Source: https://www.schwabe.com/newsroom-publications-14013
Timestamp: 2019-04-24 08:32:29+00:00

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Apple v. Samsung – The district court denied Apple's motion for an injunction, but in a split decision the Circuit reverses, clarifying the standard for showing irreparable harm post- eBay in cases where a product includes many features and embodies many patented inventions. The majority rules that in order to show irreparable injury, the patented features do not need to be the sole reason why consumers purchase the infringing product. Here, where the patents cover many features that the record reflects contribute to the consumer's purchasing decision, causal nexus has been shown. Evidence of copying also supports this nexus. In balancing the hardships of the injunction, the majority accepts as true Samsung's testimony to the district court that design-arounds for the patented features would be easy or already existed.
SCA Hygiene – An en banc Circuit reaffirms the panel decision that laches is available as a defense in patent cases. The Supreme Court held in Petrella v. Metro-Goldwyn-Mayer that laches is not available as a defense in copyright cases because the statute of limitations itself takes account of delay. Here the Circuit considers en banc the extent to which Petrella is applicable to patent cases. The majority holds that section 286 is not a statute of limitations, as in Petrella, but is instead a limitation on damages, and that section 282 codifies laches as a defense to patent infringement. Accordingly, the Circuit holds 6-5 that laches is still available as a defense as to legal remedies such as damages in patent cases. However, a delay in filing suit may still be considered in fashioning equitable relief such as injunctions.
R+L Carriers – R+L brought suit against Qualcomm, asserting infringement of the claims of its patent. While the case was pending, R+L filed for ex parte reexamination. Although the patent survived, R+L added language to all of the claims at issue. Because the new claims were not substantially identical to the original claims, and because there was no dispute that Qualcomm ceased its allegedly infringing activity before the reexamination certificate issued, there can be no infringement of the patent.
Astornet – Astornet asserted its patent against three corporations, alleging that the three companies, NCR Government Systems; MorphoTrust; and BAE Systems, had contracts with the Transportation Security Administration (TSA), an agency of the United States government, to supply TSA certain boarding-pass scanning systems. The district court dismissed the actions, holding that Astornet's exclusive remedy for the alleged infringement was a suit against the United States in the Court of Federal Claims under 28 U.S.C. § 1498. The Circuit affirms that ruling. Because this opinion is believed to be of limited interest to our readers, it is not further discussed below.
This appeal springs from a suit filed by Apple alleging infringement of five patents directed to the slide-to-unlock, auto-correct and other features of its smartphones and tablets. The district court held on summary judgment that Samsung infringed the '172 patent. The case proceeded to trial, and a jury found that nine Samsung products infringed one or both of Apple's '647 and '721 patents, awarding $119,625,000.
Following the verdict, Apple filed a motion seeking a permanent injunction regarding use of the infringing features, in which it proposed that the injunction be stayed for 30 days for Samsung to remove the infringing features. This was based on Samsung's representations at trial that it could remove the infringing features from its products "quickly and easily." The injunction was denied despite the narrowness of Apple's proposed injunction because Apple had not shown irreparable injury.
Apple asserts on appeal that there is no causal nexus requirement when the patentee is seeking, as in this case, a narrow injunction, limited to the infringing features. The majority notes that Apple misunderstands the purpose of the causal nexus requirement. This requirement ensures that an injunction is only entered against a defendant on account of a harm resulting from the defendant's wrongful conduct, not some other reason. For example, it ensures that an injunction is not entered on account of "irreparable harm caused by otherwise lawful competition." Whether a patentee's irreparable harm stems from infringement of its patents is entirely independent of the scope of the proposed injunction. Here, the district court did not err by requiring Apple to satisfy the causal nexus requirement.
The majority of the Circuit panel agrees with Apple's argument that the court erred in finding that Apple did not suffer irreparable harm due to lost market share and lost downstream sales stemming from the infringement. The district court had determined that Apple did not show that the infringing features "drive consumer demand for Samsung's infringing products."
When a patentee alleges it suffered irreparable harm stemming from lost sales solely due to a competitor's infringement, a finding that the competitor's infringing features drive consumer demand for its products satisfies the causal nexus inquiry. Such a showing may, however, be nearly impossible from an evidentiary standpoint when the accused devices have thousands of features, and thus thousands of other potential causes that must be ruled out. The causal nexus requirement does not demand such a showing. Instead, it is a flexible analysis, as befits the discretionary nature of the four-factor test for injunctive relief. We have explained that proving a causal nexus requires the patentee to show "some connection" between the patented features and the demand for the infringing products.
