Appeal from the United States District Court for the Northern District of California in Case No. 11-CV-1846, Judge Lucy H. Koh.
The opinion of the court was delivered by: Bryson, Circuit Judge.
Before BRYSON, PROST, and O'MALLEY, Circuit Judges.
Opinion for the court filed by Circuit Judge BRYSON. Concurring in part and dissenting in part opinion filed by Circuit Judge O'MALLEY.
This is an appeal from the denial of a preliminary injunction. While the appeal presents substantial issues of law and fact, the decision whether to issue a preliminary injunction is one that is committed to the discretion of the district court, which makes the appellant's task in overturning that decision a difficult one. With respect to three of the four patents at issue in this appeal, we conclude that the appellant has not satisfied its burden of demonstrating an abuse of discretion, and we therefore affirm the denial of preliminary injunctive relief. With respect to the fourth patent, we conclude that the district court committed legal error in one important respect, so we vacate that portion of the court's order and remand for further proceedings in that part of the case.
Apple, Inc., is the owner of several design and utility patents pertaining to smartphones and tablet computers. U.S. Design Patent Nos. D593,087 ("the D'087 patent") and D618,677 ("the D'677 patent") are directed to designs that Apple contends are generally embodied in the iPhone, Apple's popular smartphone. Those patents issued on May 26, 2009, and June 29, 2010, respectively. Both patents claim a minimalist design for a rectangular smartphone consisting of a large rectangular display occupying most of the phone's front face. The corners of the phone are rounded. Aside from a rectangular speaker slot above the display and a circular button below the display claimed in several figures of the patent, the design contains no ornamentation. The D'087 patent claims a bezel surrounding the perimeter of the phone's front face and extending from the front of the phone partway down the phone's side. The parts of the side beyond the bezel, as well as the phone's back, are disclaimed, as indicated by the use of broken lines in the patent figures. The D'677 patent does not claim a bezel but instead shows a black, highly polished, reflective surface over the entire front face of the phone. The D'677 patent disclaims the sides and back of the device. Representative depictions of the designs claimed in the D'087 and D'677 patents are reproduced below:
(D'087 Patent, Fig.
Patent, Fig. 1)
Apple also owns U.S. Design Patent No. D504,889 ("the D'889 patent"), which is directed to the design of a tablet computer. The patent depicts a rectangular tablet with a polished reflective surface extending to the edge of the front side of the device. Within that surface, broken lines delineate a slightly smaller rectangular display area. The front face of the patented design has rounded corners, and a thin bezel surrounds the front surface along its perimeter. The front surface has no ornamenta- tion, buttons, speaker slots, holes, or raised surfaces. The back and sides of the design are also claimed; the figures depict a flat, unadorned back transitioning into the sides through a rounded-over edge. Apple claims that its iPad tablet computer embodies the design of the D'889 patent. A figure representing the claimed design shows the following:
Apple has also asserted U.S. Patent No. 7,469,381 ("the '381 patent"), a utility patent that claims a software feature known as the "bounce-back" feature, which is found on Apple's smartphones and tablets, such as the iPhone and the iPad. The bounce-back feature is activated when the user is scrolling through a document displayed on the device. If the user attempts to scroll past the end of the document, an area beyond the edge of the document is displayed to indicate that the user has reached the document's end. Once the user input ceases (i.e., when the user lifts up the finger that is used for scrolling), the previously visible part of the document "bounces back" into view. Claim 1 of the patent recites:
A computer-implemented method, comprising: at a device with a touch screen display: displaying a first portion of an electronic document;
detecting a movement of an object on or near the touch screen display;
in response to detecting the movement, translating the electronic document displayed on the touch screen display in a first direction to display a second portion of the electronic document, wherein the second portion is different from the first portion; in response to an edge of the electronic document being reached while translating the electronic document in the first direction while the object is still detected on or near the touch screen display: displaying an area beyond the edge of the document, and displaying a third portion of the electronic document, wherein the third portion is smaller than the first portion; and in response to detecting that the object is no longer on or near the touch screen display, translating the electronic document in a second direction until the area beyond the edge of the electronic document is no longer displayed to display a fourth portion of the electronic document, wherein the fourth portion is different from the first portion.
Apple filed suit against Samsung on April 15, 2011, alleging, inter alia, infringement of the D'677 and '381 patents. Two months later, Apple amended its complaint and asserted that Samsung was also infringing the D'087 and D'889 patents. Specifically, Apple claimed that two of Samsung's smartphones, the Galaxy S 4G and the Infuse 4G, which were released on February 23, 2011, and May 15, 2011, respectively, infringed the D'087 and the D'677 patents. Apple also alleged that Samsung's Galaxy Tab 10.1 tablet, which was released in June 2011, infringed the D'889 patent, and that all three devices infringed the '381 patent.*fn1 On July 1, 2011, Apple moved for a preliminary injunction to block the importation into and sale within the United States of the accused Samsung devices.
