IP Law Daily Consumer’s claims against Samsung based on infringement of Apple patents tossed
Thursday, December 6, 2018

Consumer’s claims against Samsung based on infringement of Apple patents tossed

By Peter Reap, J.D., LL.M.

A California consumer’s individual and putative class claims against Samsung Electronics Co., Ltd., and its affiliates, based on Samsung’s infringement of patents owned by Apple, was tossed for the second time by the federal district court in San Jose, as the court determined that plaintiff Hoai Dang failed to adequately allege claims for (1) breach of statutory warranty against infringement under the laws of all 50 states; (2) violation of California’s Unfair Competition Law (UCL); (3) violation of California’s Consumers Legal Remedies Act (CLRA); (4) restitution and unjust enrichment under the laws of California, New Jersey, and New York; and (5) declaratory and injunctive relief. The claims were premised upon the plaintiff’s purchase of his Galaxy SIII from a Best Buy store located at 181 Curtner Avenue in San Jose, California, and the plaintiff alleged that because Samsung has been found to have "infringed the patents of its chief competitor, Apple," many Samsung devices, including his smartphone, "are worth significantly less than the prices the consumers paid, resulting in injury and damages to the consumers" (Dang v. Samsung Electronics Co, Ltd., December 3, 2018, Koh, L.).

On July 2, 2018, the court granted Samsung’s motion to dismiss the plaintiff’s amended complaint. The Court dismissed the claim for breach of the implied warranty of non-infringement because Samsung, via the Manufacturer’s Warranty in the Information Booklet included with the plaintiff’s phone, disclaimed the implied warranty of non-infringement. Specifically, the warranty states: "TO THE FULL EXTENT PERMITTED BY LAW SAMSUNG [ENTITIES] ... EXPRESSLY DISCLAIM ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, INTEROPERABILITY OR NON-INFRINGEMENT, WITH RESPECT TO ... SAFE™ APPROVED DEVICES."

Second, the court dismissed the plaintiff’s claim for violation of the UCL because the claims under the UCL’s unlawful prong claim depended on the underlying warranty of non-infringement cause of action, which the court had dismissed. Third, the court dismissed the claim under the CLRA because the plaintiff failed to satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). The court dismissed the claim for unjust enrichment because the cause of action rested on Samsung’s alleged breach of the warranty of non-infringement. Finally, the court dismissed the claim for declaratory and injunctive relief, which sought to prevent Samsung from arguing that the arbitration provision in the Manufacturer’s Warranty bound the plaintiff because the Ninth Circuit had concluded that the arbitration provision was not binding.

Warranty and declaratory relief claims. First, the court found that the plaintiff’s Second Amended Complaint (SAC) added no new factual allegations relevant to the two causes of action dismissed with prejudice. For clarity, the court again dismissed with prejudice the cause of action for breach of the implied warranty of non-infringement and the cause of action for declaratory and injunctive relief.

CLRA. The plaintiff claimed that Samsung violated the CLRA by "[m]isrepresenting the source, sponsorship, approval, or certification of goods or services" and "[r]epresenting that a transaction confers or involves rights, remedies, or obligations that it does not have or involve, or that are prohibited by law." Claims sounding in fraud—such as the CLRA—are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), the court noted.

Previously, the court dismissed the CLRA claim because the plaintiff did not allege that Samsung made "specific misrepresentations or omissions." The SAC has at least cured that deficiency, as the plaintiff alleged that Samsung made both affirmative misrepresentations and omissions that violate the CLRA. Regarding omission, he alleged that "Defendants made material omissions and failed to adequately disclose the material fact of infringement to consumers." As for an affirmative misrepresentation, he alleged that Samsung’s use of the brand name Samsung "signal[ed] to consumers that the Products contained non-infringing ‘Samsung’ parts, when, in fact, the Products infringed on the patents of Apple."