In a case involving phones with hundreds of thousands of available features, it was legal error for the court to effectively require Apple to prove that the infringement was the sole cause of the lost downstream sales. The court should have determined whether the record established that a smartphone feature impacts customers' purchasing decisions. Though the fact that the infringing features are not the only cause of the lost sales may well lessen the weight of any irreparable harm, it does not eliminate it entirely.
The right to exclude competitors from using one's property rights is important. And the right to maintain exclusivity—a hallmark and crucial guarantee of patent rights deriving from the Constitution itself—is likewise important. And the need to protect this exclusivity would certainly be at its highest when the infringer is one's fiercest competitor. Essentially barring entire industries of patentees—like Apple and other innovators of many-featured products—from taking advantage of these fundamental rights is in direct contravention of the Supreme Court's approach in eBay.
The court thus erred when it required Apple to prove that the infringing features were the exclusive or predominant reason why consumers bought Samsung's products to find irreparable harm. The court should have simply required Apple to show that the patented features impact consumers' decisions to purchase the accused devices.
The record here establishes that these features do influence consumers' perceptions of and desire for these products. The district court wrote that there was evidence that Samsung valued the infringing features, including evidence that Samsung "paid close attention to, and tried to incorporate, certain iPhone features," which was "indicative of copying." The district court had rejected this evidence as insufficient to establish the requisite causal nexus.
The district court was correct that evidence of copying does not, by itself, establish a causal nexus. But that does not make the evidence wholly irrelevant. Sometimes this evidence will have little or no probative value, for example, if the record contains evidence that the infringer's belief may be at odds with consumer preferences. But here, Apple's evidence of copying established a further link between Apple's and Samsung's subjective beliefs and consumers' perceptions, thereby strengthening a causal nexus and irreparable harm to Apple. It was legal error for the court to reject such strong evidence in this case. Given the strength of the evidence of copying and Samsung's professed belief in the importance of the patented features as a driver of sales, and the evidence that carriers or users also valued and preferred phones with these features, the district court erred by disregarding this evidence, which further establishes a causal nexus and Apple's irreparable harm.
The record establishes that the features claimed in the patents were important to product sales and that customers sought these features in the phones they purchased. While this evidence of irreparable harm is not as strong as proof that customers buy the infringing products only because of these particular features, it is still evidence of causal nexus for lost sales and thus irreparable harm. On this record, applying the correct legal standard for irreparable harm, Apple has established irreparable harm.
Having found that there was irreparable harm, the majority holds that these factors strongly weigh in favor of Apple. As the district court found, the extent of Apple's downstream and network effect losses are very difficult to quantify and Apple's proposed injunction was narrowly tailored to cause no harm to Samsung other than to deprive it of the ability to continue to use Apple's patented features. Furthermore, Samsung's witnesses and counsel assured the jury that design-arounds to the infringing features would be "simple or already exist." And Samsung asserted at oral argument that none of the products it currently sells practice the '721 patent or the '172 patent, and that only a single product practices the '647 patent.
The public interest nearly always weighs in favor of protecting property rights in the absence of countervailing factors, especially when the patentee practices his inventions. "Apple does not seek to enjoin the sale of lifesaving drugs, but to prevent Samsung from profiting from the unauthorized use of infringing features in its cellphones and tablets. Apple seeks only a narrow feature-based injunction commensurate in scope with its monopoly rights. Samsung said that it can effect the removal of the patented features without recalling any products or disrupting customer use of its products. Given the important public interest in protecting patent rights, the nature of the technology at issue, and the limited nature of the injunction, this factor strongly favors an injunction.
Judge Reyna files a concurring opinion that addresses the reputational harm to Apple, an issue the majority opinion did not reach. Chief Judge Prost filed a sharp dissent, arguing that an opinion she wrote in an earlier Apple/Samsung decision required substantially more than was shown here to establish the causal nexus.
Comment: This opinion can't help but lower the bar for injunctions in patent cases. Note the majority's recognition that the right to exclude competitors from using one's property rights is important, especially when the parties are competitors. The recognition that the public interest nearly always weighs in favor of protecting property rights, especially when the patentee practices his inventions, could have come out of any pre- eBay opinion.
Given the disparate treatment each of the three judges applies to the injunction issues, the case appears ripe for en banc review.
In Petrella v. MGM, 134 S.Ct. 1962 (2014), the Supreme Court held that laches is no defense to a copyright infringement suit brought within the Copyright Act's statutory limitations period. Fundamentally, the Court reasoned that the copyright statute of limitations, § 507(b), itself takes account of delay, crowding out the judiciary's power to decide whether a suit is timely. According to the Court, laches originally served as a guide when no statute of limitations controlled the claim. Laches is thus gap-filling, not legislation-overriding. Therefore, under Petrella, to the extent that an infringement suit seeks relief solely for conduct occurring within the limitations period, courts are not at liberty to jettison Congress' judgment on the timeliness of suit."
