defendants-appellants’ reply in further support of...

2012-1506

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

APPLE INC.,

Plaintiff-Appellee,

v.

SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., AND SAMSUNG

TELECOMMUNICATIONS AMERICA, LLC,

Defendants-Appellants.

Appeal from the United States District Court for the Northern District of California in Case No. 11-CV-01846-LHK, Judge Lucy H. Koh

DEFENDANTS-APPELLANTS’ REPLY IN FURTHER SUPPORT OF THEIR MOTION FOR STAY OF PRELIMINARY INJUNCTION

PENDING APPEAL

Attorneys for Defendants-Appellants

Charles K. VerhoevenQUINN EMANUEL URQUHART

& SULLIVAN, LLP50 California St., 22nd FloorSan Francisco, CA 94111Telephone: (415) 875-6600Facsimile: (415) 875-6700

Kevin P.B. JohnsonVictoria F. MaroulisQUINN EMANUEL URQUHART

& SULLIVAN, LLP555 Twin Dolphin Drive, 5th FloorRedwood Shores, CA 94065Telephone: (650) 801-5000Facsimile: (650) 801-5100

Kathleen M. SullivanWilliam B. AdamsQUINN EMANUEL URQUHART & SULLIVAN, LLP

51 Madison Avenue, 22nd FloorNew York, NY 10010Telephone: (212) 849-7000Facsimile: (212) [email protected]

Michael T. ZellerQUINN EMANUEL URQUHART & SULLIVAN, LLP865 S. Figueroa St., 10th FloorLos Angeles, CA 90017Telephone: (213) 443-3000Facsimile: (213) 443-3100

Case: 12-1506 Document: 19-1 Page: 1 Filed: 07/13/2012 (1 of 52)

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TABLE OF CONTENTS

Page

INTRODUCTION .....................................................................................................1

ARGUMENT.............................................................................................................1

I. APPLE IS UNABLE TO DEFEND THE DISTRICT COURT’S REFUSAL TO UPDATE THE RECORD ......................................................1

II. APPLE FAILS TO EXPLAIN HOW THE CURRENT RECORD COULD SUPPORT THE PRELIMINARY INJUNCTION...........................3

III. APPLE FAILS TO REBUT THAT THE HARM TO SAMSUNG AND THE PUBLIC FROM THE INJUNCTION OUTWEIGHS ANY HARM TO APPLE FROM A STAY..............................................................8

CONCLUSION........................................................................................................10


1

INTRODUCTION

Defendants-Appellants Samsung Electronics Co., Ltd., Samsung Electronics

America, Inc., and Samsung Telecommunications America, LLC (collectively,

“Samsung”) respectfully submit this reply in further support of their motion to stay

and suspend, pending appeal, the district court’s June 26, 2012 order granting a

preliminary injunction against Samsung’s sales of the Galaxy Tab 10.1. Samsung

demonstrated that it is entitled to stay because (1) it has a strong likelihood of

success on appeal in light of the district court’s refusal to update the record, and (2)

the harm that Samsung and the public will suffer by continuing the injunction

outweighs any harm that Apple might face if Samsung were able to resume sales of

the Galaxy Tab 10.1. In response, Apple distorts the record and governing

authorities. Apple’s attempts to downplay the rights of third parties are also

contradicted by its own recent conduct that includes menacing and disruptive

letters to downstream customers of the Galaxy Tab 10.1. This Court should issue a

stay preventing these harms to Samsung and its customers while it considers an

expedited appeal from the district court’s entry of a preliminary injunction.

