimately found that "while Samsung's construction has force and may ultimately be successful, both constructions can be said to be open." Apple was held to have made out a prima facie case for infringement because, if Apple's construction was ultimately found to be correct, the Australian Galaxy Tab 10.1 would infringe claim 1.
A prima facie case is easily shown
In determining whether a party seeking an injunction has a prima facie case, the Court appears to have adopted an approach that is very favourable to the party seeking an interlocutory injunction. The existence of granted patents is prima facie evidence of their validity, and a prima facie case of infringement may be shown where there is a construction of the claims which is open on the limited evidence that is filed in an interlocutory hearing, and which captures the products or activities of the alleged infringer. The prima facie case of the party seeking the injunction will not be displaced by evidence of patent invalidity, or cogent arguments regarding the construction of the claims, unless the strength of the evidence or arguments is such as to make it no longer a real possibility that the patents will ultimately be found to be valid and infringed.
The balance of convenience
Having decided that Apple has a prima facie case, and that therefore the threshold requirement for an interlocutory injunction was met, the Court went on to consider the competing interests of Samsung and Apple.
Samsung made a number of concessions regarding Apple's position in the marketplace, including that:
- Apple had the Australian tablet market "virtually to itself";
- The aim of the launch of the Australian Galaxy Tab 10.1 was to establish a market in the Android platform (implying that one was not already established); and
- At least initially, growth of the market in the Android platform would largely be at the expense of Apple.
The Court noted that in interlocutory injunctions, it may take into account logical conclusions and generally accepted market dynamics, without evidentiary support.
In assessing the balance of convenience, the Court indicated that it would take the following factors into account:
- the significance of the detriment;
- whether damages are an adequate remedy;
- whether, as a result of the short life cycle of tablet devices, injunctive relief is equivalent to final relief;
- the preservation of the status quo in the Australian tablet market;
- whether Samsung proceeded with its "eyes wide open" (that is, aware that there was a likelihood that Apple would institute patent infringement proceedings against it);
- whether there was a relevant delay by Apple (and if so, its consequences); and
- the strength of Apple's prima facie case.
Of particular note is Justice Bennett's inclusion of the last factor. Not only does it serve as a reminder that a prima facie case influences both limbs of the O'Neill tests for granting an interlocutory injunction, but this factor was held to be in Apple's favour in part because it had "two separate, registered patents."
Some of the above factors are further considered below.
Samsung indicated to the Court that unless it was able to release the tablet by mid-October, to enable its inclusion in marketing by retailers as part of their Christmas sales campaigns, the tablet would lose commercial relevance, at least in part because a newer Samsung tablet would be likely to be released in the first half of next year. Samsung indicated that the Australian Galaxy Tab 10.1 would, in a commercial sense be "dead by March 2012 or some time shortly thereafter".
In assessing the balance of convenience, the Court was strongly influenced by Samsung's reluctance to participate in an early, partial hearing. The Court had proposed an early final hearing in November 2011 in relation to limited parts of Apple's patent infringement case and Samsung's invalidity case (with the remaining parts to be determined at a later date). The Court considered that such a hearing would reduce any potential prejudice to Samsung (as it could, if successful at the hearing, still get the Australian Galaxy Tab 10.1 into the hands of retailers prior to the peak Christmas sales). Samsung did not agree to an early final hearing, at least in part because it considered that it would require further time to prepare evidence of invalidity, and that even a hearing in November 2011 would be too late. However, in a subsequent offer to Apple, Samsung proposed an early hearing, on condition that it be able to release the Australian Galaxy Tab 10.1 until a further decision was made.
The Court was critical of Samsung's reluctance to mitigate the detriment it would suffer by having an early hearing, especially as Samsung did not submit any evidence as to why it would not be ready for an early hearing, and that its counter-proposal indicated that it could, in fact, prepare for and participate in an early hearing. This counted against Samsung in the Court's assessment of the balance of convenience.
