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The Apple v. Samsung II Appeal Briefs - Do Patents on Features That Don't Drive Sales Merit Injunctions? ~pj
Saturday, January 19 2013 @ 11:33 PM EST

Apple and Samsung are having an intriguing debate before the Federal Circuit Court of Appeals. What does a patent holder have to prove in order to get an injunction? That is the question Apple raises. If there are, as claimed, approximately 200,000 patents that could be asserted against smartphones, which ones matter in the injunction analysis? Just a small handfull? Do you have to prove that the patent covers a feature that you can demonstrate consumers want, that it's a feature that *drives* sales, in order to warrant an injunction?

Apple a couple of months back filed its petition for rehearing en banc of an October 2012 order by the Federal Court of Appeals in Apple v. Samsung II that held that in order to obtain injunctive relief in a case where an accused product contains many features, a “patentee must . . . show that the infringing feature drives consumer demand for the accused product”. Apple argues that this so-called "causal nexus" requirement violates equity.

As I read their motion, they are saying that the Federal Circuit's order narrows drastically the ability of patent holders to obtain injunctions, and that there is a conflict with other rulings by this court and the US Supreme Court.

The complicated part is that this is exactly what just happened to FRAND patents, as far as the FTC is concerned, that the ability to obtain an injunction was made almost impossible for a patent holder to obtain, and Apple supports that happening. Here, however, it does not, and waxes poetic about the property rights of patent owners and how historic it would be to suddenly narrow or wipe out for all practical purposes their rights to relief.

Dan Levine points out on Twitter that they seek en banc review probably because the old-timers on the court but not on the original panel, such as Chief Judge Randall Rader, tend to be more favorable toward patent holders' requests for injunctive relief and are therefore more likely to grant Apple's motion. The odds are against en banc review happening, according to experts, he reports on Reuters, although not inconceivable. Samsung has just filed its opposition. Here's Apple's brief, and Samsung's reply which it has just filed, both PDFs. I have them both as text for you.

As you know, I don't think software programs should be, or legitimately are, patentable subject matter, so it's complicated to say this, but I think Apple has a point, if one believed in the entire patent law as presently practised, which I don't, but Apple raises an interesting question, if one assumes that patents should issue for things like unified search on a mobile smartphone. The Federal Circuit ruled that the district court "abused its discretion" in granting an injunction against Samsung's Galaxy Nexus, because there was no proof that people purchase the phone, or the iPhone, based on the search feature.

So even if Apple had a patent on unified search, the reasoning goes, if people don't care about that feature, so what? Why should Apple get an injunction on any stupid little patented thing they can find to sue over? If that's the rule, Apple argues, however, then a lot of patents out there have issued that can't get injunctions:

In Apple I , this Court held that the district court "was correct to require a showing of some causal nexus between Samsung's infringement and the alleged harm to Apple" before granting a preliminary injunction. 678 F.3d at 1324 (emphasis added). Apple I specifically did not hold that "proof of ... `consumer motivation' is a prerequisite to a finding of irreparable harm." Id. at 1324 n.3. Rather, the nexus may be shown through "consumer preference or some other kind of causal link." Id. at 1327 (emphasis added). Indeed, Apple I affirmed a finding of causal nexus where the patented feature "mattered" to consumers. Id. at 1328.

In Apple II , the same district court found that Samsung had likely infringed four valid Apple patents, that sales of the infringing Galaxy Nexus smartphone were likely to cause Apple significant irreparable harm, and that a causal nexus had been established for one of the asserted patents (No. 8,086,604) but not the other three. A81A93. The '604 patent claims a novel way of returning search results from multiple sources termed "unified search," which is enabled in the Siri function of the iPhone and by the Quick Search Bar on the Samsung Galaxy Nexus. A24; A84A85. Relying on almost 20,000 pages in briefing, expert affidavits and exhibits, deposition testimony, and contemporaneous documents from Apple, Samsung, Google, and industry observers--including direct and circumstantial evidence that this search functionality "matters" to smartphone purchasers--the district court in a 101-page opinion found a causal nexus between Samsung's infringement of the '604 patent and Apple's irreparable injury. A81A85. The court exercised its discretion to preliminarily enjoin sales of the Galaxy Nexus.

On appeal, this Court reversed the preliminary injunction because even though Apple had established the four traditional equitable relief factors, the district court had incorrectly applied the causal nexus standard. Slip op. 612. Apple II ruled that Apple was required to provide evidence that "directly ties consumer demand" for the accused product to the infringing feature.

Samsung replies that there's nothing new happening, that the causal nexus is old news:
Apple’s Petition for Rehearing En Banc should be denied. First, this Court should not review en banc the panel’s unanimous holding that, in order to obtain injunctive relief in a case where an accused product contains many features, a “patentee must . . . show that the infringing feature drives consumer demand for the accused product” (Slip op. 8 (emphasis added)). Despite Apple’s rhetoric, that requirement does not impose “a new prerequisite to preliminary injunctive relief” (Pet. 6), nor does the panel’s holding work any “unprecedented jurisprudential shift” (id.) or otherwise conflict with any decision of the Supreme Court or this Court. To the contrary, such a causal-nexus requirement is an inherent, well-established aspect of irreparable harm analysis as well as of patent principles that foreclose “leverag[ing] [a] patent for competitive gain beyond that which the inventive contribution and value of the patent warrant” (Slip op. 7).
Background

This is involving the litigation currently ongoing, Apple v. Samsung II, in Seattle, not the one where the jury already ruled for Apple on other issues. This is another prong of Apple's thermonuclear war against Android, Apple v. Samsung II, Docket No. 12-CV-00630-LHK, the initials being the initials of the judge in both litigations, the Hon. Lucy H. Koh.

The Apple II case started with Apple claiming infringement of 8 patents, but the appeal is only about one of them, U.S. Patent No. 8,086,604, the '604 patent on unified search, which the Federal Circuit's order being appealed defined like this:

Unified search refers to the ability to access information on more than one data storage location through a single interface. For example, a device equipped with unified search allows the user to search the local memory of the device as well as the Internet by entering a single search query.
The district court found that of the four patents that Apple used to request the injunction, only one, the '604, was legitimate for that purpose and on that basis ordered a preliminary injunction against the Galaxy Nexus for infringing it. The Federal Circuit on appeal said she was wrong and that no injunction was warranted.

The appeal centered on claim 6 of the patent (which has a dependent claim 19 which no one seems to discuss), a specific implementation of unified search addressing a particular search area, something Apple calls Quick Search Box, or QSB, which is what makes Siri able to do what "she" does:

The apparatus disclosed in claim 6 recites a specific and particular implementation of unified search that uses modules to conduct the search. For the purpose of this appeal, we assume that a search module is a software program or subroutine that employs a particular search algorithm.
It's why I assume it isn't actually patentable subject matter, since algorithms are just mathematics, which courts have said can't be patented. They just do it anyway, but I think in time, some court is bound to notice, once the level of technical understanding rises to the appropriate level, that the above sentence means it isn't patentable, by its very terms. But for the sake of the rest of the discussion, let's set that aside, and we'll look at the issue as if mathematics *were* patentable subject matter.

What the Panel at the Federal Circuit Unanimously Held

The Federal Circuit held in Apple I that the stardard for an injunction is irreparable harm. That's normal. (And by the way, you can find the order attached to Apple's brief as an Addendum beginning on page 16.) In other words, if money at the end of litigation can make the plaintiff whole, a preliminary injunction is not justifiable, because it harms the defendant, who may be innocent of infringement in the end. How do you show irreparable harm, according to Apple I? By showing a causal nexus between the harm and the patented feature. The order quotes what Apple I held:

To show irreparable harm, it is necessary to show that the infringement caused harm in the first place. Sales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature. If the patented feature does not drive the demand for the product, sales would be lost even if the offending feature were absent from the accused product. Thus, a likelihood of irreparable harm cannot be shown if sales would be lost regardless of the infringing conduct.
Yes, you might prove infringement, but if it isn't causing you lost sales, where's the harm in the context of a preliminary injunction analysis? Rather, the court said, "the patentee must rather show that the infringing feature drives consumer demand for the accused product." On what basis would you order an injunction to prevent financial harm if there isn't any harm directly related to the patented feature, what the law calls a "causal nexus" -- nobody is buying to get that feature and if you took the feature out, no one would stop buying the phone? The Court ruled like this:
We hold that the district court abused its discretion. To begin with, to the extent the district court endorsed Apple's articulation of the causal nexus test, it erred as a matter of law. The causal nexus requirement is not satisfied simply because removing an allegedly infringing component would leave a particular feature, application, or device less valued or inoperable. A laptop computer, for example, will not work (or work long enough) without a battery, cooling fan, or even the screws that may hold its frame together, and its value would be accordingly depreciated should those components be removed. That does not mean, however, that every such component is "core" to the operation of the machine, let alone that each component is the driver of consumer demand. To establish a sufficiently strong causal nexus, Apple must show that consumers buy the Galaxy Nexus because it is equipped with the apparatus claimed in the '604 patent- not because it can search in general, and not even because it has unified search....

