July 5, 2012
Two recently-decided cases brought by Apple illustrate the necessity of identifying real harm to one’s business before filing a lawsuit in federal court. The court dismissed the first, Apple v Motorola, because Apple was unable to show that it had been damaged by the alleged patent infringement. In contrast, Apple achieved a tremendous victory in Apple v. Samsung. The court granted a preliminary injunction prohibiting Samsung from selling its new Galaxy Nexus smartphone, because Apple was able to demonstrate that it was likely to suffer irreparable harm if Samsung was permitted to continue to infringe Apple’s patents.
Apple v. Motorola illustrates the types of claims a business should not pursue. At the end of that case, Apple was left with claims that Motorola had employed two features subject to its patents, the value of which Apple could not quantify. At bottom, the court’s reaction was “stop wasting everyone's time.” Finding that Apple would not be able to prove any money damages, and could not prove entitlement to an injunction, the court dismissed the case. The court gave the back of its hand to Apple’s claims that the court should issue a declaration that Motorola had infringed or award symbolic “nominative” damages. The court wrote: “You can’t go into federal court and say you had a contract with X and X broke it and you’re really annoyed even though you sustained no injury of any sort (in fact you made money because you re-contracted at a higher price) so please give me a judgment for $1 that I can pin on my wall.”
Apple v. Samsung, on the other hand, illustrates precisely the type of case a business should pursue. In that case Apple was able to show that, unless the court issued a preliminary injunction, Apple would be likely to lose not only phone sales, but immeasurable additional sales when purchasers of the Galaxy Nexus followed that purchase with purchases of other Android products and applications rather than the Apple products and applications they would be likely to purchase if they first purchased an iPhone. The size of the victory for Apple is reflected in the size of the bond the court required Apple to post: $95 million, the amount of profit Samsung asserted it would lose if it could not sell the Galaxy Nexus. It seems intuitive that Apple is correct that the smart phone is a “gateway” device that leads one to purchase additional products that use the same operating system as the phone. Therefore posting the $95 million bond (which is unlikely to be posted in cash, and which will be returned to Apple unless Samsung succeeds in overturning the injunction on appeal or otherwise proving that the court was wrong to grant the injunction) to knock out the Galaxy Nexus seems like it will be good business for Apple.
The take away for businesses should be that there is little utility in starting lawsuits out of spite. Although you may cause your adversary to incur legal fees and suffer disruption caused by litigation, you are bound to incur costs like that of your own, and to lose momentum when the strong action you trumpeted at the outset of the case turns into fodder for your adversary at the end. On the other hand, Apple v. Samsung teaches that despite the incessant protests of those who would curtail the protection given to IP owners, those who do suffer actual harm can still obtain not mere vindication, but effective relief in federal court.