Petrella also addressed the extent to which laches should affect equitable relief. The Court explained: "In extraordinary circumstances, however, the consequences of a delay in commencing suit may be of sufficient magnitude to warrant, at the very outset of the litigation, curtailment of the relief equitably awardable."
Section 282(b) provides: The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded: (1) Noninfringement, . . .(2) Invalidity . . . (4) Any other fact or act made a defense by this title.
"The defenses which may be raised in an action involving the validity or infringement of a patent are specified in general terms, by the second paragraph of section 282, in five numbered items …[which] … would include ... equitable defenses such as laches, estoppel and unclean hands."
Accordingly, we conclude that Congress codified a laches defense in § 282.
If laches as codified in § 282 is a defense against only equitable relief, Petrella prohibits judicial application of laches to bar legal damages. If, however, laches as codified operates as a defense to both legal and equitable relief, patent law's statutory scheme—like the Lanham Act, —does not implicate Petrella. In that case, § 282 obligates us to apply laches as a defense to legal relief, notwithstanding § 286's time limitation on the recovery of damages.
Turning to the content of the laches defense in § 282, the text of § 282 provides little guidance. Similarly, the legislative history is silent on the meaning of laches, and Federico does no more than mention laches' codification in § 282.
In these circumstances, the Supreme Court counsels that "when a statute covers an issue previously governed by the common law, we must presume that Congress intended to retain the substance of the common law."This canon of construction is especially applicable here. Congress's purpose in enacting the Patent Act was to codify the prevailing law wholesale, except where changes were expressly noted. Analyzing the legislative history, the majority concludes that, if anything, Congress intended to adopt the laches patent common law when it included laches in § 282. Section 282 therefore retains the substance of the common law as it existed at the time Congress enacted the Patent Act.
Upon review, the case law demonstrates that, by 1952, courts consistently applied laches to preclude recovery of legal damages. Nearly every circuit recognized that laches could be a defense to legal relief prior to 1952. Accordingly, Section 282 retains laches as a statutory defense to damages in patent cases.
One major difference between copyright and patent law bears mention: copyright infringement requires evidence of copying, but innocence is no defense to patent infringement. For example, a company may independently develop an invention and spend enormous sums of money to usher the resultant product through regulatory approval and marketing, only to have a patentee emerge six years later to seek the most profitable six years of revenues. This risk likely explains why the amici in this case—encompassing industries as diverse as biotechnology, electronics, manufacturing, pharmaceuticals, software, agriculture, apparel, health care and finance—overwhelmingly support retaining laches in patent law.
The second question for en banc review concerns the extent to which laches can limit recovery of ongoing relief. Aukerman v. Chaides, 960 F.2d 1020 (Fed. Cir. 1992) held that laches could not bar prospective relief. Reexamination of that rule is necessary in light of Petrella and the Supreme Court's decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). As noted in Petrella, "the District Court, in determining appropriate injunctive relief may take account of the plaintiff's delay in commencing suit. Many of the facts relevant to laches, such as the accused infringer's reliance on the patentee's delay, fall under the balance of the hardships factor. Unreasonable delay in bringing suit may also be relevant to a patentee's claim that continued infringement will cause it irreparable injury. More than anything, courts should consider all material facts, including those giving rise to laches, in exercising its discretion under eBay to grant or deny an injunction.
HUGHES, Circuit Judge, concurring-in-part, dissenting-inpart, with whom MOORE, WALLACH, TARANTO, and CHEN, Circuit Judges, join.
In Petrella, the Supreme Court emphasized that it had never approved the use of laches to bar a claim for legal damages brought within a statutory limitations period. The majority reasons that Petrella is not controlling here because Congress specifically incorporated laches as a defense to legal damages into the Patent Act of 1952. But the majority has no sound basis for finding that Congress intended to displace the uniform limitations period in § 286 with the case-specific doctrine of laches. The majority's key logic—that Congress adopted the view of some lower courts that laches could bar legal relief in patent cases—requires us to presume that Congress ignored the Supreme Court. For in 1952, the Supreme Court had already recognized the common-law principle that laches cannot bar a claim for legal damages. I know of no precedent for inferring a congressional departure from a common-law principle recognized by the highest court based solely on aberrational lower-court decisions.
