U.S. judge awards Apple undisclosed royalties if Samsung infringes certain patents in the future

[Update] Just after this post went live, Samsung filed a notice of appeal. Apple will do so pretty soon, too. [/Update]

Since Apple and Samsung agreed in August to drop all patent infringement actions against each other outside the U.S., there has been a much lower frequency of Apple v. Samsung news. It's now just about limited amounts of money (relative to the size of the companies involved) and whether or not Apple will get a face-saving exit from what was once intended to be a "thermonculear war" on Android.

Next week there will be an interesting appellate hearing. On December 4, the Federal Circuit will hear the parties' argument in Samsung's appeal (Apple dropped its cross-appeal in July) of the final judgment in the first Samsung case. With support from 27 U.S. law professors, Samsung is trying to get the $929 million damages amount in that first case reduced. The single biggest issue is the disgorgement of infringer's profits that U.S. patent law allows with respect to design patents.

In mid-December Samsung will respond to Apple's appeal of the denial of a sales ban in the second California litigation between these parties. Apple appealed that denial even before the final judgment in that case. It also tried, unsuccessfully, to speed up proceedings by asking the Federal Circuit to reconsider an order that granted Samsung a (customary) extension to respond. And it could now happen that the Federal Circuit will hear Apple's appeal of the injunction denial together with the parties' upcoming (we can set our watches by them) cross-appeal of the final judgment on the merits in the same case. That final judgment came down late on Tuesday by California time. It would make sense for the appeals court to discuss and adjudge the underlying liability issues and Apple's request for an extraordinary remedy at the same time.

In order to bring their appeals on the merits, Apple and Samsung had to wait for a formal final judgment in that second California case. Post-trial clean-up following the $119 million verdict (a disappointment for Apple, which demanded about 20 times as much) was already complete in September when Judge Koh denied Apple's request for a retrial and declined to overrule the jury in any significant way in either party's favor. Relatively speaking, the finding that Samsung did not willfully infringe Apple's slide-to-unlock patent (even the jury had not found any willful infringement of any other patent claim-in-suit) was the most important post-trial decision. But the final judgment couldn't come down without firstly adjudicating Apple's request for ongoing (postjudgment) royalties, filed shortly after the denial of injunctive relief.

Postjudgment royalties only come into play if products sold in the future are actually found to infringe a patent on which a party prevailed. While Judge Koh has awarded Apple some undisclosed per-patent per-product figures on Samsung products that might infringe any or all of the three patents on which Apple prevailed at trial (but pending appeal), the court has not determined that Apple is actually entitled to royalties on Samsung's future U.S. sales--just potentially. And Samsung disputes that there is any continuing infringement, as the following passage from the order on Apple's ongoing-royalties motion recaps:

"Samsung claims that there is no need for continuing remedies because it no longer infringes any of the '172, '721, and '647 Patents. [...] According to Samsung, '[n]o Samsung product released since 2012 has even been accused of infringing the '172 or '721 patents,' and 'Samsung long ago designed around these patents.' [...] As to the '647 Patent, Samsung represents that 'post-verdict sales of the accused products in this case have already ended,' and that the only version of the Galaxy S III product on sale 'incorporate[s] different code' than the relevant infringing source code."

Judge Koh agreed with Apple that it had not waived its right to obtain postjudgment royalties. She found that all patent holders who fail to win an injunction (but generally seek royalties in a given case) are entitled to ongoing royalties. As for the amounts, while those are redacted out in the public version of the order, it appears that she agreed with Apple to a large extent, but that's speculative. And she granted Apple's request (though some courts have denied such requests) for ongoing royalties relating not only to the (rather old) products presented at the trial earlier this year but also to future products that are "no more than colorably different" from the adjudged ones. But it doesn't matter if Samsung is right that it no longer infringes anyway.

If Apple indeed believes that there is any ongoing infringement, then the question of whether there was any postjudgment infringement will have to be decided by the court. Apple would have to prove not only that there was a postjudgment infringement but also that such infringement was of the same kind as an infringement previously identified by the jury. Otherwise a new decision on the merits would be needed, which would require a whole new lawsuit and another trial.

Should Apple bring any such claims, then we may find out at that time what per-product amounts Judge Koh awarded and decided to hide from the public. Those numbers will likely come to light during the appellate proceedings anyway.