ARGUMENT

I. APPLE IS UNABLE TO DEFEND THE DISTRICT COURT’S REFUSAL TO UPDATE THE RECORD

Apple fails to rebut that Samsung has a strong likelihood of success on

appeal because the preliminary injunction is based on a stale record that had not


2

been updated in the seven months since the October 2011 preliminary injunction

hearing and thus did not reflect substantial new developments that rendered

obsolete the district court’s prior rulings on likelihood of success and irreparable

harm. Mot. 8-10. Apple acknowledges (Opp. 3-5), as it must, that the district

court did not consider any new evidence when issuing the preliminary injunction,

having previously issued—without notice or the benefit of briefing—an order

prohibiting reliance on new evidence. Nor does Apple seriously contest (Opp. 8-

10) that the governing case law, including the Supreme Court’s decision in Salazar

v. Buono, 130 S. Ct. 1803 (2010), demonstrates that preliminary injunctive relief

must be based on the circumstances that exist at the time of a court’s order, not as

they may have existed at some point in the past.

Instead, Apple accuses Samsung of employing a “delay strategy” (Opp. 2)

and principally argues that the district court’s refusal to consider additional

evidence was compelled by this Court’s mandate (Opp. 7-8). But this Court’s

broad remand for “further proceedings” regarding the order “denying an injunction

with respect to the D’889 patent,” Apple, Inc. v. Samsung Elecs. Co., Ltd., 678

F.3d 1314, 1333 (Fed. Cir. 2012), did not foreclose the district court from updating

the record,1 and it was an abuse of discretion for the court not to do so given the

1 Notwithstanding Apple’s protestations to the contrary (Opp. 7), neither

this Court’s directive that the district court assess the balance-of-hardships and public-interest factors on remand, nor its recognition that this assessment might be


3

considerable passage of time since the preliminary injunction hearing and the

substantial developments that Samsung identified. See, e.g., Salazar, 130 S. Ct. at

1816 (“[A] court must never ignore significant changes in the law or circumstances

underlying an injunction lest the decree be turned into an instrument of wrong”);

MercExchange, L.L.C. v. eBay, Inc., 467 F. Supp. 2d 608, 611 (E.D. Va. 2006)

(stating that it would be an abuse of discretion not “to consider the facts as they

exist at the time of remand”).2 And Apple never explains why considering the

updated record with the evidence Samsung already had proffered would have

caused undue delay or how any delay could even constitute a legitimate excuse for

refusing to consider the current circumstances as precedent required.

II. APPLE FAILS TO EXPLAIN HOW THE CURRENT RECORD COULD SUPPORT THE PRELIMINARY INJUNCTION

Apple is also unable to defend the preliminary injunction based on the

current record, which reflects that (1) the tablet computer market no longer has just

two players as the district court previously assumed (see Mot. 10-12); (2) the

physical 035 mockup—not the iPad 2—is an embodiment of the D’889 patent and

conducted “in short order,” Apple, 678 F.3d at 1333, can reasonably be read as foreclosing the district court from updating the stale record with respect to the other preliminary injunction factors.

2 Apple’s invocation of the district court’s denial of Samsung’s motion for reconsideration (Opp. 10) is unavailing, as Samsung will argue on appeal that the preliminary injunction itself should be vacated for failure to consider significant changes in circumstances since the preliminary injunction record closed.


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that mockup is substantially different from the Galaxy Tab 10.1 (Mot. 12-18); and

(3) the Galaxy Tab 10.1 differs substantially from the D’889 patent, as suggested

by an analogous decision just this past week from the British High Court of Justice

finding that Samsung’s Galaxy Tabs do not infringe Apple’s British design patents.

1. As to the tablet market, Apple does not dispute that there has been a

surge of major entrants into that market, but instead wrongly contends that

Samsung had raised this issue in the prior appeal. Opp. 15. The evidence that

Samsung has identified, however, involves entrants into the tablet market that post-

date the closing of the preliminary injunction record. See Mot. 10-11 & nn.2-4.