At best, the district court's findings indicate that some consumers who buy the iPhone 4S like Siri because, among other things, its search results are comprehensive. That does not sufficiently suggest, however, that consumers would buy the Galaxy Nexus because of its improved comprehensiveness in search. More specifically, that an application may sell in part because it incorporates a feature does not necessarily mean that the feature would drive sales if sold by itself. To the contrary, here, the only pertinent evidence -- Apple's own survey evidence -- shows that unified search is not one of the top five reasons consumers select Android smartphones. In this light, the causal link between the alleged infringement and consumer demand for the Galaxy Nexus is too tenuous to support a finding of irreparable harm....

This record does not permit the inference that the allegedly infringing features of the Galaxy Nexus drive consumer demand. There is therefore no need for us to review the district court's assessment of Apple's allegations of irreparable harm. Regardless of the extent to which Apple may be injured by the sales of the Galaxy Nexus, there is not a sufficient showing that the harm flows from Samsung's alleged infringement. Thus, the district court abused its discretion in determining that the irreparable harm factor counsels in favor of entering an injunction.

The Resulting Apple and Samsung Debate

Apple's answer to the question as to why it should get an injunction, at least after infringement is proven at trial, is: because it's like any property. You don't get to walk across my lawn if I don't want you to, even if you aren't harming the lawn. Why not? Because it's my lawn, and I get to say you can't. Otherwise, where's the property ownership right to exclude? Why should patents be any different? There shouldn't be a requirement in all cases to prove that customers yearn for the patented feature, in that they may not even know what makes the product just work the way they want. If they *are* different, Apple argues, then a lot of patents have issued that don't matter, that customers don't even know enough to want or value, but for which patents issued without the right to seek injunctions. That would indeed be historic:

The "Causal Nexus" Requirement Is Contrary to the Principles of Equity

Courts may "grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent." 35 U.S.C. § 283; see Root v. Lake Shore & M.S. Ry. Co., 105 U.S. 189, 19192 (1881).

The "principles of equity" have never included a patent-specific, much less a feature-specific, "causal nexus" as a necessary predicate to injunctive relief. Since this Court was created, the concept of a "causal nexus" in this context appears in just two opinions--Apple I and Apple II.

At this point, Samsung and Motorola are sitting up straight and saying, hey, that's what we said about FRAND patents, that you are taking away from us rights that traditionally belonged to us. Apple is, indeed, in an ethical and legal dilemma, if one assumes that what's good for the goose is good for the gander. Maybe it will turn out to have been a mistake to even raise the issue of injunctions in the FRAND context, because once you start to look at it as not automatic to get an injunction due to harm to the public or whatever, you can get results like the Federal Circuit saying, in effect, your patented feature isn't important enough to warrant an injunction. All you get is damages and/or royalties. That raises the question in my mind, though, whether you can get damages if you can't prove that you were damaged financially in an injunction analysis. Maybe the reality is that even though there is no fair use defense in patent law, in real life there kind of should be, in that not all patents that are infringed matter a hill of beans to anybody, that they are just hooks to use to prevent your competitors from doing things that really they should be allowed to do, in that a lot of patents have issued that everyone seems to agree never should have.

Courts do care about harm from patent litigation, when it's obvious. They aren't going to lightly issue injunctions that turn the entire marketplace on its head. That's how it used to be, but since eBay, there's been a change. Changes happen in the law when courts see how things are working out. I gather Apple would like to narrow that change. Because without it, its legal strategy to destroy Android isn't going to work out so well. But maybe, just maybe, courts are beginning to notice how the game is played and they aren't so enamored of it either.

Apple's other answer is that people *do* buy iPhones to get Siri, that they presented evidence of that, which the court found insufficient. Just between you and me, if you were arguing this with your friends or family, could you seriously argue that nobody went out and bought an iPhone to get Siri, when Siri was first presented to the public? I couldn't. I think people did exactly that. I think if it sold separately, as an app, for example, when it first came out, people would have paid for it. I hate the patent smartphone wars and think they are being fought stupidly, but fair is fair. But Samsung points out that the issue is why do people buy an *Android* phone, and there was evidence presented in a survey and that unified search wasn't in the top five reasons people buy an Android. Samsung adds:

For example, a consumer might pay more to add a patented cup-holder to a car, or pay less if a cup-holder were removed, but it does not follow that the consumer is driven to buy that car over a competitor’s car for the cup-holder. Far from imposing new evidentiary strictures warranting en banc review, the panel decision leaves wide latitude to introduce consumer surveys, advertisements, product reviews and other evidence to show what drives consumer demand as appropriate in particular cases.

Because Apple’s “limited” evidentiary submission contained “no evidence that directly ties consumer demand for the Galaxy Nexus” to the alleged infringement (Slip op. 8 (emphasis added)), Apple is wrong to suggest (Pet. 2) that the panel decision will foreclose injunctive relief in “broad swathes of cases.” To the contrary, to sustain an injunction on such a deficient record would permit patent holders to remove complex products from the marketplace based a single, minor feature that has not been linked to consumer demand.

To Samsung, Apple is trying to show a conflict between Apple I and Apple II and trying to describe huge harm to patent holders broadly but in reality, they failed to prove what you need to prove and what everyone knows you need to prove to get an injunction, a causal nexus:
Apart from failing to show causal nexus, Apple failed to show any injury sufficient to constitute irreparable harm. Apple I held that a party must establish a loss of market share that is more than “insubstantial” in order to establish irreparable harm. Apple I, 678 F.3d at 1324-25. Here, even if every Galaxy Nexus sale would otherwise have been an iPhone sale (which is highly doubtful given that a host of manufacturers sold 315 models of competing Android phones), Apple could have gained, at most, only an additional 0.5% of the U.S. smartphone market in the first quarter of 2012. Dkt. 46 at 23 (Opening Brief). Potential loss of a fraction of 0.5% of market share is “insubstantial.” Because the record provides this independent alternative ground to vacate the preliminary injunction, en banc review of the panel’s causal-nexus requirement is all the less warranted.
Samsung argues that there is nothing new in this picture, legally, and there is no conflict with eBay (or other rulings that it addresses one by one) precisely because eBay said you don't automatically get an injunction just because you own a patent that is being infringed:
First, eBay rejected Apple’s contention (Pet. 12) that patent exclusivity, like trespass to real property, warrants injunctive relief for infringement as a matter of course. As this Court made clear in Robert Bosch LLC v. Pylon Manufacturing Corp., 659 F.3d 1142, 1149 (Fed Cir. 2011), “eBay jettisoned the presumption of irreparable harm” from patent infringement “as it applies to determining the appropriateness of injunctive relief.”
That's what eBay stands for.

So. What do you think? Has the court stumbled on to the nearly perfect solution to the patent smartphone wars? If so, mad props to Quinn, Emanuel, y'all.

Here's Samsung's responsive brief to Apple's petition for rehearing en banc, as text, minus a couple of administrative pages, followed by Apple's earlier-filed motion for rehearing after the double line of stars:

*****************

12-1507

______________

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

______________

APPLE INC.,

Plaintiff-Appellee,

v.

SAMSUNG ELECTRONICS CO., LTD., SAMSUNG
ELECTRONICS AMERICA, INC., AND SAMSUNG
TELECOMMUNICATIONS AMERICA, LLC,

Defendants-Appellants.