The Court accepted Apple's submission that the sale of the Australian Galaxy Tab 10.1 would cause Apple significant detriment, because people who buy an Australian Galaxy Tab 10.1 would be more likely to remain with the "Android ecosystem", and Apple would be deprived of revenue from apps, accessories, iTunes revenue and the like. This may be considered a concession by Apple that the "Android ecosystem" is competitive, and that once people are exposed to Android, they are unlikely to buy into the Apple ecosystem.
Samsung argued that the harm that Apple claims relates to the sale of the competing tablets, and does not relate to the specific features of the Australian Galaxy Tab 10.1 asserted to infringe Apple's patents. The Court rejected this argument, indicating that the allegedly infringing features cannot be separated from the Australian Galaxy Tab 10.1, and so Apple's detriment must be determined with reference to sales of the Australian Galaxy Tab 10.1 as a whole.
In balancing the harm that would be suffered by Samsung and Apple, the Court noted that once a threshold amount of potential harm has been reached (in this case, both Apple and Samsung were able to show that they would suffer substantial amounts of harm), it is not practicable for the Court to "engage in a quantitative or qualitative assessment of which detriment is greater".
Injunctive relief equivalent to final relief
Both Apple and Samsung submitted that a decision whether to grant an interlocutory injunction would, in a commercial sense, decide the dispute. Apple contended that because the Australian Galaxy Tab 10.1 has a short and limited life cycle, any injunction against its sale that issued after a final hearing would be of little commercial consequence, as the Australian Galaxy Tab 10.1 would already have been superseded (or be about to be superseded). The Court agreed with Apple, and placed significant weight on Apple's patent rights "predicated on its publication of its inventions and the grant of valid patents". The Court considered that it should not deprive Apple of the rights it obtained through its granted patents. Influencing the Court's consideration of this issue was not only on the weight it gave to the granted status of Apple's patents, but also Samsung's unwillingness to participate in an early hearing.
As is clear from the brief history set out at the beginning of this article, the Australian Galaxy Tab 10.1 is not the first Samsung Android-based tablet marketed or intended to be released in Australia, and there are many other Android-based tablets available in the market. Apple has not attempted to restrain the sale of the earlier Galaxy Tab 10.1v, the Galaxy Tab 7 tablets, or Samsung's Galaxy S or SII smartphones. Samsung indicated that these devices possess the features that allegedly infringe Apple's patents. However, the Court considered that it did not have enough evidence about the presence of the allegedly infringing features in these other tablets to draw any inferences from Apple not instituting proceedings earlier. The delay relevant to determining the balance of convenience is any delay relating specifically to the Australian Galaxy Tab 10.1.
Themes and lessons
A number of themes appear through Justice Bennett's decision, and appear to have influenced what was a close judgment. Justice Bennett appeared to give significant weight to the status of Apple's patents as having been registered, and to the fact that Apple asserted two patents, rather than just one. This consideration was relevant to both limbs of the O'Neill test.
Her Honour also appeared to be strongly influenced by Samsung's unwillingness to participate in an early hearing. Samsung may have negated the adverse inferences that were drawn from this unwillingness by providing evidence supporting its contention that it could not be ready for a hearing in November.
Her Honour's reasons suggest that having multiple, granted patents that can be asserted against an infringer will put a patentee in a very strong position if it chooses to seek an interlocutory injunction. Parties concerned about potential patent infringement may be wise to challenge the validity of any patents about which they are concerned outside of the context of an application for an interlocutory injunction.
Although interlocutory injunctions are particularly powerful in the consumer electronics industry, where product lifecycles can be short and where an interlocutory injunction is commercially determinative of the issues, Australia's increasing propensity for on-line shopping may mean that consumers will simply turn to online retailers based overseas to obtain goods that are not sold in Australia, reducing the commercial impact of any injunction.
Although Apple has won this battle, Samsung hasn't conceded the war. It has appealed Justice Bennett's decision to the Full Federal Court, and has been successful in its application to have the appeal heard quickly (although a date for the hearing of the appeal is yet to be determined). It has also urgently sought to restrain Apple's sale in Australia of its latest and greatest handset, the iPhone 4S on the basis that it infringes some of Samsung's patents. A hearing on this issue is scheduled for the middle of November 2011.