Here's the order, which issued even without a hearing because Judge Koh wanted to close this case (for now) and maybe also wanted to make it possible for the Federal Circuit to consolidate the different appeals (injunction denial and liability issues) from this case:

14-11-25 Order Granting in Part Apple's Motion for Ongoing Royalties by Florian Mueller

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Apple fighting Samsung in two U.S. courts in parallel in quest of prospective patent remedies

The low percentage of smartphone patent infringement assertions that ultimately prove meritorious is an industry-wide problem as my recent analysis of 222 assertions brought by Apple, Microsoft, Motorola, Nokia and Samsung in the U.S., Germany and the UK showed. Apple has an additional problem more so than anyone else: even in cases in which it has, so far, established liability, it has repeatedly been denied injunctive relief. This also happened to Samsung when the Obama Administration vetoed an ITC import ban, but only in that one U.S. case (and over standard-essential patents in a couple of other countries).

Samsung's lead counsel in the recent trial, John Quinn, added insult to injury from Apple's perspective when he said that this patent enforcement effort against Android had become "Apple's Vietnam" and highlighted Apple's failure to win a sales ban. Later, Apple finally gave up its pursuit of a sales ban in the first California case and dropped a cross-appeal. A few months after the trial in the second case, history repeated itself and, in late August, Judge Koh decided that this year's trial win didn't entitle Apple to injunctive relief for failure to establish irreparable harm caused by any infringements identified.

Almost three years and a half after it first sued Samsung, and a couple of months after agreeing on a withdrawal of all pending Samsung actions outside the U.S., Apple is still acting, with respect to U.S. patent remedies, like there's no tomorrow. It's pursuing a postjudgment royalties motion in district court, theoretically seeking $6.46 per device infringing three patents, while also pursuing an appeal to the Federal Circuit of the late-August injunction denial.

I regret to say so, but the way Apple is now pushing for mutually exclusive remedies -- you get a sales ban or you get ongoing royalties, but you'll never get both at the same time -- in two U.S. courts (the Federal Circuit Judge Koh's district court) in parallel comes across as desperate. I can't help but suspect that Apple feels utterly insecure about the non-final liability win from the spring trial. The logical thing to do now would be to get a final judgment in California, have the appeals court in Washington D.C. look at it, and seek a reversal of the injunction denial on that basis; alternatively, ongoing royalties could still be sought thereafter. At least there would be clarity about liability. The patents underlying Apple's trial win have some serious validity issues, and one can also disagree on some of the infringement theories. Apple is now trying to get as much leverage out of a less than solid trial win at the very earliest opportunity, which looks desperate.

It's always been a problem (not only for Apple but also for some other litigants, such as Microsoft and Oracle) that the courts don't move as fast as the mobile devices market does. Various tactics have been tried to accelerate the process. Preliminary injunction requests have turned out to be long shots (whatever Apple won got overturned) in the U.S. and in Germany. The ITC has a forceful remedy and is usually faster than district courts but is more difficult to persuade on the liability side than layperson juries (and remands have slowed down some of the cases considerably). But it's not just that the legal process is slow. The root cause of Apple's patent remedies problem is that it patents, to the extent they turn out valid and infringed at all, cover too small parts of the overall feature set of today's smartphones and tablet computers to give it huge leverage.

For as much as I understand Apple's frustration, I just doubt that judges will consider it a wise allocation of court and party resources to seek rulings on two mutually exclusive remedy requests in parallel when neither kind of decision should be made at this stage of the proceedings, i.e., where there is reasonable doubt that the district court's liability findings in Apple's favor will all stand.

In recent days there have been some more filings related to Apple's parallel pursuit of mutually exclusive remedies. Last week, Apple filed the opening brief in its Federal Circuit appeal of the injunction denial, and it did so five weeks (!) ahead of the filing deadline (this post continues below the document):

14-10-03 Apple's opening brief in injunction-related appeal.pdf by Florian Mueller

Maybe Mr. Quinn's "Vietnam" comment created an even greater sense of urgency on Apple's (and its lawyers') part to win a U.S. sales ban. There's a long list of lawyers on that brief and I'm sure they were able to do great work even under massive time constraints. Theoretically, the entitlement to injunctive relief can be clarified before the liability-related appeal, but this approach almost puts the cart before the horse.