_________________________

Appeal from the United States District Court for the Northern District of California
in case no. 12-CV-00630-LHK, Judge Lucy H. Koh

RESPONSE TO PETITION FOR REHEARING EN BANC

Charles K. Verhoeven
Kevin P.B. Johnson
Victoria F. Maroulis
QUINN EMANUEL URQUHART
& SULLIVAN, LLP
[address, phone, fax]

John B. Quinn
William C. Price
Derek L. Shaffer
QUINN EMANUEL URQUHART
& SULLIVAN, LLP
[address, phone, fax]

Attorneys for Defendants-Appellants

[Certificate of Interest - see PDF]

i, ii, iii

TABLE OF CONTENTS

Page

ARGUMENT ..............................................1

I. THE PANEL DECISION’S CAUSAL-NEXUS HOLDING DOES
NOT WARRANT EN BANC REVIEW...........................1

A. The Panel’s Causal-Nexus Requirement Does Not Conflict
With eBay Or This Court’s Post-eBay Decisions ........................2

B. The Panel’s Decision Does Not Conflict With Apple I ..........6

C. The Panel’s Decision Created No New Or Impractical
Evidentiary Rules For Proving Causal Nexus..........................9

D. Apple Faced No Irreparable Harm From Sales Of The Galaxy
Nexus In Any Event .................................12

II. THE PANEL’S CLAIM CONSTRUCTION DOES NOT WARRANT
EN BANC REVIEW .......................................13

CONCLUSION ..............................15

i

TABLE OF AUTHORITIES

Page

Cases

Advanced Med. Optics, Inc. v. Alcon Labs., Inc.,
No. 03-1095, 2005 WL 3454283 (D. Del. Dec. 16, 2005)......................7

Apple Inc. v. Samsung Elecs. Co., Ltd.,
678 F.3d 1314 (Fed. Cir. 2012) .....................4, 6, 7, 8, 9, 11, 12

Apple Inc. v. Samsung Elecs. Co., Ltd.,
No. 11-1846, 2012 WL 2401680 (N.D. Cal June 26, 2012) .....................6

Apple Inc. v. Samsung Elecs. Co., Ltd.,
No. 11-1846, 2011 WL 7036077 (N.D. Cal. Dec. 2, 2011) ...................8

Automated Merch. Sys., Inc. v. Crane Co.,
357 Fed. App’x 297 (Fed. Cir. 2009) ...............................4

Bd. of Regents of the Univ. of Texas Sys. v. BENQ Am. Corp.,
533 F.3d 1362 (Fed. Cir. 2008) ............................14

Cant Strip Corp. of Am. v. Schuller Int’l, Inc.,
No. 93-15425, 1994 WL 475862 (9th Cir. Sept. 1, 1994)......................2

Dippin’ Dots, Inc. v. Mosey,
476 F.3d 1337 (Fed. Cir. 2007) ............................14

eBay Inc. v. MercExchange, L.L.C.,
547 U.S. 388 (2006).....................................2, 3, 6

Edwards Lifesciences AG v. Corevalve, Inc.,
699 F.3d 1305 (Fed. Cir. 2012) .............................5, 6

i4i Ltd. Partnership v. Microsoft Corp.,
598 F.3d 831 (Fed. Cir. 2010) .............................4, 5

i4i Ltd. Partnership v. Microsoft Corp.,
670 F. Supp. 2d 568 (E.D. Tex. 2009).............................5

Kustom Signals, Inc. v. Applied Concepts, Inc.,
264 F.3d 1326 (Fed. Cir. 2001) ................................14

Mostaghim v. Fashion Inst. of Tech.,
No. 01-8090, 2001 WL 1537545 (S.D.N.Y. Dec. 3, 2001)..................................2

Perfetti Van Melle USA v. Cadbury Adams USA LLC,
732 F. Supp. 2d 712 (E.D. Ky. 2010).........................2

Procter & Gamble Co. v. Ultreo, Inc.,
574 F. Supp. 2d 339 (S.D.N.Y. 2008) ...........................2

ii

Quad/Tech, Inc. v. Q.I. Press Controls B.V.,
701 F. Supp. 2d 644 (E.D. Pa. 2010), aff’d, 413 F. App’x 278 (Fed. Cir. 2011) ...............................7

Robert Bosch LLC v. Pylon Manufacturing Corp.,
659 F.3d 1142 (Fed Cir. 2011) ........................3, 4, 6

In re Skvorecz,
580 F.3d 1262 (Fed. Cir. 2009) ..........................14

Spectrum Int’l, Inc. v. Sterilite Corp.,
164 F.3d 1372 (Fed. Cir. 1998) ........................14

Stanley v. Univ. of S. Cal.,
13 F.3d 1313 (9th Cir. 1994) ..........................2

Sundance, Inc. v. DeMonte Fabricating Ltd.,
No. 02-73543, 2007 WL 37742 (E.D. Mich. Jan. 4, 2007)..................7

Trading Techs. Int’l, Inc. v. eSpeed, Inc.,
2008 WL 4531371 (N.D. Ill. May 22, 2008)......................12

Miscellaneous

Mark A. Lemley & Philip J. Webster, Should Property or Liability Rules Govern
Information?
, 85 Tex. L. Rev. 783 (2007) ...................3, 12

Apple Inc.’s Memorandum of Law in Support of Its Motion to Stay, Eastman
Kodak Co. v. Apple, Inc.
, 2010 WL 2209043, No. 10-06021 (W.D.N.Y.) March 3, 2010 .............................8

iii

Apple’s Petition for Rehearing En Banc should be denied. First, this Court should not review en banc the panel’s unanimous holding that, in order to obtain injunctive relief in a case where an accused product contains many features, a “patentee must . . . show that the infringing feature drives consumer demand for the accused product” (Slip op. 8 (emphasis added)). Despite Apple’s rhetoric, that requirement does not impose “a new prerequisite to preliminary injunctive relief” (Pet. 6), nor does the panel’s holding work any “unprecedented jurisprudential shift” (id.) or otherwise conflict with any decision of the Supreme Court or this Court. To the contrary, such a causal-nexus requirement is an inherent, well-established aspect of irreparable harm analysis as well as of patent principles that foreclose “leverag[ing] [a] patent for competitive gain beyond that which the inventive contribution and value of the patent warrant” (Slip op. 7).

Second, the panel’s construction of claim 6 likewise presents no issue warranting en banc review. That construction is correct, consistent with this Court’s precedents, and specific to the patent at issue here, with no bearing on other patents or cases that might come before this Court.

ARGUMENT

I. THE PANEL DECISION’S CAUSAL-NEXUS HOLDING DOES NOT
WARRANT EN BANC REVIEW

Contrary to Apple’s contentions (Pet. 6-7), the panel treated causal nexus as an aspect of the traditional inquiry into irreparable harm (Slip op. 7 (noting they

1

are “inextricably related”)), and thus did not add a new, fifth requirement to the traditional four equitable factors. Nor is Apple correct in asserting (Pet. 4-5) that the panel created a new “feature-specific” causal-nexus requirement. To the contrary, the panel merely applied the settled rule that irreparable harm requires “a causal nexus between the harm alleged and the infringing conduct” (Slip op. 6 (emphasis added)) to a case “where the accused product includes many features of which only one (or a small minority) infringe” (id.). Nothing about this reasoning is novel,1 nor does it create any conflict furnishing ground for en banc review.

A. The Panel’s Causal-Nexus Requirement Does Not Conflict With eBay Or This Court’s Post-eBay Decisions

Apple argues (Pet. 1, 13, 14) that the panel decision conflicts with eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), but that is incorrect. First, eBay rejected Apple’s contention (Pet. 12) that patent exclusivity, like trespass to real property, warrants injunctive relief for infringement as a matter of course. As this

2

Court made clear in Robert Bosch LLC v. Pylon Manufacturing Corp., 659 F.3d 1142, 1149 (Fed Cir. 2011), “eBay jettisoned the presumption of irreparable harm” from patent infringement “as it applies to determining the appropriateness of injunctive relief.”2

Second, Justice Kennedy’s concurrence in eBay did not limit its concern with injunctive relief to “non-practicing entity (‘troll’) cases,” as Apple again wrongly asserts (Pet. 13). To the contrary, Justice Kennedy expressly noted that “legal damages may well be sufficient to compensate for the infringement” in situations where, as here, “the patented invention is but a small component of the product the companies seek to produce.” eBay, 547 U.S. at 396-97 (Kennedy, J., concurring)). This Court has thus held Justice Kennedy’s eBay concurrence applicable in three separate circumstances: those “‘in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining license fees,’ ‘[w]hen the patented invention is but a small component of the product,’ and those involving ‘the burgeoning number of patents over business methods.’” Robert Bosch, 659 F.3d at 1150 (citation omitted) (emphasis added). The panel thus faithfully applied eBay (and Robert Bosch) by examining whether

3

the patent-in-suit, which is “but a small component” of a complex smartphone with thousands of features, causes irreparable harm so as to warrant injunctive relief.