The district court denied Apple's motion with respect to each of the accused devices and all four asserted patents. Apple, Inc. v. Samsung Elecs. Co., No. 11-cv-1846 (N.D. Cal. Dec. 2, 2011). The court noted that four factors must be considered in addressing a motion for a preliminary injunction-whether the movant is likely to succeed on the merits; whether the movant is likely to suffer irreparable harm in the absence of an injunction; whether the balance of the equities favors the movant; and whether the public interest would be served by the grant of injunctive relief. As to the claims based on the D'087 and D'889 patents, the district court denied relief on the ground that Apple had failed to show a likelihood of success on the merits. As to the claims based on the D'677 and '381 patents, the court denied relief on the ground that Apple had failed to show that it would likely suffer irreparable harm from Samsung's continuing infringement while the case was pending before the district court.
The court first examined the D'087 patent and concluded that while the patented design did not cover functional features, substantial questions were raised about the patent's validity, and therefore Apple had failed to show that it was likely to succeed on the merits. The court held that the patented design claimed only the front face of the smartphone and that the front view was likely anticipated by Japanese Patent No. 1,241,638 ("the '638 patent"). The court found the D'087 design to be substantially similar to the '638 patent because it has "similar edges and rounded corners, a bezel, a similarly shaped speaker, and similar proportions of screen and border." The '638 patent, the court found, "discloses an overall simple, minimalist design." The court rejected Apple's argument that the arched profile of the front of the '638 design differed from the flat profile of the D'087 patent; in light of the fact that the sides and back of the phone were disclaimed in the D'087 patent, the court held that it was improper to consider anything other than the front views of the two designs. Given its finding that Apple failed to establish the first factor needed for a preliminary injunction, the court did not reach the other three preliminary injunction factors for the D'087 patent.
The court then addressed the D'677 patent. The court again looked to the '638 patent as a primary reference but concluded that the '638 design was sufficiently different from the D'677 patent that it would not have been obvious to a designer to adopt a "flat, black, translucent front screen." The court therefore concluded that Samsung had not raised a substantial question regarding the validity of the D'677 patent. As to infringement, the court found that both the Galaxy S 4G and the Infuse 4G phones had an overall design that an ordinary observer would likely find substantially the same as the claimed D'677 design and that those phones were likely to infringe.
Despite those findings, the district court denied Apple's request for a preliminary injunction based on its conclusion that Apple had failed to show that it was likely to suffer irreparable harm from the importation and sale of Samsung's infringing smartphones while the case was pending in the district court. Apple made two arguments in support of its claim of irreparable harm. First, it argued that Samsung's sales eroded Apple's design and brand distinctiveness, resulting in a loss of goodwill. Second, it argued that Samsung's sales took sales away from Apple and resulted in Apple's losing market share. Apple argued that those losses would be difficult to quantify and that monetary damages thus would not be adequate to compensate it for the injuries caused by Samsung's infringement. The district court rejected both contentions.
The court was unpersuaded by Apple's first argument because "Apple has not articulated a theory as to how erosion of 'design distinctiveness' leads to irreparable harm in this case." The court also rejected Apple's related assertion that Samsung's sales of infringing phones diluted Apple's brand value, because "even assuming that brand dilution could arise from design patent infringement, Apple has not met its burden to provide evidence that such brand dilution is likely to occur in this case." The court held that "[w]ithout more evidence . . . Apple has not demonstrated that brand dilution is likely to occur."
With respect to the claim of market share loss, the court noted that
Apple and Samsung were directly competing "for new consumers [who] are
looking to make first-time smartphone purchases [and] thus the
potential for harm from infringing conduct is strong." The court added
that the initial decision regarding which product to buy can have
long-term effects on items such as downstream purchases.*fn2
The court also observed that there may be "network
compatibility" effects that stem from a particular purchasing
decision: a purchaser of one phone system may be reluctant to switch
to a competing phone for fear of incompatibility with previous digital
purchases. The court concluded that the economic effect of such losses
of customers and future downstream purchases would be difficult to
calculate and could support a finding of irreparable harm.
The district court nonetheless declined to issue an injunction with respect to the D'677 patent because it concluded that Apple had failed to establish a "nexus between Apple's harm of lost customers and loss in market share and Samsung's allegedly infringing conduct." The court found that despite Apple's evidence that "product design generally is at least one factor, and for some people may be the primary factor, influencing a person's decision to purchase a smartphone," other evidence indi- cated that the "driver in consumer demand may be the novelty of the product, and not necessarily the design," and that "smartphone buyers are motivated to purchase products for a whole host of reasons." That evidence included exhibits showing that only a small percentage of all smartphone purchasers bought the device because of its design. The court concluded that the evidence was "even more ambiguous in light of the fact that Apple's patents do not claim the entire article of manufacture." The court concluded that the absence of a nexus between the claimed design and the loss of market share, coupled with Apple's delay in seeking an injunction, undercut Apple's claim of irreparable harm.
