Wednesday, May 15, 2013

Apple, Samsung, and the Standard for Granting Preliminary Injunctions: Comparing the U.S. and Australia



The multicountry patent infringement litigation between Apple and Samsung has resulted in some subtle--or perhaps not-so-subtle--modifications to the standard for granting preliminary (a/k/a interlocutory) injunctions in both the U.S. and Australia.  

My book (p.106 n.127) very briefly sketches out the alteration in U.S. law, which occurred shortly before the book went to press.  To flesh it out just a little more, under U.S. law a court considering whether to grant a preliminary injunction in a patent infringement case must determine whether the plaintiff has shown “[1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.”  Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1375-76 (Fed. Cir. 2009) (quoting Winter v. Nat. Res. Def. Council, Inc., 129 S. Ct. 365, 374 (2008)).  Last year, however, in interlocutory appeals arising out of the two Apple v. Samsung cases before Judge Koh, the Federal Circuit held that a party seeking a preliminary injunction must show, as part of the irreparable harm requirement, a causal nexus between the alleged infringement and the alleged harm.  See Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1324-25 (Fed. Cir. 2012) (holding that “the district court was correct to require a showing of some causal nexus between Samsung's infringement and the alleged harm to Apple as part of the showing of irreparable harm. 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”; moreover, “[a] mere showing that Apple might lose some insubstantial market share as a result of Samsung's infringement is not enough. As the Supreme Court has pointed out, a party seeking injunctive relief must make ‘a clear showing’ that it is at risk of irreparable harm, which entails showing ‘a likelihood of substantial and immediate irreparable injury’”) (citations omitted); Apple, Inc. v. Samsung Elecs. Co., 695 F.3d 1370, 1375 (Fed. Cir. 2012) (reversing, for lack of a sufficient nexus, the grant of a preliminary injunction directed against the Galaxy Nexus, no pun intended).  If this standard continues to govern, it would seem to make it rather difficult for the owner of a patent that reads on a relatively minor component of a complex end product to obtain a preliminary injunction.

Within the Commonwealth, the courts have sometimes cited with approval American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396, a decision of the British House of Lords, in which Lord Diplock asserted that the party moving for a preliminary injunction is not required to prove a probability of success or prima facie case, but rather only that “the claim is not frivolous or vexatious, in other words, that there is a serious question to be tried.”  If the movant succeeds with regard to this issue, the court then weighs the balance of conveniences, considering both whether the moving party “would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of the application and the time of the trial.”  As discussed in my book (pp. 177-78), however, Lord Diplock’s analysis has its critics, and the Cyanamid analysis has not been applied in an overly literal sense within Australia or other members of the Commonwealth.  In any event, the Full Court of the Federal Court of Australia in Samsung Electronics Co. v. Apple Inc. [2011] FCAFC 156, has now clarified that the correct analysis for determining whether to grant a preliminary injunction consists of two aspects:  first whether the plaintiff has made out a prima facie case; and second, whether the balance of conveniences favors entry of the injunction.  This second element encompasses the inquiry into irreparable harm and adequacy of the remedy at law, as well as the public interest:

63 The interaction between the Court's assessment of the likely harm to the plaintiff, if no injunction is granted, and its assessment of the adequacy of damages as a remedy, will always be an important factor in the Court's determination of where the balance of convenience and justice lies. To elevate these matters into a separate and antecedent inquiry as part of a requirement in every case that the plaintiff establish “irreparable injury” is, in our judgment, to adopt too rigid an approach. These matters are best left to be considered as part of the Court's assessment of the balance of convenience and justice even though they will inevitably fall to be considered in most cases and will almost always be important considerations to be taken into account. . . .

66  In exercising that discretion, the Court is required to assess and compare the prejudice and hardship likely to be suffered by the defendant, third persons and the public generally if an injunction is granted, with that which is likely to be suffered by the plaintiff if no injunction is granted. In determining this question, the Court must make an assessment of the likelihood that the final relief (if granted) will adequately compensate the plaintiff for the continuing breaches which will have occurred between the date of the interlocutory hearing and the date when final relief might be expected to be granted. . . .

68 It may also be necessary to consider and evaluate the impact that the grant or refusal of an injunction will have or is likely to have on third persons and the public generally.

For a good discussion of recent Australian case law on interlocutory injunctions (and other issues), see King & Wood Mallesons commentaries on leading cases for 2012 and 2011.   Relevant case law for 2013 includes the Full Court’s opinion in Generic Health Pty Ltd v. Otsuka Pharmaceutical Co., [2013] FCAFC 17, and Justice Foster’s opinion in Embertec Pty Ltd v. Energy Efficient Technologies Pty Ltd, [2013] FCA 2.

Purely as a theoretical matter, I think it is very difficult to make any definitive statements about how often courts should issue preliminary injunctions.  Judge Posner once tried to reduce the relevant considerations to a formula, under which a court should grant a preliminary injunction if P x HP > (1 – P) x HD, where P is the plaintiff’s probability of success on the merits, HP the harm the plaintiff will suffer if the injunction is not granted, and HD the harm the defendant (and third parties) will suffer if the injunction is granted.  See Am. Hosp. Supply Corp. v. Hosp. Prods., 780 F.2d 589, 593–94 (7th Cir. 1986); cf. Douglas Lichtman, Uncertainty and the Standard for Preliminary Relief, 70 U. Chi. L. Rev. 197 (2003).  The Australian court’s analysis seems, to me, consistent with Judge Posner’s framework, insofar as it recognizes the interdependence of the relevant factors. 

2 comments:

  1. Though I have not yet read it, apparently in his latest updates to his excellent and highly respected looseleaf treatise on Injunctions and Specific Performance (in Canada), Justice Robert Sharpe of the Ontario Court of Appeal sharply criticizes Cyanamid’s reluctance to look at the merits. You can add this to the list of critics.

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  2. Thanks! I will ask our library to track down a copy for me.

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