Nor does the panel decision “conflict[ ] with the post-eBay precedents of this Court,” as Apple wrongly asserts (Pet. 7; see Pet. 1). First, it raises no conflict with Robert Bosch, which found injunctive relief appropriate not, as here, against a complex product of which the infringing feature is only a discrete and minor part, but rather against a relatively simple product (a windshield-wiper blade) where the patent-in-suit was effectively coextensive with the product. 659 F.3d at 1145. Moreover, Robert Bosch involved evidence of harm in the form of “irreversible price erosion,” loss of access to mass retailers and a prospect that the defendant would be unable to satisfy a judgment, id. at 1153-54, harms quite different from the lost sales and market share alleged here.3

Second, Apple is incorrect in asserting (Pet. 9) that the panel decision conflicts with i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010). This Court rejected a similar argument in Apple Inc. v. Samsung Electronics Co., Ltd., 678 F.3d 1314, 1324 (Fed. Cir. 2012) (“Apple I ”), recognizing that the irreparable harm at stake in i4i was quite different from a

4

drop-off in sales and market share like that alleged here. Id.. Microsoft’s infringement would have “rendered i4i’s product obsolete” and required i4i to “change its business strategy to survive.”i4i Ltd. P’ship, 598 F.3d at 862. Moreover, the accused feature, while “a small part of Microsoft’s WORD products,” also found its own “independent market” in “stand-alone” form, as the district court had noted.i4i Ltd. P’ship v. Microsoft Corp., 670 F. Supp. 2d 568, 600 (E.D. Tex. 2009). Only in those limited circumstances did this Court hold that a permanent injunction could issue. i4i Ltd. P’ship, 598 F. 3d at 862.

Third, Apple’s assertion (Pet. 8) of any conflict with Edwards Lifesciences AG v. Corevalve, Inc., 699 F.3d 1305 (Fed. Cir. 2012), is misplaced. That decision involved a valve prosthesis for implantation into the body without the need for open-heart surgery—and not, as here, a patent related to one discrete, minor feature of a complex device. See id. at 1307. The issue of causal nexus did not arise in that case and thus cannot create any conflict with the panel’s decision. Moreover, Edwards merely remanded denial of an injunction for reconsideration by the district court in light of changed circumstances: while the infringement stemmed from alleged manufacturing in the United States, the defendant claimed that it was moving its manufacturing to Mexico. Id. at 1315-16.4

5

Fourth, Apple errs in asserting (Pet. 5) that the panel’s causal-nexus ruling makes injunctions categorically impossible to obtain in complex-device cases, in alleged tension with Robert Bosch and Edwards. The panel created no such categorical rule. To the contrary, where a patented feature is shown to be causally related to consumer demand (unlike here), an injunction may still issue against a complex product. For example, this Court held in Apple I that Apple’s D’889 patent had the “requisite nexus” to consumer demand for Samsung’s Galaxy Tab 10.1 to warrant preliminary injunctive relief, Apple I , 678 F. 3d at 1328; see Apple I nc. v. Samsung Elecs. Co., Ltd., No. 11-1846, 2012 WL 2401680, at *5 (N.D. Cal June 26, 2012) (issuing preliminary injunction upon remand), even though the jury in that case ultimately found that the Galaxy Tab 10.1 did not infringe that patent.

B. The Panel’s Decision Does Not Conflict With Apple I

Nor, contrary to Apple’s assertions (Pet. 1, 8), does the panel’s decision “dramatically expand[ ],” or otherwise conflict with, the causal-nexus holding set forth in Apple I . That decision held:
To show irreparable harm, it is necessary to show that the infringement caused harm in the first place. Sales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature. If the patented feature does not drive the demand for the product, sales would be lost even if the offending feature were absent from the accused product.

6

678 F.3d at 1324 (emphasis added). The panel here simply followed that holding. Slip op. 6-8. Indeed, the panel quoted the above passage from Apple I in full before restating that “[t]he patentee must rather show that the infringing feature drives consumer demand for the accused product.” Id. at 8.

Apple I did not announce any new rule; lower courts had previously required in patent cases that the alleged infringement be shown to cause the alleged irreparable harm. See , e.g., Quad/Tech, Inc. v. Q.I. Press Controls B.V., 701 F. Supp. 2d 644, 657 (E.D. Pa. 2010) (plaintiff “failed to prove a causal connection between alleged loss and alleged infringement, which is necessary to prove irreparable harm”), aff’d, 413 F. App’x 278 (Fed. Cir. 2011); Sundance, Inc. v. DeMonte Fabricating Ltd., No. 02-73543, 2007 WL 37742, at *2 (E.D. Mich. Jan. 4, 2007) (denying permanent injunction where plaintiff failed to show that its licensees “are losing sales to [defendant] expressly because of its infringement,” rather than “due to a desire for other features of the [defendant’s] system” or “other competitors in the marketplace”); Advanced Med. Optics, Inc. v. Alcon Labs., Inc., No. 03-1095, 2005 WL 3454283, *10-11 (D. Del. Dec. 16, 2005) (granting injunction pre-eBay, but staying for lack of irreparable harm where patentee “conceded that the fluidics system protected by that patent does not drive demand”). Indeed, the district court in Apple I correctly applied a feature-specific causal nexus-test before this Court affirmed the correctness of that test. See Apple

7

Inc. v. Samsung Elecs. Co., Ltd., No. 11-1846, 2011 WL 7036077, at *39 (N.D. Cal. Dec. 2, 2011) (“[T]he fact that the ‘381 patent is but one patent utilized in the accused products, and does not appear to be either necessary for the product to function, or a core technology of the product, weighs against a finding of irreparable harm.”).5

Apple’s attempts (Pet. 3, 8-9) to manufacture inconsistency between Apple I and the panel’s opinion are unsuccessful. Contrary to Apple’s assertion (Pet. 3), Apple I does not require merely that a patentee show that the patented feature “mattered” to consumers. Instead, Apple I states that such a feature must “drive the demand for the product.” 678 F.3d at 1324 (emphasis added). Apple misreads the panel’s decision as requiring patentees to show that a patented feature is “the driver of consumer demand.” Pet. 8-9 (emphasis in original). The panel found that Apple had not adduced evidence that the alleged infringing feature drove any sales of the Galaxy Nexus and thus was not a driver. See I.C. infra. To the extent that

8

the Court might need to decide in the future how much the infringing feature must drive sales to give rise to irreparable injury—Apple I requires that the loss of market share resulting from infringement be not “insubstantial,” 678 F.3d at 1324- 25—that issue was not posed here given Apple’s failure to establish any lost sales resulting from alleged infringement. Thus, Apple I and the panel decision are fully in harmony and require no reconciliation by an en banc Court.

C. The Panel’s Decision Created No New Or Impractical Evidentiary
Rules For Proving Causal Nexus

Apple conjures (Pet. 9-11) a further alleged conflict with Apple I in asserting that the panel’s decision imposed a new evidentiary requirement of consumer-survey evidence to meet the causal-nexus standard. But the panel did not vacate the preliminary injunction for want of consumer surveys; it vacated because Apple adduced no evidence that consumer demand for the Galaxy Nexus was driven by the patented Quick Search Box (“QSB”) feature. Slip op. 11-12. And the panel noted that there were consumer surveys in the record—Apple’s own—that directly refuted Apple’s claim that the ‘604 patent drove sales of the Galaxy Nexus. See, e.g., J.A. 1285, 1297, 1307, 1324, 1345. In those surveys, Apple asked consumers the top factors that influenced their purchasing decisions, and the responses failed to list the QSB search methodology among them. See Slip op. 11.

Apple attempts to discount this evidence by arguing that, because both products allegedly practiced the ‘604 patent, consumers would find no basis to cite

9

unified search as one of the top five reasons “why consumers buy Android rather than iPhones.” Pet. 11 (emphasis in original). But the record contains not only surveys comparing the two phones (e.g., J.A. 1297), but also a survey asking consumers simply the “most important attributes” in their purchase of Android smartphones (J.A. 1285). That chart shows that “unified search is not one of the top five reasons consumers select Android smartphones.” Slip op. at 11.6

Nor, contrary to Apple’s assertion (Pet. 10), does the panel decision rule out resort to circumstantial evidence to establish causal nexus. It simply requires that the evidence—circumstantial or direct—be substantial enough to refute any countervailing evidence. In the face of direct evidence that consumer demand for Android phones is driven by features other than the patented features, Apple’s other evidence was simply too insubstantial, as the panel found in addressing it.7

10

Apple wrongly faults (Pet. 10) the panel decision for suggesting that causal nexus cannot be established merely by evidence that a consumer would pay less for the accused product if the allegedly infringing feature were removed. Because Apple offered no such evidence here, this argument is purely hypothetical. In any case, the panel is correct that the fact that a consumer might pay more or less for a product proves nothing standing alone about whether “consumers buy that product” for reason of the infringing feature and not for other reasons. Apple I , 678 F.3d at 1324. For example, a consumer might pay more to add a patented cup-holder to a car, or pay less if a cup-holder were removed, but it does not follow that the consumer is driven to buy that car over a competitor’s car for the cup-holder. Far from imposing new evidentiary strictures warranting en banc review, the panel decision leaves wide latitude to introduce consumer surveys, advertisements, product reviews and other evidence to show what drives consumer demand as appropriate in particular cases.