Further, the conceded absence of a two-player market, plus Apple’s undisputed

gain in market share since the Galaxy Tab 10.1’s introduction, undermines any

“inference that an infringing sale amounts to a lost sale for the patentee.” Robert

Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1151 (Fed. Cir. 20011); see also

eBay Inc. v. MercExchange LLC, 547 U.S. 388, 393-94 (2006) (no presumption of

irreparable harm based on infringement).3

2. As to the 035 mockup, Apple does not dispute (Opp. 11-15) that the

physical mockup was not part of the preliminary injunction record (because, as

3 Nor can the fact that Apple and Samsung are “direct competitors” (Opp.

16) support a finding of irreparable harm due to lost market share. See, e.g., Abbott Labs. v. Andrx Pharms., Inc., 452 F.3d 1331, 1348 (Fed. Cir. 2006) (holding that “generic competition” that affects sales of patented product not sufficient to establish irreparable harm).


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Samsung explained (Mot. 14, 17), Apple had withheld production until after the

preliminary injunction hearing), that Apple has admitted since the preliminary

injunction record closed that the 035 mockup embodies the D’889 patent, and that

the physical 035 mockup reveals substantial differences from the Galaxy Tab 10.1.

Instead, after overstating the district court’s reliance on drawings of the patented

design,4 Apple first contends that “[c]ourts are not required to compare the accused

device to any embodiment claimed by a patent.” Opp. 13. But the fact is that, at

Apple’s urging (Dist. Ct. Dkt. 449 at 47 n.27), the district court did look to the iPad

products that it considered to be an embodiment of the D’889 patent, and Apple

cites no authority for its view that a party can cherry-pick which claimed

embodiment it will show the court and the jury, and which it will hide from them.5

Further, Apple’s statements (Opp. 11-12) about a gap on the physical

mockup are disingenuous, as they contradict Apple’s own prior argument that “no

gap can be seen between the front surface and the rim” when the 035 model is

viewed from the front (Dist. Ct. Dkt. 1136 at 5 n.1). Moreover, Apple’s argument

4 Contrary to Apple’s assertion (Opp. 11), in concluding that Apple has a

likelihood of success on infringement, the district court relied heavily on its finding that the Galaxy Tab 10.1 is “virtually indistinguishable” from the Apple products. (Dkt No. 449 at 47-48; Dkt No. 1135 at 4.) The district court’s additionalconsideration of the patent drawings cannot immunize that error from scrutiny, as it is clear that the iPad comparison was the driving factor in the court’s analysis.

5 Nor is there any requirement that the embodiment be a commercial one. See, e.g., Lee v. Dayton-Hudson, 838 F.2d 1186, 1189 (Fed. Cir. 1988).


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that a single feature—which Apple claims is unnoticeable—could make the 035

model substantially different from the D’889 patent would apply all the more to the

numerous noticeable differences between the iPad 2 and the patented design:

thinner profile; different aspect ratio; no rim around the front; no thick side edge

running perpendicular to the back and front; no reflective material on the back or

sides; added buttons, slots, and markings.

Apple also mischaracterizes (Opp. 12-13) the history of the photos in the

D’889 file history to imply that the 035 mockup is not proper evidence. But the

PTO did not even comment on Apple’s statement that the 035 model was an

embodiment of the D’889 patent. Nor did the PTO “cancel” the 035 as an

embodiment, as Apple states. (Opp. 13.) Instead, it merely prevented Apple from

including a photo appendix (not simply drawings) in the issued patent pursuant to

37 C.F.R. § 1.153 (see Matsui Decl. Ex. 6 at APLNDC00032436). Far from

showing that the physical 035 mockup is irrelevant, Apple’s attempt to include

pictures of the 035 in the issued patent is even stronger evidence of its relevance as

an embodiment of the patent on which it was based.

Apple is also wrong (Opp. 13-14) that the iPad 2 can embody both the

D’889 patent and another design patent. Were that so, any attempt by Apple to get

a new patent on that design would, contrary to public policy, effectively restart the

clock on the limited monopoly it was granted seven years ago. Apple’s authorities


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are inapplicable. MPEP § 1504.06(II) states that a party may overcome a double

patenting rejection by the PTO through a terminal disclaimer, but Apple nowhere

claims it has filed a terminal disclaimer of any relevance here. MPEP

§ 1504.05(II)(B)(8) simply provides that “segregable parts” of an entire design are

to be separately patented, but that has no relevance where, as here, a party seeks to

patent a whole design. Thus, Apple’s efforts to justify the district court’s reliance

on the iPad 2 are misplaced.