To state a claim under the CLRA based on a fraudulent omission, "the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose." Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824, 835 (2006). To satisfy the standard set out in the caselaw for a CLRA omission claim such as the plaintiff’s, he must allege that Samsung’s omission either implicates a safety hazard or concerns a central function of the Galaxy SIII. The plaintiff failed to do so, the court decided. The plaintiff alleged only that Samsung "failed to adequately disclose the material fact of infringement" to consumers. He did not allege that infringement at all affects the Galaxy SIII’s functionality, nor that infringement implicates a safety hazard. In addition, the omission claim failed because Samsung did not omit information related to infringement. As the court explained in its previous order, Samsung expressly disclaimed the implied warranty of non-infringement.

The plaintiff’s affirmative misrepresentation theory for his CLRA claim was predicated on Samsung’s use of its own brand name. The misrepresentation claim is governed by the reasonable consumer test and requires a showing that members of the public are likely to be deceived by Samsung’s alleged misrepresentation. The plaintiff contended that Samsung’s use of its brand name was deceptive because "significant components of the products were not that of Samsung, but rather that of its rival Apple." Yet nowhere in the SAC did the plaintiff allege that his Galaxy SIII in fact included Apple components, the court observed.

Further, Samsung disclaimed any warranty of non-infringement. Thus, the plaintiff could not plausibly claim that a consumer would understand the brand name "Samsung" on a package label to mean that the phone in that package included no parts infringing another’s patent. Therefore, the court granted Samsung’s motion to dismiss the CLRA claim with prejudice because the plaintiff failed to cure the deficiencies previously identified by the court, amendment would be futile, and amendment would cause undue prejudice to Samsung.

UCL. The UCL creates a cause of action for business practices that are (1) unlawful, (2) unfair, or (3) fraudulent, the court noted.

The plaintiff’s unlawful prong claim rests on Samsung’s alleged violations of (1) the warranty of non-infringement, (2) the CLRA, and (3) the Tariff Act of 1930. Because the court has dismissed the warranty and CLRA claims with prejudice, the plaintiff may not rely on those claims as a predicate for an unlawful prong UCL claim, the court explained. Additionally, the plaintiff’s attempt to rely on the Tariff Act of 1930 failed because he did allege any harm from Samsung’s violation of the Tariff Act of 1930.

The unfair prong of the UCL prohibits a business practice that violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits. The court previously dismissed the unfair prong UCL claim because the unfair prong claim "entirely overlap[ped]" with Plaintiff’s unlawful prong UCL allegations. The unfair prong UCL claim in the SAC was no different, and so, failed.

Plaintiff’s SAC included the new allegation that Samsung violated the fraudulent prong of the UCL. The claim under the fraudulent prong was dismissed because the CLRA claim failed, and causes of action under the CLRA and the fraudulent prong of the UCL rise or fall together, the court held.

Unjust enrichment. The elements of a claim of quasi-contract or unjust enrichment are (1) a defendant's receipt of a benefit and (2) unjust retention of that benefit at the plaintiff’s expense. In its previous order, the court dismissed the plaintiff’s unjust enrichment claim because he had "not alleged facts showing that it was unjust for Samsung to keep Plaintiff’s money when Samsung did not warrant that the Galaxy SIII was non-infringing." The unjust enrichment claim rested on Samsung’s alleged failure to inform the plaintiff that the phone infringed Apple’s patents, but Samsung "expressly disclaimed any warranty of non-infringement," which "doom[ed] Plaintiff’s unjust enrichment claim."

The plaintiff failed to cure the deficiencies previously identified, according to the court. The gravamen of the unjust enrichment claim remained that Samsung was unjustly enriched because Samsung did not disclose that certain "component parts . . . infringed upon Apple’s patents."

This case is No. 5:14-cv-00530-LHK.

Attorneys: Michael Robert Reese (Reese LLP) for Hoai Dang. Bruce Alan Khula (Squire Patton Boggs [US] LLP) for Samsung Electronics Co, Ltd., Samsung Electronics America, Inc. and Samsung Telecommunications America, LLC.

Companies: Samsung Electronics Co, Ltd.; Samsung Electronics America, Inc.; Samsung Telecommunications America, LLC

MainStory: TopStory Patent TechnologyInternet CaliforniaNews

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