Because Apple’s “limited” evidentiary submission contained “no evidence that directly ties consumer demand for the Galaxy Nexus” to the alleged infringement (Slip op. 8 (emphasis added)), Apple is wrong to suggest (Pet. 2) that the panel decision will foreclose injunctive relief in “broad swathes of cases.” To the contrary, to sustain an injunction on such a deficient record would permit patent holders to remove complex products from the marketplace based a single,

11

minor feature that has not been linked to consumer demand.8 In cases where consumer demand for the accused product is shown to be driven by a patented feature, a different result might follow. See, e.g., Trading Techs. Int’l, Inc. v. eSpeed, Inc., 2008 WL 4531371, at *5 (N.D. Ill. May 22, 2008) (rejecting defendant’s argument that “the infringing screen is just a small component of a much larger software package, the bulk of which is non-infringing,” where plaintiff had shown at trial that the patented features were “the central features that make MD_Trader the popular software program that it is”); Apple I , 678 F. 3d at 1328.

D. Apple Faced No Irreparable Harm From Sales Of The Galaxy
Nexus In Any Event

Apart from failing to show causal nexus, Apple failed to show any injury sufficient to constitute irreparable harm. Apple I held that a party must establish a loss of market share that is more than “insubstantial” in order to establish irreparable harm. Apple I , 678 F.3d at 1324-25. Here, even if every Galaxy Nexus sale would otherwise have been an iPhone sale (which is highly doubtful given that a host of manufacturers sold 315 models of competing Android phones), Apple

12

could have gained, at most, only an additional 0.5% of the U.S. smartphone market in the first quarter of 2012. Dkt. 46 at 23 (Opening Brief). Potential loss of a fraction of 0.5% of market share is “insubstantial.” Because the record provides this independent alternative ground to vacate the preliminary injunction, en banc review of the panel’s causal-nexus requirement is all the less warranted.

II. THE PANEL’S CLAIM CONSTRUCTION DOES NOT WARRANT
EN BANC REVIEW

Apple also seeks en banc review of the panel’s construction (Slip op. 13-15) of the claim element requiring “a plurality of heuristic modules . . . wherein each heuristic module corresponds to a respective area of search and employs a different predetermined heuristic algorithm.” As the panel explained, this element requires every module to employ a unique algorithm—a construction compelled not only by the rules of grammar (id. at 15-16), but also by the ‘604 patent’s specification and by disclaimers Apple made during prosecution to distinguish the claim over prior art (id. at 17-18; J.A. 1403-04). This narrow claim construction, particular to this patent only, presents no conflict or issue of ongoing importance warranting this Court’s en banc review.

Apple relies solely upon the term “comprising,” asserting (Pet. 15) that the panel’s decision conflicts with this Court’s prior law and “calls into doubt many issued claims that relied on settled precedents regarding the meaning of the ‘comprising’ term.” But the panel’s decision does no such thing: to the contrary,

13

it acknowledges the general rule that “comprising” is open-ended, but explains why that rule is beside the point given the specific structure and history of this claim, particularly its separate use of the term “each” as a limitation. See Slip op. 16 (“Accordingly, despite the use of ‘comprising,’ claim 6 is not amenable to the addition of other modules that do not use different heuristic algorithms because such addition would impermissibly wipe out the express limitation that requires every module to have a unique heuristic algorithm.”).

Construing the claim in light of this important limitation fully comports with this Court’s precedents. “The open-ended transition ‘comprising’ does not free the claim from its own limitations.” Kustom Signals, Inc. v. Applied Concepts, Inc., 264 F.3d 1326, 1332 (Fed. Cir. 2001) (citing Spectrum Int’l, Inc. v. Sterilite Corp., 164 F.3d 1372, 1379-80 (Fed. Cir. 1998)); see also In re Skvorecz, 580 F.3d 1262, 1267 (Fed. Cir. 2009) (holding that use of “[t]his [‘comprising’] signal simply means that the device may contain elements in addition to those explicitly mentioned in the claim” and does not negate express limitation whereby “each wire leg has an offset”) (citation omitted); Bd. of Regents of the Univ. of Texas Sys. v. BENQ Am. Corp., 533 F.3d 1362, 1372-73 (Fed. Cir. 2008) (quoting Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337, 1343 (Fed. Cir. 2007)). And, as the panel noted (Slip op. 17-18), Apple itself gave that important claim limitation special

14

emphasis during prosecution of the patent in order to distinguish the claim over prior art. See J.A. 1403.

The full Court should not revisit the panel’s straightforward and correct claim construction, and Apple offers no precedent for en banc review of a claim construction so specific to a particular patent. Because Apple conceded below (J.A. 166-67, 65:5-66:25) that it cannot prevail on infringement if “every single module in the device has to use a different algorithm,” as the panel’s construction requires, Apple cannot establish a likelihood of success on the merits, and further review of the decision vacating the preliminary injunction is unwarranted.

CONCLUSION

For the foregoing reasons, Apple’s petition for en banc review should be denied.

15

Dated: January 11, 2013

Respectfully submitted,

/s/ John B. Quinn
John B. Quinn
William C. Price
Derek L. Shaffer
QUINN EMANUEL URQUHART & SULLIVAN, LLP
[address, phone, fax]

Charles K. Verhoeven
Kevin P.B. Johnson
Victoria F. Maroulis
QUINN EMANUEL URQUHART &
SULLIVAN, LLP
[address, phone, fax]

Attorneys for Defendants-Appellants

___________
1 Injunctions have long been denied for lack of causal nexus between alleged illegality and injury outside the patent area. See, e.g., Cant Strip Corp. of Am. v. Schuller Int’l, Inc., No. 93-15425, 1994 WL 475862, at *4 (9th Cir. Sept. 1, 1994) (finding “no nexus between the threatened harm and improper conduct by [defendant]”) (citing Stanley v. Univ. of S. Cal., 13 F.3d 1313, 1324-25 (9th Cir. 1994)); Perfetti Van Melle USA v. Cadbury Adams USA LLC, 732 F. Supp. 2d 712, 725-26 (E.D. Ky. 2010) (finding no “causal connection” between reduced sales and defendants’ use of a diluting trademark); Procter & Gamble Co. v. Ultreo, Inc., 574 F. Supp. 2d 339, 352 (S.D.N.Y. 2008) (finding no “causal nexus between the allegedly false advertising and sales potentially lost” by plaintiff); Mostaghim v. Fashion Inst. of Tech., No. 01-8090, 2001 WL 1537545, at *3 (S.D.N.Y. Dec. 3, 2001) (“The only potential irreparable harm . . . has no causal nexus with the alleged FERPA violation.”).

2 See also Mark A. Lemley & Philip J. Webster, Should Property or Liability Rules Govern Information?, 85 TEX. L. REV. 783, 785, 796-800 (2007) (arguing that in the patent context, unlike the real property context, “injunctive relief can systematically overcompensate plaintiffs and overdeter defendants”).

3 Lost sales are classically compensable monetarily. See Automated Merch. Sys., Inc. v. Crane Co., 357 Fed. App’x 297, 300-02 (Fed. Cir. 2009) (vacating preliminary injunction for lack of proof of lost market share) (“Lost sales (without more) are presumed to be compensable through damages, so they do not require injunctive relief.”).

4 Apple misleadingly cites Edwards for the proposition that patentees “‘may normally expect to regain the exclusivity that was lost with the infringement’ with no mention of the casual nexus standard” (Pet. 8) (citation omitted), neglecting to note the concurrence’s concern that such broad statements “appear to me to deviate from the standard articulated by the Supreme Court [in eBay] and our court,” 699 F.3d at 1317 (Prost, J., concurring) (citing Robert Bosch, 659 F.3d at 1149).

5 Apple itself conceded two years before Apple I that an injunction may not issue against a smartphone absent a causal nexus between the accused feature and the claimed irreparable harm. In Kodak v. Apple, Apple sought to stay a patent-infringement action pending a parallel ITC investigation and reexamination proceedings. See Apple Inc.’s Memorandum of Law in Support of Its Motion to Stay, Eastman Kodak Co. v. Apple, Inc., 2010 WL 2209043, No. 10-06021 (W.D.N.Y.) March 3, 2010. Arguing that Kodak would not be irreparably harmed by a stay, Apple maintained that “Kodak cannot establish that sales of Apple’s iPhones will erode Kodak’s market share or that sales of the iPhone 3GS were due solely to inclusion of the accused functionality.” Id. at 10 (emphasis added).

6 Because Apple’s ‘604 patent covers only a specific kind of unified search, Apple’s claim (Pet. 3-4) that consumers desire some unified search falls that much further from the mark. See Slip op. 10 n.2.