3. Apple also fails to mention this week’s decision from the British High

Court of Justice that found that Samsung’s Galaxy Tablets do not infringe Apple’s

community registered design. See Samsung Electronics (UK) Ltd. v. Apple Inc.,

Case No. HC 11 03050 (July 9, 2012), available at

http://www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/samsung-

apple.pdf (last accessed July 12, 2012). The court explained that the Galaxy

Tablets “do not have the same understated and extreme simplicity which is

possessed by the Apple design. … The overall impression produced is different.”

Id. ¶ 90. This ruling reinforces the substantial differences that exist between the

Galaxy Tab 10.1 and Apple’s patented designs, and thus further strengthens

Samsung’s likelihood of defeating Apple’s allegations of infringement in the

underlying proceeding.


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III. APPLE FAILS TO REBUT THAT THE HARM TO SAMSUNG AND THE PUBLIC FROM THE INJUNCTION OUTWEIGHS ANY HARM TO APPLE FROM A STAY

Apple cannot overcome Samsung’s showing that the harm to its customer

relationships, reputation and good will from the injunction outweighs any harm

that Apple might experience from the continued sale of the Galaxy Tab 10.1. Mot.

18-20. In its Opposition, Apple gainsays any prospect of irreparable harm to

Samsung and its downstream customers while sales of the Galaxy Tab 10.1 are

enjoined during the pendency of this appeal. But Apple omits to mention that on

June 28, it sent letters to multiple carriers and downstream customers of the Galaxy

Tab 10.1 letters insisting that they are obliged by the preliminary injunction to,

“[a]t a minimum,” “immediately remov[e] for sale the Galaxy Tab 10.1 from all

physical and online venues under your direction or control” and, also to “ceas[e]

immediately to engage in any of the specified acts (e.g., importing, offering to sell,

or selling within the United States) in connection with the Galaxy Tab 10.1 ….”

Exh. 1-2 to Reply Decl. of Kathleen M. Sullivan.6 While Samsung does not know

precisely how many such letters Apple sent, it has received reports that Apple has

sent them to many entities that currently carry the Galaxy Tab 10.1.

6 Samsung received the letters submitted herewith pursuant to the

submitting party’s obligation to provide notice to Samsung of a potential claim under their Supply Agreement.


9

Apple’s menacing letters greatly overreach, incorrectly claiming that third-

party retailers are subject to the prohibitions of the preliminary injunction, which

they clearly are not. None of them is a party to the action, and the law is clear that

they are permitted to sell their existing inventory, even without a stay. 7

Nonetheless, such letters seek unfairly to disrupt the business of both Samsung and

its retail partners, who are now being threatened by a company with a self-

proclaimed commitment to “thermonuclear” litigation—disruptions that Apple’s

bond does not take into account.8

7 See, e.g., Paramount Pictures Corp. v. Carol Publishing Group, Inc., 25

F. Supp. 2d 372, 374-76 (S.D.N.Y. 1998) (nonparty distributors and retailers were not subject to copyright injunction against publisher and thus were entitled to continue sales of their existing inventory); Peterson v. Fee Int’l, Ltd., 435 F. Supp. 938, 943-44 (W.D. Okla. 1975) (nonparty reseller of infringing wrenches not enjoined from sale of inventory acquired prior to entry of injunction); see also Regal Knitwear Co. v. N.L.R.B., 324 U.S. 9, 13 (1945) (“The courts, nevertheless, may not grant an enforcement order or injunction so broad as to make punishable the conduct of persons who act independently and whose rights have not been adjudged according to law.”); Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 96 F.3d 1390, 1395 (Fed. Cir. 1996) (“Because the appellants were never made parties to the underlying action and thus never had an opportunity to contest the findings of liability in that case, they are not subject to being enjoined or held in contempt with respect to their independent conduct regarding the subject matter of the [underlying] case.”).

