Monday, June 25, 2012

Apple v. Motorola and the meaning of "goodwill"

Judge Posner on the relationship, or lack thereof, between patent infringement and brand value:

Apple in conjuring loss of consumer goodwill and of market share tries to make the kind of case for an injunction that was made successfully by the plaintiff in  i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831, 862 (Fed. Cir. 2010), where the court concluded that “a small company was practicing its patent, only to suffer a loss of market share, brand recognition, and customer goodwill as the result of the defendant’s infringing acts. Such losses may frequently defy attempts at valuation, particularly when the infringing acts significantly change the relevant market, as occurred here.” Apple is not a “small company”; its market capitalization exceeds that of Google and Microsoft combined. To suggest that it has suffered loss of market share, brand recognition, or customer goodwill as a result of Motorola’s alleged infringement of the patent claims still in play in this case is wild conjecture.

  [T]he quality of the iPhone (and of related Apple products, primarily the iPad) and consumers’ regard for it have, so far as the record shows, nothing to do with the handful of patent claims that I had ruled presented triable issues of infringement. Apple’s “feel good” theory does not indicate that infringement of these claims (if they were infringed) reduced Apple’s sales or market share, or impaired consumer goodwill toward Apple products.

Apple is complaining that Motorola’s phones  as a whole ripped off the iPhone as a whole. But Motorola’s desire to sell products that compete with the iPhone is a separate harm—and a perfectly legal one—from any harm caused by patent infringement.

And here’s some TM heresy: “[Apple] bases its claim for injunctive relief on future harms that it claims cannot be quantified for purposes of a monetary remedy, namely loss of consumer goodwill and of market share. In fact such losses are conventional items of damages.”  Apple, Inc. v. Motorola, Inc., No. 1:11-cv-08540 (N.D. Ill. June 22, 2012). 

Despite having some skepticism about Posner’s ability to figure out exactly how the world works, I agree that the relationship between “goodwill” and irreparable harm is shamefully undertheorized; too much of the time “goodwill” seems to mean “I want to grant you an injunction even though you have no evidence of any harm.”  Sometimes, though, it means “I want to award extra damages.”  I think there is definitely a role for adding a damages kicker when we think (1) there have been damages that can’t be precisely quantified and (2) the losing defendant should run the risk of error rather than the prevailing plaintiff, but I’m unconvinced “goodwill” works for that concept or that it explains irreparable harm. 

Maybe, as Posner gestures at elsewhere in the opinion, we need to think about the concept of right at work here: if there is some harm to the nature of the right—a dignitary harm, perhaps, lack of respect for the autonomy of the owner—then that might count as irreparable regardless of the money.  Once we did that, however, it would become harder to see how infringement of intangible rights inflicted that harm, especially in the case of patent infringement, which doesn’t require willfulness or even knowledge of the patent owner’s rights, and which here involves only faceless though in Apple’s case highly anthropomorphized corporate entities; and in any event the patentee’s ability to exercise its own autonomy is unaffected by the existence of someone else practicing the patent.  Indeed, perhaps only consumer confusion could inflict autonomy-based harm in this model (though I’d expect an argument over an abstract right to control others’ noncompeting, nonrivalrous uses as an exercise of autonomy; this argument that a work is the “face” of a particular creator has been more convincing in copyright than in patent).

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