Apple is now obviously trying hard to argue that everything's different from the cases in which it was previously denied injunctive relief. It basically says its patent claims are stronger than in the past, its evidence of a causal nexus between alleged infringements and alleged irreparable harm was better, and it places more emphasis than ever on the availability of workarounds -- an aspect that I felt Apple didn't stress enough in at least one previous injunction appeal. But the truth is that Apple picked relatively narrow claims for this year's trial (so narrow that its current products don't even implement all of the asserted claims), and that structurally Apple's "causal nexus" evidence faces the same issues as before.

With most major tech companies having to defend themselves against patent assertions many times (including Apple itself), it's admittedly not easy for Apple to garner support from similar companies for a pro-injunction initiative. Companies that increasingly rely on patent monetization (rather than building real products) are Apple's best shot. Nokia is such an example. Another one of those types of companies is Ericsson, which was just granted an extension to file an amicus curiae brief. Officially, Ericsson will support "neither party," but make no mistake, it will support Apple's strategic interests here, either entirely or almost entirely.

Meanwhile, Samsung asks Judge Koh for permission to file a sur-reply to Apple's reply in support of its postjudgment royalties motion. Samsung says Apple raised new issues in its reply that it needs to respond to (this post continues below the document):

14-10-06 Samsung's proposed sur-reply re. ongoing royalties.pdf by Florian Mueller

It will be very interesting to see how Judge Koh deals with Apple's postjudgment royalties motion. One of Samsung's arguments is that Apple isn't entitled to postjudgment royalties anymore because Judge Koh limited the number of post-trial motions and Apple would have had to requests this remedy before (rather than just seek damages, which relate to past infringement). An outright denial would be really bad for Apple. Of all the possibilities the one that seems relatively most likely is that the postjudgment royalties matter will be stayed pending an appeal of a final ruling on the merits.

A possible explanation for Apple's try-everything-at-once approach could be that Apple and Samsung may be in final settlement negotiations to put the U.S. part of the dispute to rest as well, and Apple may just want to build as much pressure as it can at this stage, given that its position isn't too strong anyway. But this isn't necessarily what this is about. It could also be that no settlement will happen until all appeals have been exhausted. In that case, things would take so long that the five weeks Apple saved by filing its opening brief way ahead of schedule wouldn't make much of a difference in the greater scheme of things.

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Apple asks court to order Samsung to pay $6.46 per unit if it infringes 3 patents going forward

It's been a week since Judge Lucy Koh denied Apple's motion for a permanent U.S. sales ban against Samsung devices infringing the three patents on which Apple prevailed at the spring trial in their second California case, and Apple has meanwhile taken two steps in response to that decision. The U.S. is the only jurisdiction in which Apple still hopes to obtain at least a little bit of leverage over Samsung after dropping all ex-U.S. patent suits in an orderly retreat because Steve Jobs's vision of a thermonuclear war on Android didn't materialize.

First, it almost immediately appealed Judge Koh's decision to the Federal Circuit. Everyone knows about the fast-paced nature of the smartphone market, but Apple's decision to bring a separate appeal of the injunction denial instead of waiting for Judge Koh's final judgment is not going to please any judge -- neither Judge Koh nor the circuit judges. It would obviously be more efficient to hear an appeal involving all issues, liability and both kinds (monetary and injunctive) of remedies. Also, any reversal on the liability side would narrow the issues to be dealt with on the remedies side, and the liability-related outcome of the jury trial is far from rock-solid. For example, the United States Patent and Trademark Office (USPTO) has meanwhile rejected one of the asserted patent claims. But bringing an immediate, separate appeal of an injunction denial saved Apple time in the first Samsung case because a final judgment didn't come down until more than 14 months after Apple's injunction-denial appeal because a limited damages retrial was needed.

If Judge Koh hands down a final judgment in the second California case soon, all of the related appellate proceedings will almost certainly be merged. This time around, Apple wants a retrial. I understand its disappointment with this year's jury verdict, but I doubt that it's going to get one.

I'm also skeptical, as I previously explained on Twitter (1, 2, 3, 4, 5), concerning Apple's chances to get the denial reversed on appeal. While it helps Apple that Judge Koh sided with it on the public interest factor, the fundamental problem is that the related features don't really drive demand for these kinds of devices (even more so since Apple asserted rather narrow claims, some of which its own current products don't even practice). Any attempt to show a "causal nexus" between the infringements identified and irreparable harm to Apple will have to distort reality in order to arrive at the results Apple wants. It's much harder to lure courts than consumers into a reality distortion field. Basically, Judge Koh's denial of an injunction in the second California case was just consistent with the standard she applied in the first one. Apple's evidence was structurally the same, for the most part. They had one or two additional elements, but those didn't seem to remedy the shortcomings of the evidence in the first case.