8 Contrary to Apple’s assertions (Opp. 17), the public statements by Samsung representatives about the significance of the injunction on its global business operations do not defeat Samsung’s argument of irreparable harm. Samsung’s statements to reassure the market do not mean, or imply, that Samsung’s good reputation and good will are not being tainted by the preliminary injunction. Nor, of course, do those statements, made before Apple’s threatening


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Apple’s actions show that it is using the continued operation of the

preliminary injunction, and this Court’s denial of an interim stay, to improperly

harass downstream customers and to interfere with the availability of computer

tablets that third parties have rightly come to prefer and to rely upon. In light of

these unwarranted injuries to third parties (and Samsung’s relationships with those

third parties), this Court should stay the preliminary injunction until this Court

receives highly expedited briefing and decides the substantial questions posed by

this appeal.

CONCLUSION

The June 26, 2012 Order Granting Preliminary Injunction should be stayed

pending expedited appeal.

letters were known, account for Apple’s attempts to interfere with downstream customers.

Dated: July 13, 2012 Respectfully submitted,

By: /s/ Kathleen M. SullivanCharles K. VerhoevenQUINN EMANUEL URQUHART

& SULLIVAN, LLP50 California St., 22nd FloorSan Francisco, CA 94111Telephone: (415) 875-6600Facsimile: (415) 875-6700

Kathleen M. SullivanWilliam B. AdamsQUINN EMANUEL URQUHART & SULLIVAN, LLP

51 Madison Avenue, 22nd FloorNew York, NY 10010Telephone: (212) 849-7000Facsimile: (212) [email protected]


11

Attorneys for Defendants-Appellants

Kevin P.B. JohnsonVictoria F. MaroulisQUINN EMANUEL URQUHART

& SULLIVAN, LLP555 Twin Dolphin Drive, 5th FloorRedwood Shores, CA 94065Telephone: (650) 801-5000Facsimile: (650) 801-5100

Michael T. ZellerQUINN EMANUEL URQUHART & SULLIVAN, LLP865 S. Figueroa St., 10th FloorLos Angeles, CA 90017Telephone: (213) 443-3000Facsimile: (213) 443-3100


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CERTIFICATE OF INTEREST

Counsel for Defendants-Appellants certifies the following:

1. The full name of every party or amicus represented by me is:

Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Samsung

Telecommunications America, LLC

2. The name of the real party in interest (if the party named in the

caption is not the real party in interest) represented by me is:

N/A

3. All parent corporations and any publicly held companies that own

10 percent or more of the stock of the party or amicus curiae represented by

me are:

Samsung Electronics America, Inc. (“SEA”) is a wholly-owned subsidiary of

Samsung Electronics Co., Ltd. (“SEC”), a publicly held corporation organized

under the laws of the Republic of Korea. SEC is not owned by any parent

corporation and no other publicly held corporation owns 10% or more of its stock.

No other publicly held corporation owns 10% or more of SEA’s stock. Samsung

Telecommunications America, LLC (“STA”) is a wholly-owned subsidiary of

SEA. No other publicly held corporation owns 10% or more of STA’s stock.


13

4. The names of all law firms and the partners or associates that

appeared for the party or amicus now represented by me in the trial court or

are expected to appear in this court are:

Quinn Emanuel Urquhart & Sullivan, LLP: Charles K. Verhoeven; Kathleen M.

Sullivan; Kevin P.B. Johnson; Victoria F. Maroulis; Michael T. Zeller; Todd M.

Briggs; Margret M. Caruso; Rachel Herrick Kassabian; Kevin A. Smith; William

B. Adams

Steptoe & Johnson LLP: John M. Caracappa; Paul A. Gennari; Michael R.