7 The panel carefully discussed the three documents Apple offered as circumstantial evidence to overcome its consumer survey. Slip op. 11-12. The first was a developer’s guide “intended to inform software-developers of the usefulness of Android’s search capabilities.” Id. at 11. The second and third are blog posts that predate the launch of the Galaxy Nexus by over two years. Id. One “at best” reflects only a blogger’s “individual belief” about the importance of the QSB’s search feature; the other “says nothing about consumer demand.” Id. at 11- 12. In the face of the survey evidence, the panel correctly concluded that the documents “do not sufficiently show that the patented feature drives consumer demand.” Id. at 11.

8 Apple suggests (Pet. 13-14) that such injunctions can be narrowed to obviate undue market disruptions, but Apple has never suggested anything less than a complete ban on Galaxy Nexus sales, and, in any event, Apple’s efforts to intimidate carriers and other downstream retailers with overbroad readings of the preliminary injunction issued below illustrate that such narrowing would be ineffective. See Dkt. 39, 42 at Ex. 1; see also Lemley & Webster, 85 TEX. L. REV. at 785, 798 (“[C]ourts cannot easily tailor injunctions to forbid only the prohibited conduct.”).

16

[Certificate of Service - see PDF]

17, 18

************************
************************

2012-1507

______________

IN THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT

______________

APPLE INC.,

Plaintiff-Appellee,

v.

SAMSUNG ELECTRONICS CO., LTD.,
SAMSUNG ELECTRONICS AMERICA, INC., and
SAMSUNG TELECOMMUNICATIONS AMERICA, LLC,

Defendants-Appellants.

_________________________

Appeal from the United States District Court
for the Northern District of California
In case no. 12-cv-0630, Judge Lucy H. Koh

PETITION FOR REHEARING EN BANC

Harold J. McElhinny
Michael A. Jacobs
Richard S.J. Hung
Brian R. Matsui
MORRISON & FOERSTER LLP [address, phone]

Josh A. Krevitt
Principal Attorney
H. Mark Lyon
GIBSON, DUNN & CRUTCHER LLP
[address, phone]

Mark A. Perry
GIBSON, DUNN & CRUTCHER LLP
[address, phone] Attorneys for Apple, Inc.

[Certificate of Interest - see PDF]

i, ii, iii

TABLE OF CONTENTS

Page

STATEMENT OF COUNSEL ................ 1

INTRODUCTION ................................ 1

BACKGROUND ............................. 2

ARGUMENT ......................................... 4

I. The "Causal Nexus" Requirement Is Contrary to the Principles of
Equity ................................ 4

II. The Claim Construction Ruling Was Erroneous ...................... 14

CONCLUSION ........................... 15

i

TABLE OF AUTHORITIES

Page(b)

Apple, Inc. v. Samsung Elecs. Co.,
678 F.3d 1314 (Fed. Cir. 2012) ........................ 1, 2, 3, 6, 8, 9

Carl Zeiss Stiftung v. Renishaw PLC,
945 F.2d 1173 (Fed. Cir. 1991) .................................1, 14

Cincinnati Car Co. v. N.Y. Rapid Transit Corp.,
37 F.2d 100 (2d Cir. 1930) ....................................14

Cont'l Paper Bag Co. v. E. Paper Bag Co.,
210 U.S. 405 (1908) ........................................12

eBay Inc. v. MercExchange, LLC,
547 U.S. 388 (2006) .............................. 1, 2, 6, 11, 13, 14

Edwards Lifesciences AG v. Corevalve, Inc.,
2012 WL 5476839 (Fed. Cir. Nov. 13, 2012) ........................ 1, 5, 8, 12, 13

Elec. Car Co. of Am. v. Hartford & W.H.R. Co.,
87 F. 733 (C.C.D. Conn. 1898) .................................6

Hoechst-Roussel Pharm., Inc. v. Lehman,
109 F.3d 756 (Fed. Cir. 1997) .............................12

i4i Ltd. Partnership v. Microsoft Corp.,
598 F.3d 831 (Fed. Cir. 2010) .............................9, 14

Momenta Pharm., Inc. v. Amphastar Pharm., Inc.,
686 F.3d 1348 (Fed. Cir. 2012) .................................12

Praxair, Inc. v. ATMI, Inc.,
543 F.3d 1306 (Fed. Cir. 2008) ................................13

ResQNet.com, Inc. v. Lansa, Inc.,
346 F.3d 1374 (Fed. Cir. 2003) ...........................1, 15

Robert Bosch LLC v. Pylon Mfg. Corp.,
659 F.3d 1142 (Fed. Cir. 2011) ............................ 1, 5, 6, 8, 10, 12

Root v. Lake Shore & M.S. Ry. Co.,
105 U.S. 189 (1881) .................................4

ii

SunTiger, Inc. v. Scientific Research Funding Grp.,
189 F.3d 1327 (Fed. Cir. 1999) .............................. 14, 15

TiVo Inc. v. Echostar Corp.,
646 F.3d 869 (Fed. Cir. 2011) ...................................14

Verizon Services Corp. v. Vonage Holdings Corp.,
503 F.3d 1295 (Fed. Cir. 2007) ................................7, 8

Voda v. Cordis Corp.,
536 F.3d 1311 (Fed. Cir. 2008) ...................................6

Weinberger v. Romero-Barcelo,
456 U.S. 305 (1982) .......................................13

Whitlock v. Hilander Foods, Inc.,
720 N.E.2d 302 (Ill. App. Ct. 1999) ..............................12

Winter v. NRDC,
555 U.S. 7 (2008) ............................... 1, 2, 6, 13

Statutes

35 U.S.C. § 271(a) .........................6

35 U.S.C. § 283 ....................................4

iii

STATEMENT OF COUNSEL

Based on my professional judgment, I believe the panel decision is contrary to the following decisions of the Supreme Court and this Court: Winter v. NRDC, 555 U.S. 7 (2008); eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006); Edwards Lifesciences AG v. Corevalve, Inc., 2012 WL 5476839 (Fed. Cir. Nov. 13, 2012); Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314 (Fed. Cir. 2012); Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142 (Fed. Cir. 2011); ResQNet.com, Inc. v. Lansa, Inc., 346 F.3d 1374 (Fed. Cir. 2003); Carl Zeiss Stiftung v. Renishaw PLC, 945 F.2d 1173 (Fed. Cir. 1991). In addition, this appeal requires answers to the following precedent-setting questions of exceptional importance: 1) whether the Court erred in vacating a preliminary injunction for lack of a "causal nexus" even though the district court found that all four traditional factors favor equitable relief; and 2) whether the Court erred in construing a claim containing open-ended "comprising" language as "closed-ended" because it includes the word "each."

Date: November 26, 2012

/s/ Josh A. Krevitt
Josh A. Krevitt
Attorney of Record for Apple Inc.

INTRODUCTION

In successive appeals involving ongoing litigation between Apple and Samsung, this Court articulated and applied a "causal nexus" requirement that a patentee must satisfy to obtain injunctive relief against infringement. Apple, Inc. v. Sam-

1

sung Elecs. Co., 678 F.3d 1314, 1324 (Fed. Cir. 2012) (Apple I ); slip op. 612 (Apple II ). Most recently, in Apple II , the Court invoked this requirement to vacate a preliminary injunction notwithstanding the district court's detailed factual findings that the patentee had established all four factors that courts have traditionally considered in issuing preliminary injunctions. Cf. Winter v. NRDC, 555 U.S. 7, 20 (2008); eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 394 (2006).

The "causal nexus" requirement, as applied in Apple II, requires the patentee to prove, as a prerequisite to securing a preliminary injunction, that the patented feature "drives consumer demand for the accused product." Slip op. 8, 10, 12. Neither the Supreme Court nor this Court has ever before imposed such a feature- specific prerequisite to injunctive relief. In this respect (and others) Apple II conflicts with Apple I and the Supreme Court's prohibition against judicially adopted principles that could preclude injunctive relief in broad swathes of cases. The "causal nexus" requirement warrants en banc review because it dramatically reduces the availability of preliminary injunctions, particularly in cases involving multi-featured smartphones, tablets, computers, and other electronic devices.

BACKGROUND

Beautiful and revolutionary, yet remarkably easy to use, Apple's iPhone has become the archetype for the modern smartphone. Samsung has repeatedly appro- priated the patented technologies on which Apple spent years of effort and millions

2

of dollars, taking customers from Apple in the primary market for smartphones as well as in secondary markets (including tablets and applications) that are related to smartphone purchases. Apple has sought to enforce in court a number of design and utility patents infringed by Samsung's devices.