The Supreme Court has repeatedly cautioned this court not to create special rules for patent cases. In light of the Supreme Court's clear, consistent, and longstanding position on the unavailability of laches to bar damages claims filed within a statutory limitations period, we should not do so here. I respectfully dissent-in-part.
The '078 patent relates to an improved method of consolidating freight into trailers to optimize delivery efficiencies for the loads in each trailer. According to the patent, prior art shipping practices would evaluate the contents of each incoming trailer by reviewing bills of lading for the packages when they arrived at a central terminal. The freight on each trailer was then consolidated with freight going in the same direction and hauled away from the central terminal. The purpose of consolidation was to deliver all of the freight on time, while using the fewest number of trailers to do so. Although load planning software at the time could help perform this task more efficiently, the prior art software could not account for unscheduled freight that was not entered into the computer. To solve this alleged deficiency in the prior art, the '078 patent discloses a system for transmitting the contents of a trailer to the central terminal so that load planning can occur while the trailer is en route.
After suing Qualcomm for infringement of its ‘078 patent, R+L filed for ex parte reexamination of its patent. In the first office action, the PTO rejected original claim 1 as anticipated by a key prior art reference—a publication from the N&M Transfer Company that "teaches a method for transferring shipping documentation data for a package from a transporting vehicle to a remote processing center." To overcome the PTO's rejection, R+L modified original claim 1 to recite that, prior to the package being removed from the transporting vehicle, an advance loading manifest document for another transporting vehicle is prepared which includes said package for further transport of the package on another transporting vehicle. In allowing amended claim 1, the PTO explained that the key prior art reference only discussed loading a "manifest for the current shipping vehicle and not an advance loading manifest document for another transporting vehicle."
After the PTO issued the reexamination certificate, the district court ordered the parties to brief the effect of the claim amendments made during reexamination. The district court then determined that R+L's amendment to original claim 1 substantively narrowed the claim, thereby precluding recovery of damages for infringement prior to the date the PTO issued the reexamination certificate. The district court agreed with the accused infringers that, although original claim 1 covered both manual and computer-prepared loading manifests, amended claim 1 covered only computer-prepared loading manifests.
Because Qualcomm sold its allegedly infringing business unit before the PTO issued the reexamination certificate, R+L conceded that it could not recover damages against Qualcomm based on the determination that claim 1 was substantively narrowed during reexamination. Accordingly, R+L stipulated to entry of final judgment, dismissing its infringement claims against Qualcomm. R+L appealed.
A patentee of a patent that survives reexamination is only entitled to infringement damages for the time period between the date of issuance of the original claims and the date of issuance of the reexamined claims if the original and the reexamined claims are "substantially identical." 35 U.S.C. § 252. If, on the other hand, a substantive change has been made to the original claims during reexamination, the patentee is entitled to infringement damages only for the time period following issuance of the reexamination certificate. "Identical" does not mean "verbatim," but means at most without substantive change. To determine whether substantive changes have been made, we consider whether the scope of the claims is identical, not merely whether different words are used.
We disagree with both Qualcomm and R+L on the primary premises of their arguments. As for Qualcomm, we do not agree that claim 1 was substantively narrowed in reexamination because insertion of the term "advance" into the claims limited claim 1 to only computer-generated loading manifests. Qualcomm reads too much into the term "advance," which was added to the claim for reasons unrelated to the format for preparing the loading manifests. Speculation about what R+L was attempting to accomplish vis-à-vis the N&M reference does not change our view.
Under the statute and our prior case law, it is irrelevant why an amended claim is narrowed during reexamination, or even whether the patentee intended to narrow the claim in a particular way. If the scope of the amended claim is not "substantially identical" to the scope of the original claim—based on a normal claim construction analysis—per § 252, that fact affects intervening rights.
That conclusion does not expose Qualcomm to damages for infringement of amended claim 1, however, because we find that claim 1 was narrowed in other ways during reexamination and is, thus, not substantially identical to original claim 1. R+L amended "loading manifest" to claim an " advance loading manifest document for another transporting vehicle." R+L made this amendment after the PTO rejected original claim 1 over various pieces of prior art, not just N&M. The examiner expressly stated he was allowing amended claim 1 because "the manifest discussed by [the prior art] is a manifest for the current shipping vehicle and not an advance loading manifest document for another transporting vehicle."
Accordingly, we conclude that amended claim 1 is not "substantially identical" to original claim 1. R+L is, thus, not entitled to infringement damages prior to issuance of the reexamination certificate. Since R+L concedes that Qualcomm did not perform any allegedly infringing conduct after the PTO issued the certificate, the district court properly entered judgment dismissing the case against Qualcomm.

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