Heimbold; Huan-Yi Lin

Dated: July 13, 2012 Respectfully submitted,

By: /s/ Kathleen M. Sullivan______Kathleen M. SullivanQUINN EMANUEL URQUHART & SULLIVAN, LLP51 Madison Avenue, 22nd FloorNew York, NY 10010Telephone: (212) 849-7000Facsimile: (212) [email protected]

Attorney for Defendants-Appellants


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PROOF OF SERVICE

The undersigned hereby certifies that on July 13, 2012, I electronically filed

the foregoing DEFENDANTS-APPELLANTS’ REPLY IN FURTHER SUPPORT

OF MOTION TO STAY PRELIMINARY INJUNCTION PENDING APPEAL

and supporting REPLY DECLARATION OF KATHLEEN M. SULLIVAN with

the Clerk of the Court for the United States Court of Appeals for the Federal

Circuit by using the appellate CM/ECF system. I certify that all participants in the

case are registered CM/ECF users and that service will be accomplished by the

CM/ECF system.

I further certify that on July 13, 2012, I caused to be served by email the

confidential version of the REPLY DECLARATION OF KATHLEEN M.

SULLIVAN on the following counsel:

Harold J. McElhinny Brian Robert MatsuiMichael A. Jacobs Morrison & Foerster LLPJennifer L. Taylor Suite 6000Morrison & Foerster LLP 2000 Pennsylvania Avenue, NW425 Market Street Washington, DC 20006San Francisco, CA 94105 [email protected]@[email protected]@mofo.com

/s/ Kathleen M. Sullivan__________ Kathleen M. Sullivan


1

IN THE UNITED STATES COURT OF APPEALSFOR THE FEDERAL CIRCUIT

APPLE INC.,

Plaintiff-Appellee,

v.

SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., AND SAMSUNG TELECOMMUNICATIONS AMERICA, LLC,

Defendants-Appellants.

No. 2012-1506

PUBLIC NON-CONFIDENTIAL REPLY DECLARATION OF KATHLEEN M. SULLIVAN IN FURTHER SUPPORT OF DEFENDANTS-

APPELLANTS’ MOTION FOR STAY PENDING APPEAL

KATHLEEN M. SULLIVAN hereby declares as follows pursuant to 28

U.S.C. § 1746:

1. I am a partner in Quinn Emanuel Urquhart & Sullivan, LLP, counsel

for Defendants-Appellants Samsung Electronics Co., Ltd., Samsung Electronics

America, Inc., and Samsung Telecommunications America, LLC (collectively,

“Samsung”). I submit this reply declaration in further support of Samsung’s

Motion for a Stay Pending Appeal.


2

Confidential Material Redacted

2. Attached hereto as Exhibit 1 is a true and accurate copy of a letter

(with enclosures), dated June 28, 2012, from Jonathan A. Patchen of Taylor &

Company Law Offices, LLP, to Dane A. Drobny, Senior Vice President, General

Counsel and Corporate Secretary, Sears Holding Corporation.

3. Attached hereto as Exhibit 2 is a true and accurate copy of a letter

(with enclosures), dated June 28, 2012, from Jonathan A. Patchen of Taylor &

Company Law Offices, LLP, to Charles Wunsch, General Counsel, Senior Vice

President and Corporate Secretary, Sprint; and John W. Chapman, Vice

President/Legal Department, Sprint/Nextel Corporation.

4. Confidential Material Omitted: Paragraphs 2 and 3 of this declaration

and Exhibits 1 and 2 contain confidential business information concerning the

recipients of the letters from Plaintiff-Appellee Apple Inc. addressing the

preliminary injunction that was entered in the underlying action. Portions of

Paragraphs 2 and 3 and Exhibits 1 and 2 have been redacted to protect the

aforementioned confidential information.

I declare under penalty of perjury that the foregoing is true and correct.

Executed on July 13, 2012 in New York, New York

/s/ Kathleen M. SullivanKathleen M. Sullivan


EXHIBIT 1


EXHIBIT 2
