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| Author: Scott D. Greenberg, Esq. |
Introduction
In August 2012, the jury in Apple Inc. v. Samsung
Electronics Co., Ltd., U.S. District Court, Northern District of
California, 5:11-CV-01846, returned a verdict awarding Apple $1.05
billion. The jury determined that some, but not all, of Apple’s asserted
design and utility patents and trade dress designs were, respectively,
infringed and diluted by some, but not all, of Samsung’s challenged products.
In an opinion and order dated December 17, 2012 (“December 17
Order”), U.S. District Court Judge Koh denied, in its entirety, Apple’s
post-verdict motion for a permanent injunction. As further discussed below,
Judge Koh held that injunctive relief was not warranted under the Supreme
Court’s four-pronged standard set out in eBay v. MercExchange, L.L.C.,
547 U.S. 388 (2006) (“eBay”). Apple has already filed a
notice of appeal of this decision to the U.S. Court of Appeals for the Federal
Circuit.
This article focuses on Judge Koh’s denial of permanent
injunctive relief from Samsung’s dilution of trade dress as found by the jury.
The Court concluded that, although the federal dilution statute does not
require any further showing of injury beyond the act of dilution itself in
order for an injunction to issue, injunctive relief for Samsung’s acts of trade
dress dilution was not warranted under the additional eBay factors,
especially Factor 2: the adequacy of monetary damages to compensate for Apple’s
injury, and Factor 4: the public interest – in this case the interest of
consumers against future disruption of the phone product market, particularly
in view of the fact that none of Samsung’s phone products that were
specifically found diluting were still on the market.
The Trade Dress Dilution Findings
The jury found that both Apple’s registered iPhone trade dress,
which is the subject of U.S. Trademark Registration No. 3,470,983, and Apple’s
asserted unregistered iPhone 3G trade dress, were valid and famous, and were
willfully diluted by six Samsung smartphone products, including Samsung’s
Galaxy S 4G phone, which blurred the distinctiveness of Apple’s famous trade
dress.
Set out below is Apple’s unregistered iPhone 3G trade dress as presented and described in Apple’s trial brief:
Set out below is a visual comparison of Apple’s
iPhone 3GS product and Samsung’s Galaxy S 4G product as presented in one of
Apple’s earlier case briefs:
In addition, the following graphic was included in Apple’s trial brief in order to demonstrate how Samsung’s smartphone designs changed after Apple’s introduction of the iPhone:
In addition, the following graphic was included in Apple’s trial brief in order to demonstrate how Samsung’s smartphone designs changed after Apple’s introduction of the iPhone:
The jury found that eleven other challenged Samsung phone
products did not dilute Apple’s above-mentioned trade dress designs. Moreover,
the jury found that Apple’s third asserted phone trade dress design and its
iPad tablet trade dress were not protectable.
Denial of Permanent Injunction for Trade Dress Dilution
Following the jury verdict, Apple sought to permanently enjoin
Samsung from infringing Apple’s subject patents, and from diluting Apple’s
subject trade dress “including” by selling or offering for sale the six Samsung
smartphone products found to dilute those Apple trade dress designs. December 17 Order, slip op. at 2.
Although Judge Koh noted that eBay itself was a patent infringement case, she also noted that, in eBay, the Supreme Court held that patent cases are subject to the same injunction analysis as other civil cases. “This ruling would indicate that the same four-part analysis would apply to other intellectual property cases, such as those involving trade dress dilution.” December 17 Order, slip op. at 16.According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
eBay, 547 U.S. at 391; December 17 Order, slip op. at 2.
Factor 1: Irreparable Injury
The federal dilution statute, 15 U.S.C. Sec. 1125(c), states
that “[s]ubject to the principles of equity” the owner of a famous and
distinctive mark “shall” be entitled to an injunction against acts of dilution
which impair the distinctiveness of the famous mark “regardless of the presence
or absence of actual or likely confusion, of competition, or of actual
economic injury.” (emphasis supplied).
The Court noted that the provision of the dilution statute
subjecting injunctive relief to the “principles of equity” lent support to the
Court’s decision to consider the four-part eBay test with regard to Apple’s
requested injunction for Samsung’s trade dress dilution. December 17 Order, slip op. at 16. However, with regard to eBay Factor 1,
irreparable injury, the Court determined that, under the above-quoted provision
of the statute (“shall…regardless of…actual economic injury”), Apple was not
required to make any showing of injury beyond the harm of the dilution itself
in order to establish irreparable harm with regard to its dilution
claims. December 17 Order, slip op. at 12 – 15. “Accordingly, Apple
has established irreparable harm with regard to its trade dress dilution
claims.” December 17 Order, slip op. at 15.
Notwithstanding the above-quoted determination, the Court’s
opinion then proceeds to note that the six Samsung smartphone products held to
dilute Apple’s trade dress are no longer on the market. December 17 Order, slip
op. at 15. Judge Koh does not definitively state that this fact defeats
Apple’s showing of irreparable harm. She does, however, note that under
her reading of Ninth Circuit precedents in dilution cases, the Ninth Circuit
appears to contemplate that the injunction remedy is intended to allow courts
to put a stop to “ongoing diluting behavior”, and since there is no ongoing
diluting behavior to enjoin in the present case, “Apple cannot credibly claim
to suffer any significant hardship in the absence of a trade dress injunction.”