With respect to delay, the district court found that Apple's failure to seek an injunction sooner and its failure to seek to enjoin two other allegedly infringing phones undercut Apple's claim of urgency and favored Samsung in the irreparable harm calculus. The court noted that Apple had alleged in its complaint that Samsung had been copying its designs and trade dress since 2007; the court found that Apple's failure to file suit until April 2011 and to seek an injunction until July 2011 undermined its claim of irreparable harm. The court rejected Apple's argument that its delay should be excused on the ground that the parties were engaged in negotiations, because the negotiations only covered part of the period of delay. In light of the delay and the lack of nexus between the infringement and the loss of market share, the court concluded that "Apple has not met its burden of establishing that Samsung's allegedly infringing products will likely cause Apple irreparable harm."
The court held that the balance of hardships favored Samsung. The court found that in light of the presence of other smartphone manufacturers in the market, it was unclear that an injunction against Samsung's devices would significantly benefit Apple, even though it would substantially injure Samsung. Finally, the court found the public interest factor to be neutral. Based on its four-factor analysis, the court refused to enjoin sales of the Galaxy S 4G and Infuse 4G smartphones.
The court conducted a similar irreparable harm analysis for the D'889 patent and the Samsung Galaxy Tab 10.1 tablet. With respect to the tablet patent and product, however, the court found that Apple had shown a likelihood of irreparable harm. The court reached that conclusion for several reasons. First, the tablet market appeared to be dominated by only two manufacturers, Apple and Samsung, who together controlled a substantial share of the market. The evidence suggested that Apple's market share decreased in accordance with the increase in Samsung's market share after the introduction of the Galaxy Tab. Second, the court concluded that design mattered more to consumers in tablets than in smartphones. Finally, the court found that delay was not an issue in the case of the request for preliminary relief against Samsung's tablet.
The court nonetheless concluded that a preliminary injunction should be denied because there were substantial questions about the validity of the D'889 patent, and therefore Apple was unable to show that it would likely succeed on the merits. Although the court found that the design claimed by the D'889 patents was not dictated by functionality, it concluded that Samsung had raised a substantial question about whether the patented design would have been obvious in light of a combination of several prior art references.
At the outset of its obviousness analysis, the court characterized the visual impression of the patented design as a "broad, simple design that gives the overall visual impression of a rectangular shape with four evenly rounded corners, a flat glass-like surface without any ornamentation[,] a rim surrounding the front surface, . . .
[a] flat [back] panel that rounds up near the edges[, and an] overall design [that] creates a thin form factor." According to the court, the design created basically the same visual impression as a prototype tablet developed in 1994 by Roger Fidler. Although the Fidler tablet lacked a "flat glass-like surface," the court found that difference not to "detract from the fact that the 'overall visual impression' created by the D'889 patent is the same as the 1994 Fidler tablet." Accordingly, the court used Fidler as a primary reference in its obviousness analysis. For the flat glass screen, the court turned to the 2002 Hewlett-Packard Compaq Tablet TC1000, which "contains a flat glass screen that covers the top surface of the tablet and a thin rim that surrounds the front face of the device."
The court found that the combination of Fidler and the TC1000 would likely render the D'889 patent obvious. The court rejected Apple's secondary consideration evidence, including evidence of industry skepticism and the unexpected commercial success of the iPad, because the court found the evidence of skepticism to be inconclusive and the evidence of commercial success not to show "the requisite nexus between the patented design and the success of the iPad." Accordingly, the court concluded that Apple's secondary consideration evidence failed to overcome the substantial questions of invalidity and that Apple had not established that it is "likely to succeed at trial against Samsung's challenge to the validity of the D'889 patent."
With respect to the issue of infringement, the court found that the design of the Galaxy Tab 10.1 would appear substantially the same as the D'889 patent in the eyes of an ordinary observer. Nonetheless, the court concluded that "because Samsung has raised a substantial question regarding the validity of the D'889 patent, Apple has not met its overall burden of establishing a likelihood of success on the merits." The court thus denied Apple's request for injunctive relief with respect to the D'889 patent.
The court next turned to the '381 patent. Samsung claimed that the patent was anticipated by two prior art references, International Publication No. WO 03/081458 ("the Lira reference") and the LaunchTile and XNAV computer programs. The court found that Apple's patent was not anticipated by those references because in those devices the "bounce-back" feature was activated for only some user inputs, and it served principally as an alignment control technique to align the display window following user input. The court explained that the Lira reference did one of two things in response to a user's scrolling past the document's edge: "if the user has scrolled less than the threshold amount past the edge, the screen will snap back to the original column, but . . . if the user has scrolled past this threshold amount, the screen will either stay put or snap to the next column, depending on the settings used." The court found that functionality to differ from the functionality claimed in the '381 patent, which ...