Apple somewhat surprisingly dropped its recent cross-appeal of the final judgment in the first case, thereby accepting as the definitive outcome that the three software patents at issue in that case don't entitle it to the injunction it had been seeking for almost three years. While this could have different tactical reasons, it definitely doesn't exude confidence in the quality of Apple's evidence concerning irreparable harm in the first case -- but it seems that the evidence in the second case isn't structurally hands-down superior over the one in the first case.

Now on to the second response by Apple to the injunction denial. Late on Wednesday, Apple brought a motion for ongoing royalties, also called postjudgment royalties. This is the standard remedy at law that is available to patent holders if they can't prevent future infringement by means of an injunction.

Apple's motion for postjudgment royalties makes clear that the fight for an injunction is far from over ("Apple believes that it has been and continues to be irreparably harmed by Samsung's infringement and that only injunctive relief would suffice to remedy that harm — and Apple will urge that position before the Federal Circuit"). But if Apple (regardless of how likely it is or not) finally obtained an injunction, there would be no more need for the court to set postjudgment royalties. Therefore, Judge Koh may be quite inclined to postpone any decision on this motion until after the Federal Circuit appeal (which could also narrow the scope of any postjudgment royalties decision due to reversals of liability findings).

In December 2012, after Judge Koh first denied Apple an injunction in the first case (where it denied one again after an appeal), I already raised the issue of postjudgment royalties. Interestingly, Apple still hasn't brought such a motion in the first case. I guess that's because Samsung hasn't implemented the rubberbanding patent in years, the tap-to-zoom-and-navigate patent is way too narrow to be of any use (Samsung worked around it a long time ago and has no reason to infringe), and the '915 pinch-to-zoom API patent faces serious validity issues (plus, Samsung claims to have worked around that one, too). But what about the patents at issue now?

Apple wants "at least" $2.75 per product infringing the '647 "data tapping" ("quick links") patent, $2.30 for the '172 autocomplete patent, and $1.41 for the '721 slide-to-unlock patent. That would be a hypothetical total of "at least" $6.46 per unit. Let's look at it on a patent-by-patent basis.

The '172 autocomplete patent is the one the USPTO now considers invalid (the asserted claim is among the ones it recently rejected). The jury didn't hold it invalid, but juries rarely do. In any event, it can be worked around.

The '721 slide-to-unlock patent is weak in all respects. Maybe Judge Koh will be the first judge in the world of eleven judges to look at it (ten in Europe and now Judge Koh) to conclude that Apple deserves a patent on its slide-to-unlock image (even though slide-to-unlock per se had been invented before). But even Apple doesn't believe that Samsung's (relatively speaking) more recent products infringe that patent. Apple didn't even assert it against devices like the Note 2 (which is not exactly new; yesterday Samsung announced and demonstrated the Note 4 at the IFA trade show in Berlin).

The '647 "quick links" patent is the most interesting one of the three, at least in terms of the legal issues that a claim of continued infringement (in which case Samsung would likely disagree and the court would have to decide on whether Apple is indeed entitled to royalties) could raise. The way I see it, Samsung is in the clear if, together with Google, it copies certain Android code into the apps that use it. The Federal Circuit adopted Judge Posner's claim construction of this patent in Apple v. Motorola. In May, Apple and Google/Motorola dropped all of their pending cases against each other including the "Posner case", but it's hard to see how Apple would, even though it would be formally possible, persuade any court in the U.S. of a different claim construction. The Federal Circuit didn't explicitly comment on Judge Posner's workaround theory, but to me that one is an inevitable and logical conclusion from his claim construction, so it was implicitly endorsed by the appeals court.

If Apple had gotten its way at the spring trial in terms of the damages it claimed, it would now be demanding a far higher per-unit royalty for future infringement. Still, the amounts seem too high considering the huge number of patents in a smartphone or tablet.

Finally, here's Apple's motion:

14-09-03 Apple Motion for Ongoing Patent Royalties From Samsung by Florian Mueller

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