Preliminary skirmish concludes in Apple versus Samsung down under

The opening gambit in the Australian arm of the global dispute between Apple and Samsung finally drew to a close on 9th December 2011, when the High Court of Australia refused Apple's request for special leave to appeal from a decision of the Full Bench of the Federal Court denying a preliminary injunction against the launch of the Galaxy Tab 10.1.

In a temporary win for Apple, an injunction had originally been granted by a single judge of the Federal Court, pending a full trial in relation to Apple’s claims of patent infringement.

Samsung’s tablet is now on sale in Australia, just in time for Christmas, and four months after the originally planned launch in mid-August 2011.

At present, no date is set down for the main infringement case to be heard. However, Samsung has a countersuit pending against Apple's iPhone 4S, and other 3G devices, which is scheduled to be heard during March and April 2012.

Original decision to grant an injunction
The tussle over whether a preliminary injunction was appropriate in this case is an important one for rights holders and accused infringers in Australia. The grant of interim relief, pending a full trial, is a contentious issue. On the one hand, patent cases can take a long time to resolve, during which period the sale of allegedly infringing products may be very damaging to the patentee. On the other hand, patent cases are generally very complex and evidence intensive, making it notoriously difficult for a court to guess at the likely outcome at a preliminary stage, without the benefit of all relevant facts and information.

A problem widely perceived with the initial decision in this case was that it set a low threshold for grant of a preliminary injunction. The trial judge was willing to accept that Apple had put forward a plausible argument that it could succeed in the final proceedings, and that this was sufficient to overcome the threshold issue, even though Samsung had put forward an at least equally plausible non-infringement argument of its own.

Having crossed the threshold, the trial judge went on to consider the "balance of convenience", which involves weighing up the relative impact of an interim injunction on each party. In doing so, the judge found that the considerations were almost evenly balanced. Significantly, it was accepted by the court, as well as by both Apple and Samsung, that it would be difficult to compensate either party adequately by an award of damages, due to the distinct "ecosystems" in which the Apple and Samsung devices operate. In particular, the loss to Apple by the sale of an Android-based Samsung device is not limited to the potential loss of an iPad sale. There are ongoing losses of business through Apple’s iTunes and Apps Stores, as well as the likelihood that the Samsung customer will become an "Android person" (as one of Apple’s lawyers put it in the original hearing), and therefore continue to prefer Android devices over Apple devices in the longer term. The same, of course, applies to a significant degree in reverse, although Samsung is not the sole supplier of Android-based devices and content.

According to the trial judge, two factors in particular appeared to tip the balance slightly in Apple’s favour. First, Apple had apparently shown a greater willingness to proceed with an early trial than Samsung. The judge considered this important because it was accepted by both sides that the lifecycle of the Galaxy Tab would be relatively short, such that a preliminary injunction might well amount to final relief in the sense that it would effectively ensure that the product was never launched, even if Samsung were ultimately to prevail.

Second, Apple relied on two patents in its preliminary case, each of which might independently be infringed by Samsung, which the judge saw as increasing Apple’s prospects of success overall.

Preliminary injunctions: the correct principles
On appeal, a full bench of three judges of the Federal Court unanimously overturned the initial decision. The court found, in particular, that the primary judge had been wrong to consider the threshold test in isolation from the balance of convenience considerations.

As the High Court put it, in denying Apple’s subsequent application for leave to appeal to the ultimate authority:

"the governing consideration is that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted by the plaintiff and the practical consequences likely to flow from the grant of interlocutory relief."

In other words, it is not enough to establish only that the patentee has a plausible case. It is also necessary to consider all the relevant circumstances and consequences of the decision which will determine just how convincing that plausible case must be.

There is, in the words of High Court Chief Justice French during oral argument, "an interaction... between the assessment of the strength of the case and the strength of the balance of convenience".

In this context, the Full Federal Court found that Apple’s case was simply not strong enough, especially when weighed against the plausibility of Samsung’s contrary arguments, to justify the grant of a preliminary injunction in the circumstances.

Furthermore, the Full Court found that the willingness, or otherwise, of Samsung to proceed with an early trial – for reasons which were not fully known to the trial judge – was an irrelevant consideration. This was echoed in the hearing before the High Court, in which Justice Gummow described talk of a "final hearing" as "an incantation", on the basis that it is plainly apparent from the behaviour of both parties that any "final" decision would itself be appealed, and then the appeal decision most likely again brought up before the High Court.

The High Court denied Apple leave to appeal on the basis that it had demonstrated insufficient prospects of success in showing any error on the part of the Full Federal Court. This effective approval by the High Court means that the decision of the Full Federal Court represents an authoritative statement of the law in Australia as to the approach to be taken when considering the grant of interlocutory injunctions in patent cases

Significance of decision for all holders of Australian rights
The significance of the decision for rights holders, and accused infringers, in Australia therefore goes well beyond the relatively high level of public interest in the Apple/Samsung dispute. It will have an ongoing impact on IP rights enforcement and litigation strategy for the foreseeable future.

In particular, rights holders must understand that it is not easy to obtain preliminary relief in Australia. In weighing up the interests of the parties to patent litigation, as well as the general public interest in ensuring that competition is not restricted without good justification, this is no doubt the correct outcome. An interim injunction barring a competitive product from the market before a full trial on the merits – particularly in litigation as complex and fact intensive as those involving the infringement and validity of patents – is an extraordinary remedy, and should be granted only in exceptional circumstances. While it may be difficult to determine appropriate damages in complex circumstances, this does not alter the fact that when private litigants come to court seeking a decision in a commercial dispute, some form of financial compensation will almost always be an available remedy following a full trial.

A patent holder considering enforcement action in Australia needs to take into account the unlikelihood of preliminary relief in formulating a strategy. In many cases it is probable that time, money and energy would be better expended on building a strong case for the main trial, or on pursuing alternative resolution to a dispute, such as licensing or other agreements.

In this particular case, Apple scored a substantial win with the initial grant of an injunction. Although this has ultimately been overturned, Samsung’s Galaxy Tab 10.1 has been effectively excluded from the market for four months, and almost missed the Christmas shopping period altogether. However, it is probable that this strategy could be successful only once, and future litigants in comparable circumstances are unlikely to be so fortunate. Federal Court judges are now bound by the rules of precedent to follow the Full Federal Court decision, and will be significantly more reluctant to grant preliminary injunctions in future cases.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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