In Apple I , this Court held that the district court "was correct to require a showing of some causal nexus between Samsung's infringement and the alleged harm to Apple" before granting a preliminary injunction. 678 F.3d at 1324 (emphasis added). Apple I specifically did not hold that "proof of ... `consumer motivation' is a prerequisite to a finding of irreparable harm." Id. at 1324 n.3. Rather, the nexus may be shown through "consumer preference or some other kind of causal link." Id. at 1327 (emphasis added). Indeed, Apple I affirmed a finding of causal nexus where the patented feature "mattered" to consumers. Id. at 1328.

In Apple II , the same district court found that Samsung had likely infringed four valid Apple patents, that sales of the infringing Galaxy Nexus smartphone were likely to cause Apple significant irreparable harm, and that a causal nexus had been established for one of the asserted patents (No. 8,086,604) but not the other three. A81A93. The '604 patent claims a novel way of returning search results from multiple sources termed "unified search," which is enabled in the Siri function of the iPhone and by the Quick Search Bar on the Samsung Galaxy Nexus. A24; A84A85. Relying on almost 20,000 pages in briefing, expert affidavits

3

and exhibits, deposition testimony, and contemporaneous documents from Apple, Samsung, Google, and industry observers--including direct and circumstantial evidence that this search functionality "matters" to smartphone purchasers--the district court in a 101-page opinion found a causal nexus between Samsung's infringement of the '604 patent and Apple's irreparable injury. A81A85. The court exercised its discretion to preliminarily enjoin sales of the Galaxy Nexus.

On appeal, this Court reversed the preliminary injunction because even though Apple had established the four traditional equitable relief factors, the district court had incorrectly applied the causal nexus standard. Slip op. 612. Apple II ruled that Apple was required to provide evidence that "directly ties consumer demand" for the accused product to the infringing feature. Id. at 8. The Court also reversed the construction of a disputed claim term. Id. at 15.

ARGUMENT

I. The "Causal Nexus" Requirement Is Contrary to the Principles of Equity

Courts may "grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent." 35 U.S.C. § 283; see Root v. Lake Shore & M.S. Ry. Co., 105 U.S. 189, 19192 (1881).

The "principles of equity" have never included a patent-specific, much less a feature-specific, "causal nexus" as a necessary predicate to injunctive relief. Since this Court was created, the concept of a "causal nexus" in this context appears in

4

just two opinions--Apple I and Apple II. Apple I ruled that the district court had not abused its discretion in requiring a causal relationship between Samsung's likely infringement and Apple's irreparable injury; Apple II ruled that the same district court abused its discretion in granting a preliminary injunction in related litigation even after finding that the requisite "causal nexus" existed.

One of Samsung's amici in Apple II asked this Court to construe the "causal nexus" standard to preclude injunctive relief in "most cases involving legitimate smartphone manufacturers, particularly where the asserted patent is directed to a single feature in the smartphone." Dkt. No. 58-2 at 2. Apple II can be read as doing just that: It allows infringement to continue, even where all four traditional factors are met, in this and many other cases involving smartphones, computers, tablets, videogames, or other electronic devices. Apple II thus conflicts with other decisions that warn against tipping the scales of equity in this fashion. See Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1149 (Fed. Cir. 2011) ("Although eBay abolishes our general rule that an injunction normally will issue ... it does not swing the pendulum in the opposite direction"); Edwards Lifesciences AG v. Corevalve, Inc., 2012 WL 5476839, at *7 (Fed. Cir. Nov. 13, 2012) ("The Court in eBay did not hold that there is a presumption against exclusivity").

There are four--and only four--factors that courts have traditionally considered in issuing preliminary injunctions: likelihood of success, irreparable injury,

5

balance of hardships, and public interest. Winter, 555 U.S. at 20. (A preliminary injunction issued before a liability determination is an "extraordinary remedy," id. at 9, whereas a permanent injunction is imposed after liability has been established, see Robert Bosch, 659 F.3d at 115355; the contexts differ and affect the standard.) In patent cases, "the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts" and "such discretion must be exercised consistent with traditional principles of equity." eBay, 547 U.S. at 394.

This Court approved in Apple I a new prerequisite to preliminary injunctive relief--the "causal nexus"--which it described "as part of the showing of irreparable harm." 678 F.3d at 1324. The Court cited just one appellate decision for this requirement, Voda v. Cordis Corp., 536 F.3d 1311, 1329 (Fed. Cir. 2008), which held only that a patentee cannot rely upon irreparable harm to its licensee. Although the patentee has always been required to show irreparable harm resulting from the act of infringement (see 35 U.S.C. § 271(a)), equity courts did not require the patentee to prove that the harm flowing from making or selling an infringing product was directly traceable to the patented feature. See, e.g., Elec. Car Co. of Am. v. Hartford & W.H.R. Co., 87 F. 733, 740 (C.C.D. Conn. 1898); see also eBay, 547 U.S. at 395 (Roberts, C.J., concurring) (noting that "courts have granted injunctive relief ... in the vast majority of patent cases"). The crucial, and unprecedented, jurisprudential shift made by Apple II was to focus the causality inquiry on

6

the patented aspect of the infringing feature rather than the act of infringement.

This Court in Apple II applied the "causal nexus" requirement independently of the irreparable harm factor. Slip op. 67 ("We hold that the district court abused its discretion in determining that Apple established a sufficient causal nexus. In that light, we do not address Samsung's argument with respect to the sufficiency of Apple's allegations of [irreparable] harm."). The district court found that "Apple has made a clear showing" that, as a result of Samsung's sales of infringing devices, Apple "is likely to lose substantial market share in the smartphone market and to lose substantial downstream sales of future smartphone purchases and tag-along products." A78. These findings were not disturbed on appeal.

Apple II reversed the preliminary injunction because the "record does not permit the inference that the allegedly infringing features of the Galaxy Nexus drive consumer demand." Slip op. 12 (emphasis added). The Court cited no authority holding that such feature-specific evidence is a prerequisite to injunctive relief, and its ruling in this respect conflicts with the post-eBay precedents of this Court that have not imposed such a requirement. For example, in Verizon Services Corp. v. Vonage Holdings Corp., 503 F.3d 1295 (Fed. Cir. 2007), this Court agreed that Verizon would be irreparably harmed by the lost opportunity to sell other services to lost telephone customers, with no suggestion that customers chose Vonage on account of patents relating to a server for enhanced name translation. Id. at

7

1299, 131011. Robert Bosch held that it was an abuse of discretion to deny injunctive relief, without suggesting that purchasers bought the products because of features protected by Bosch's patents, as opposed to other factors such as price, availability, or effectiveness. 659 F.3d at 115255. And the Court in Edwards Lifesciences instructed that absent "adverse equitable considerations," a patentee "may normally expect to regain the exclusivity that was lost with the infringement" with no mention of the casual nexus standard. 2012 WL 5476839, at *78.

Apple II also departed from Apple I in dramatically expanding the showing required for a preliminary injunction while restricting the district court's discretion.

Apple I did not dictate how district courts should exercise their equitable discretion, and explicitly refused to hold that "customer survey evidence or other proof of ... `consumer motivation' is a prerequisite to a finding of irreparable harm." 678 F.3d at 1324 n.3. Apple II , however, ruled that it was an abuse of discretion to grant preliminary injunctive relief, even where all four of the traditional factors for such relief have been established (slip op. 6, 1112), and the district court made extensive factual findings based on an enormous and complex record that there was a causal nexus between the patented functionality and smartphone demand (A81A85), because Apple had failed to provide proof that consumers were motivated to buy the infringing device because of the patented feature.

Apple II said that the infringing feature must be "the driver of consumer de-

8

mand." Slip op. 10, 12 (emphasis added). The Court faulted Apple for not showing that "consumers buy the Galaxy Nexus because it is equipped with the apparatus claimed in the '604 patent--not because it can search in general, and not even because it has unified search." Id. at 10 (emphasis added). The Court stated that a patented feature must "drive sales if sold by itself," and suggested that there is no causal nexus even if "an application may sell in part because it incorporates a[n infringing] feature." Id. at 11.

Apple II 's statement that the patented feature must drive device sales conflicts with Apple I's holding that a causal nexus could be established by evidence showing simply that the patented feature "mattered" to consumers (678 F.3d at 1328)--which the district court found in this case. Nor can Apple II 's emphasis on feature-specific consumer preferences be reconciled with i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), where an injunction was affirmed over the infringer's objections even though "purchasers ... were not motivated to buy [Microsoft Word] solely because of (or even partly because of)" the patented functionality. Apple I, 678 F.3d at 1324.