Id. As discussed below, the Court further considers the fact of
Samsung’s discontinuance of the particular diluting smartphone products in the
portion of the decision applying eBay Factor 4, the public interest.
In contrast to the above-discussed dilution findings, with
regard to the findings of patent infringement the Court noted that the wording
of the injunction provision of the patent statute is entirely discretionary
(December 17 Order, slip op. at 2), and that irreparable harm cannot be presumed
from the act of patent infringement under eBay and Federal Circuit
precedents (December 17 Order, slip op. at 2). The Court proceeded to
hold that Apple failed to make the required showing of irreparable harm with
regard to patent infringement because it failed to demonstrate a causal nexus
between (a) Apple’s competitive injury in the marketplace resulting from
Samsung’s smartphone sales and (b) Samsung’s infringement of the particular
design and utility features covered by the infringed patents, i. e. that those
particular features were driving consumer demand for Samsung’s
smartphones. December 17 Order, slip op. at 7 – 12.
Factor 2: Adequacy of Monetary Damages
The Court held that this factor favors Samsung. With
regard to trade dress dilution, the Court noted that Apple’s top licensing
executive testified that the “unique user experience IP” that Apple has
previously licensed includes trade dress along with design and utility
patents. December 17 Order, slip op. at 17. “Thus, there is some evidence
that Apple has not always insisted on exclusive use of its trade dress, but
rather has found money to be an acceptable form of compensation.” Id.
Factor 3: Balance of Hardships
The Court held that this factor was neutral because neither
party would be greatly harmed by either outcome. “Apple has not
identified any hardship it would face in the absence of an injunction.”
December 17 Order, slip op. at 18. As to Samsung, because it maintains,
in support of its own arguments, that it has stopped selling the six trade
dress diluting products, “Samsung cannot now turn around and claim that Samsung
will be burdened by an injunction that prevents sale of these same
products.” December 17 Order, slip op. at 19.
Factor 4: Public Interest
With regard to the findings of trade dress dilution, the Court
held that “in the absence of case law authorizing a trade dress dilution
injunction where there are no diluting products still on the market, an
injunction cannot be in the public interest. The potential for future
disruption to consumers would be significantly greater if this Court were to
issue an injunction, and such disruption cannot be justified in the absence of
clear authority.” December 17 Order, slip op. at 21.
Conclusion: Injunctions for Trade Dress Dilution v.
Infringement
It remains to be seen how the Federal Circuit will treat Judge
Koh’s denial of a permanent injunction upon Apple’s already-filed appeal.
In any event, it appears that Judge Koh’s denial of permanent injunctive relief
from Samsung’s acts of trade dress dilution under the eBay test was
based primarily on Samsung’s voluntary cessation of marketing of the particular
Samsung smartphone products that were held to have diluted Apple’s famous trade
dress and the perceived adequacy of monetary relief.
It should be borne in mind, however, that in this case Apple obtained a verdict of dilution of its iPhone trade dress, but not infringement of those phone designs (Apple's complaint also included claims of infringement of its iPhone trade dress, but Apple stipulated to the dismissal of those infringement claims prior to trial). A claim of trade dress infringement requires proof of likelihood of consumer confusion, mistake, or deception as to the plaintiff being the origin or sponsor, or otherwise being affiliated with, the defendant’s goods or services. See 15 U.S.C. 1125(a). By contrast, trade dress dilution-by-blurring requires proof of a famous and distinctive trade dress and a likelihood of the defendant’s blurring of the distinctiveness of that trade dress, essentially by employing a design that consumers will associate with the famous design, regardless of whether or not those consumers are confused as to source of defendant’s product, which is not a required element for dilution. See 15 U.S.C. Section 1125(c).
Therefore, a finding of trade dress infringement entails a
finding of likely source confusion, and this will generally strengthen the
successful plaintiff’s claim for an injunction against a defendant’s present and
possible future product or packaging designs that are likely to cause such
source confusion, even in trade dress infringement cases where the court
applies the eBay injunction test (an issue of applicability upon which,
to date, federal courts have disagreed). In particular, a proven likelihood of
consumer confusion as to plaintiff being the source of the defendant’s product
can be shown to result in a loss of control by plaintiff over its consumer
goodwill and product reputation. This loss of control over, and possibly actual
damage to, plaintiff’s customer goodwill and product reputation strengthens a
plaintiff’s ability to establish: the irreparable nature of the plaintiff’s
injury and a causal nexus between this injury and the acts of defendant
likely to cause such confusion (eBay Factor 1), the insufficiency of
monetary compensation (eBay Factor 2), the relative harm to plaintiff (eBay
Factor 3), and the public interest in the granting of the injunction, i.e. the
public interest against consumer confusion and deception (eBay Factor
4).
In the absence of these elements of injury to the public and damage to
goodwill and reputation which stem from source-confusion, at least one federal
court has now determined that acts of dilution are sufficiently redressed by
monetary damages where the defendant has voluntarily ceased use of the diluting
products.
