Will the 'Nexus' Requirement of Apple v. Samsung Preclude Injunctive Relief in the Majority of Patent Cases?: Echoes of the Entire Market Value Rule
56 Pages Posted: 20 Jun 2013 Last revised: 17 Jul 2014
Date Written: June 19, 2013
In eBay, Inc. v. MercExchange, LLC, the Supreme Court put an end to the practice of presuming that injunctive relief is appropriate upon a finding of patent infringement, where it held that "the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards." 547 U.S. 388, 394 (2006). This decision made injunctive relief much more difficult to obtain, but also attempted to maintain discretion and avoid rigid rules for determining when injunctive relief is appropriate. Beginning with Apple Inc. v. Samsung Elecs. Co., 678 F.3d. 1314 (Fed. Cir. 2012), the Federal Circuit has added a "nexus" requirement for determining whether a patent owner has suffered irreparable harm in the form of lost sales — inquiring whether the sales were lost "because of" the infringement or for some other reason. This new hurdle to injunctive relief, which appears to be borrowed from patent infringement damages law, is exceedingly difficult to satisfy where the patented feature or component comprises only a portion of a larger accused product or system. Because most patents are directed to a single component or feature of a larger product or system, such a rule will likely preclude injunctive relief in the vast majority of cases. Apple adopts concepts and verbiage from precedent concerning the "entire market value rule," which prevents patentees from collecting damages based on a multi-component product unless it can be shown that the patented feature drives the consumer demand for the entire product. This standard is virtually indistinguishable from the nexus requirement, and can rarely be satisfied in cases where many different factors are likely to influence consumers’ purchasing decisions, such as price, advertising, and brand name recognition, let alone the multitude of technical and design features not covered by a plaintiff’s patent. Importantly, however, failure to satisfy the entire market value rule results in a limitation on damages, but failure to satisfy the nexus requirement results in zero injunctive relief.
Despite several patents being infringed by Apple’s direct competitor Samsung and Apple’s lost sales to Samsung, Apple has thus far been denied preliminary and permanent injunctive relief across the board almost entirely on the basis of lack of nexus. If Apple’s innovative phone and tablet designs and features cannot satisfy this standard, few, if any, individual aspects of a multi-component product can hope to do so. This result can be viewed as inequitable, and is perhaps why a number of post-Apple decisions have found various ways to skirt or even ignore the nexus test and grant injunctive relief. However, in the third of Apple’s appeals to the Federal Circuit lies the potential to relax the rigidness and potential inequity of the nexus test by, for example: (1) recasting the way that nexus considerations are analyzed under eBay by addressing them outside the context of irreparable harm; (2) allowing nexus to be considered in the aggregate where multiple patents are infringed by a single product; and (3) encouraging more flexible injunctions to be entered that enjoin the infringing features only and allow time for those features to be designed around before the injunction goes into effect.
Keywords: patent, infringement, injunction, damages, smartphone, tablet, entire market value, Apple, Samsung, equity, equitable, remedy, remedies, ebay, laserdynamics
JEL Classification: K39, K40, K41
Suggested Citation: Suggested Citation