Apple II also can be read to circumscribe the manner in which a patentee may prove a causal nexus. Apple I articulated the standard as whether sales would be lost "if the offending feature were absent from the accused product" (Apple I , 678 F.3d at 1324), because a patentee could demonstrate a causal nexus by exam-

9

ining demand for a product without the patented functionality. Apple II, however, said that this very analysis was reversible error. See slip op. 10 (causal nexus "not satisfied simply because removing an allegedly infringing component would leave a particular feature ... less valued or inoperable"). This would severely constrain patentees' ability to prove, through available evidence, the causal connection between infringement and harm. Even if a patentee can prove that a feature "matters" to consumers, such that consumers will pay less for a product without the feature, this evidence may not suffice under Apple II to show consumer demand.

Survey evidence establishing that a given feature "drives demand" may be unavailable or impractical in many cases because consumer preferences are often not so discretely discernible, particularly if consumers do not know or understand the role that patented inventions play in making multi-function devices work well. In fact, electronic devices contain a host of features, many patented, that are not even apparent to consumers yet which unquestionably enhance the utility and ultimately the value of the product. In cases involving such products, and many others, circumstantial evidence will be important to establishing the prerequisites to a preliminary injunction. To the extent Apple II restricts patentees from relying on such evidence, it conflicts with this Court's previous recognition that showings of harm "need not be made by direct evidence." Robert Bosch, 659 F.3d at 1154.

Apple II makes preliminary injunctions in some cases of even demonstrated

10

infringement a logical impossibility, because the infringing feature will never drive sales for one device over the other where the feature is in both devices. This case illustrates the problem: The Apple II Court found it dispositive that the unified search feature did not appear on an Apple consumer survey showing the five reasons why consumers buy Android phones rather than iPhones. Slip op. 11. But the accused devices include the infringing unified search feature precisely so that Samsung can attract iPhone customers (A84A85; A1558); this is not a distinction between the products and thus would never have appeared on the sole piece of evidence invoked by the Court to reverse the injunction in this case.

As applied in Apple II , the "causal nexus" standard will result in windfalls to infringers who may continue selling infringing products, capturing sales not only in the primary market but also in downstream and secondary markets. The infringer is unlikely to be held liable in damages for those latter stolen sales, and thus Apple II effectively allows it to obtain a compulsory license from the patentee at a discount price. See eBay, 547 U.S. at 395 (Roberts, C.J., concurring) (noting the "difficulty of protecting a right to exclude through monetary remedies that allow an infringer to use an invention against the patentee's wishes"). That is precisely what Samsung is doing: By continuing to sell the infringing device, Samsung is capturing customers in the primary market for smartphones, as well as in downstream markets such as tablets, and the harm it is thereby inflicting on Apple can

11

never be recouped through an award of damages--as the district court found.

The Court in Apple II expressed concern that a minor infringement could keep a product from consumers (slip op. 78), but this "ignore[s] the fundamental nature of patents as property rights granting the owner the right to exclude." Robert Bosch, 659 F.3d at 1149. The infringement of a patent is a trespass (Hoechst-Roussel Pharm., Inc. v. Lehman, 109 F.3d 756, 759 (Fed. Cir. 1997)), and therefore a "patentee's right to exclude is a fundamental tenet of patent law." Edwards Lifesciences, 2012 WL 5476839, at *7. Property owners have never been categorically denied injunctions against minor trespassing encroachments (see, e.g., Whitlock v. Hilander Foods, Inc., 720 N.E.2d 302, 307 (Ill. App. Ct. 1999)), because exclusionary remedies--not damages--are the "traditional property remedy." Momenta Pharm., Inc. v. Amphastar Pharm., Inc., 686 F.3d 1348, 136162 (Fed. Cir. 2012) (Rader, C.J., dissenting). Patentees are "entitled to the same rights and sanctions." Cont'l Paper Bag Co. v. E. Paper Bag Co., 210 U.S. 405, 425 (1908).

Apple II's reversal of the injunction broke with these decisions and created a fundamental conflict regarding the nature of patent rights. This Court's recent decision in Edwards Lifesciences confirms that "[a]bsent adverse equitable considerations," injunctive relief should protect against infringement of a valid patent. 2012 WL 5476839, at *7. And before Apple II , it was settled that "a patent provides a right to exclude infringing competitors, regardless of the proportion that the

12

infringing goods bear to a patentee's total business." Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1330 (Fed. Cir. 2008) (Lourie, J., concurring). By depriving Apple of its right to exclude, Apple II "devalue[s]" the patent-in-suit (id.) and ultimately diminishes the value of all U.S. patents by depleting available remedies.

Concerns over windfalls to patentees from injunctive relief apply primarily in the context of non-practicing entity ("troll") cases, not competitor-versus- competitor cases like this one. See eBay, 547 U.S. at 39697 (Kennedy, J., concurring). In any event, such concerns can be addressed more directly under the "balance of hardships" and "public interest" prongs of the preliminary injunction standard. See, e.g., Winter, 555 U.S. at 33. Here, however, Samsung did not even appeal from the district court's findings that Samsung did "not present any evidence of what hardship it will suffer," and that the balance of hardships and the public interest favored entry of an injunction. A97A98 (emphasis added).

Equity courts dealt with concerns regarding overbroad injunctions through their power to "mould each decree to the necessities of the particular case." Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982); see also Edwards Lifesciences, 2012 WL 5476839, at *8 (detailing "the variety of equitable considerations, and responsive equitable remedy in patent cases"). Here, Samsung could have removed the infringing Quick Search Box feature from its smartphones and then applied to the district court for a modification of the injunction. See, e.g., Cincinnati

13

Car Co. v. N.Y. Rapid Transit Corp., 37 F.2d 100, 10001 (2d Cir. 1930). Alternatively, if a whole-device injunction were viewed as too broad, Samsung could have been enjoined from including the infringing Quick Search Box in its smartphones, which would have incentivized Samsung (or Google) to develop a non-infringing alternative if one were available. Sees, e.g., i4i, 598 F.3d at 839.

Apple II did not consider such well-recognized equitable alternatives. Nor did it remand for the district court to exercise its discretion over such issues, even though "district courts are in the best position to fashion an injunction tailored to prevent or remedy infringement." TiVo Inc. v. Echostar Corp., 646 F.3d 869, 890 n.9 (Fed. Cir. 2011) (en banc); Edwards Lifesciences, 2012 WL 5476839, at *9.

In eBay, the Supreme Court disapproved "expansive principles suggesting that injunctive relief could not issue in a broad swath of cases," and rejected rules that categorically grant or deny injunctive relief in patent cases. 547 U.S. at 39394. Apple II runs counter to that instruction, and warrants rehearing en banc.

II. The Claim Construction Ruling Was Erroneous

This Court has long recognized that a patent claim using the phrase "comprising" is open-ended, allowing patentees to use this phrase to ensure that the claim includes additional, non-recited structures. See, e.g., Carl Zeiss Stiftung v. Renishaw PLC, 945 F.2d 1173, 1178 (Fed. Cir. 1991); SunTiger, Inc. v. Scientific Research Funding Grp., 189 F.3d 1327, 1336 (Fed. Cir. 1999). The decision here

14

incorrectly reaches the opposite result. Slip op. 1518.

Apple's asserted claim recites a structure "comprising ... a plurality" of heuristic modules, "wherein each heuristic module [has an attribute]." A9. Relying on ResQNet.com, Inc. v. Lansa, Inc., 346 F.3d 1374 (Fed. Cir. 2003), the district court correctly found that Samsung's accused device likely infringed because it included a plurality of heuristic modules having that attribute, even though it included other modules that did not. A12A14. The Court, however, read the claim term "each" as making the entire claim closed-ended, with the result that the patentee cannot choose which structures in the accused device meet the recited elements. Slip op. 1516. But that is precisely what the term "comprising" permits, meaning Apple can identify one "plurality" that meets the claims even if other "pluralities" in the accused device do not. SunTiger, 189 F.3d at 1336 ("If a claim reads merely on a part of an accused device, that is enough for infringement"). The Court's decision thus removes an important tool--the open-ended "comprising" claim--from claim drafters, and calls into doubt many issued claims that relied on settled precedents regarding the meaning of a "comprising" term.

CONCLUSION

The Court should hear the case en banc.

Respectfully submitted,

Date: November 26, 2012

/s/ Josh A. Krevitt
Josh A. Krevitt

15

Harold J. McElhinny
Michael A. Jacobs
Richard S.J. Hung
Brian R. Matsui
MORRISON & FOERSTER LLP
[address, phone]

Josh A. Krevitt
Principal Attorney
H. Mark Lyon
GIBSON, DUNN & CRUTCHER LLP
[address, phone]

Mark A. Perry
GIBSON, DUNN & CRUTCHER LLP
[address, phone]

Attorneys for Apple Inc.

[Ed: Addendum, the Federal Circuit's October 11, 2012 order in Apple II. See PDF.]


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