Federal Circuit Stays Injunction Pending Appeal for Medical Bandages & Dressings Used by U.S. Military

Last week, on November 18, 2010, the United States Court of Appeals for the Federal Circuit granted a stay to HemCon, Inc., which will prevent implementation of the injunction issued against it and in favor of Marine Polymer Technologies, Inc.  The stay will remain in effect during the pendency of HemCon’s appeal to the Federal Circuit. The stay issued by the Federal Circuit will allow the adjudicated infringing bandages sold by HemCon to continue to be supplied to the United States Military.

The permanent injunction had been awarded by the United States Federal District Court for the District of New Hampshire, and relates to U.S. Patent No. 6,864,245, for Biocompatible poly-?-1?4-N-acetylglucosamine. In essence, the ‘245 patent relates to a polymer of high molecular weight that is free of proteins and substantially free of organic and inorganic contaminants. The biodegradable barriers of the invention include p-GlcNAc based materials used for temporary barriers which become resorbed by the body. Products that prevent the formation of surgical adhesions, stop bleeding, and promote wound healing are contemplated by the ‘245 patent.

The injunction issued by Judge DiClerico of the District of New Hampshire reads as follows:

For the life of United States Patent No. 6,864,245 (“the ‘245 patent”) HemCon, Inc., its officers, agents, servants, employees, attorneys, successors in interest, assigns, and all other persons in active concert or participation with them, including without limitation, HemCon’s distributors, are enjoined from infringing asserted claims 6, 7, 10, 11, 12, 17, and 20 of the ‘245 patent by making, using, selling, offering to sell, distributing, or importing into the United States HEMCON® BANDAGE (4″ x 4″, 2″ x 2″, and 2″ x 4″), CHITOFLEX™ Dressings, HEMCON® DENTAL DRESSINGS (10mm x 12mm and 1″ x 3″), and any other products which are no more than colorably different from these infringing products.

According to the HemCon website, the hemostatic HemCon® Bandage provides a patient with the time needed to either reach care or gain the critical time to clot and offers an antibacterial barrier against a wide range of microorganisms.  The ChitoFlex dressing incorporate the same technology as the hemostatic HemCon® Bandage, but is in a unique stuffable strip form. The ChitoFlex dressing is provided in a variety of lengths, and each piece of ChitoFlex, whether roll or used in strip form, provides the medical professional with a solution that is quick-acting, natural, localized and effective when applied to a wound.  Both the Hemcon Bandages and the ChitFlex dressings are easy to apply, and are effective to stop even the most severe bleeding.  For more on HemCon products see HemCon Products Overview.

For those familiar with the law surrounding injunctions you can probably already see why the Federal Circuit most likely issued a stay of the permanent injunction, though the extremely brief Order is not very informative.  Whenever a Court issues an injunction they are resorting to their equitable powers, and whenever a Court is asked to do what is equitable and just given the circumstances more than just the immediate dispute is supposed to be considered.  One of the things a Court is supposed to consider is the potential impact on the public.

As explained recently by the Supreme Court in eBay v. MercExchange, in order to be entitled to receipt of an injunction a plaintiff requesting an injunction must demonstrate four things:

(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.

Although the decision to issue a stay pending appeal is rather cryptic, I suspect the Federal Circuit may have been looking specifically at this fourth factor when it decided to issue the stay pending appeal.

It is somewhat difficult to piece together the entirety of this litigation.  In looking on PACER for documents I was initially surprised to see the number of Motions and Orders filed under Seal, which means they are kept secret and not available to the public.  In some instances where a trade secret is involved you will see this in patent infringement cases, but never have I seen so many documents filed under Seal.  Once the underlying technology gets factor in, however, it is easy to understand that there is far more than meets the eye, potentially issues of national security as pertaining to the treatment of soldiers wounded in battle.  I am speculating here, but I suspect this is a pretty good speculation.

In a press release John W. Morgan, HemCon’s President and Chief Executive Officer, is quoted as saying:

HemCon is extremely pleased that the appellate court agreed that HemCon could continue selling its product line during the pendency of the appeal. We will urge on appeal that the lower court decision finding infringement was incorrect, in part because the Marine Polymer patent is invalid when properly interpreted.  The stay is a victory for HemCon’s customers, including military personnel whose lives are being saved by HemCon products, and hospital patients who benefit from reduced infection risk and better hemostasis.

Morgan went on to say:

In imposing the stay, the Court of Appeals concluded that HemCon had shown a strong likelihood of succeeding on appeal, or at least a substantial case on the merits and that any potential harm weighed in HemCon’s favor.  We believe the appeals court will ultimately agree with our conclusion that our products do not infringe the Marine Polymer patent. We look forward to further presenting our case to the Court.

You cannot blame Morgan for being excited, particularly given that the judgment included a monetary loss of over $29,000,000 in addition to the permanent injunction.  Having said this, however, I think his reading of the tea-leaves might be a little misplaced, at least when his statements are read by a lay observer.

In deciding to issue the stay the Federal Circuit explained:

To obtain a stay,  pending appeal, a movant must establish a strong likelihood of success on the merits or, failing that, nonetheless demonstrate a substantial case on the merits provided that the harm factors militate in its favor.  In deciding whether to grant a stay, pending appeal, this court assess the movant’s chances of success on the merits and weights the equities as they affect the parties and the public.

Based on the arguments in the motions papers, and without prejudicing the ultimate disposition of this case by a merits panel, we determine that HemCon, Inc. has met its burden to obtain a stay of the permanent injunction and the final judgment.

Given the products involved, that they are used by the United States military and are seemingly revolutionary for their ability to act as a barrier and accelerate clotting and wound healing, it seems extremely likely that this stay was based on the potential negative effect on the public more than anything else.  Of course, much remains to be decided as this case moves forward on appeal.