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CAFC Sanity on Permanent Injunctions. A Twisted Sister Moment?


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: December 20, 2012 @ 2:50 pm
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Chief Judge Randall Rader of the CAFC.

On Monday the United States District Court for the Northern District of California refused to issue a permanent injunction against Samsung’s continued infringement of Apple’s patents. That ruling was reached despite the fact that Apple’s patents withstood invalidity challenges from Samsung, despite the fact that Apple prevailed in the patent infringement litigation AND despite the fact that the district court found that Apple and Samsung were direct competitors. For my rant on the decision explaining why it was wrong and the damage done to the patent system by failure to grant permanent injunctions to victorious patentees who are competitors see No Permanent Injunction for Apple in Samsung Patent Battle.

On Wednesday, December 19, 2012, in a wholly unrelated case, but one that shares important factual similarity to the aforementioned Apple/Samsung matter, the United States Court of Appeals for the Federal Circuit determined that the United States Federal District Court for the Southern District of California abused its discretion when it refused to award a victorious patent plaintiff a permanent injunction where the patentee directly competes with the infringer. The case is Presidio Components v. American Technical Ceramics. The opinion was authored by Chief Judge Rader and joined by Judge Plager and Judge Wallach.

Perhaps this case will be a turning point, something of a Twisted Sister moment. You know — “we’re not gonna take it, no, we ain’t gonna take it, we’re not gonna take it anymore…” I sure hope so!

Background

After a trial, the district denied American Technical Ceramics Corporation’s (“ATC”) motions for judgment as a matter of law (“JMOL”) and in the alternative a new trial on validity and infringement of U.S. Patent No. 6,816,356 (“the ’356 patent”). ATC appealed those decisions. Presidio Components, Inc. (“Presidio”) cross-appealed the district court’s denial of a permanent injunction, JMOL on willfulness, and its ongoing royalty rate and false marking determinations.

The Federal Circuit affirmed the vast majority of the district court’s determinations set forth in what Chief Judge Rader characterized as a comprehensive and attentive opinion. The exception, however, was with respect to the district court’s finding of no irreparable injury and the related denial of a permanent injunction, as well as the ongoing royalty determination and false marking judgment.  The false marking judgment was reversed due to an intervening change in law.

Lack of Permanent Injunctions

The part of the case I want to focus on is with respect to the issue of whether the patentee was entitled to a permanent injunction. Once upon a time a victorious patentee was ordinarily granted a permanent injunction nearly as a matter of right.  That made perfect sense given that the patent grant itself is an exclusive right and a permanent injunction is an exclusionary order. The permanent injunction in a patent case really would say nothing more than the patent itself says. The sole effect of the permanent injunction is really to continue to vest the district court with authority to enforce the right granted in the patent after a finding that the patents in question are not invalid and have been infringed. That just means that if there is continued infringement of the same order the patentee could return to the district court under a contempt proceeding rather than having to start over from scratch with a long, protracted and expensive patent litigation.

Starting late in the morning on May 15, 2006, the United States Supreme Court changed everything. The court issued its ruling in eBay v. MerchExchange that day, which ruled that in order to receive a permanent injunction in a patent litigation the victorious plaintiff needs to demonstrate: (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.

Ever since the eBay decision it has been harder and harder for victorious patentee plaintiffs to get a permanent injunction, which largely turns the patent system into a compulsory licensing regime. In my opinion, and the opinion of many in the industry, the eBay case was a bad mistake by the Supreme Court. It is, however, the law and until they decide to change it or Congress steps in we have to deal with it.

Having said that, there has to be a place where the patent grant itself actually gets considered. If the familiar 4 part injunction test doesn’t ever consider that we are dealing with an exclusionary right then it simply is not appropriate in patent cases. If we are going to live with the 4 factor test it has to be informed by the fact that the patentee has been given a right to exclude and the patent has withstood challenge. The patent is valid and being infringed. There has to be injunctive relief in most cases, otherwise why get a patent? Unfortunately, in most cases since eBay a permanent injunction is not obtained, which is just wrong.

The CAFC on Permanent Injunctions

Enter the Federal Circuit.

Based on the aforementioned four-factor test for permanent injunctions, the district court denied Presidio’s request for a permanent injunction. Specifically the trial court detected no irreparable injury or inadequacy of monetary damages. The court also found that the balance of hardships favored injunction, while the public interest tipped in ATC’s favor. However, the trial court noted that “substantial evidence supported the jury’s finding that demand existed for the BB capacitors, which compete with the 545L capacitors.” With this direct competition in the same market, the district court still opined that ATC was not a direct competitor for purposes of finding irreparable injury.

Chief Judge Rader wrote:

The tension created by acknowledging competition for one purpose but not for another, combined with Presidio’s other evidence showing irreparable injury, shows that the district court clearly erred by dismissing the irreparable injury evident on this record.

Of course the axiomatic remedy for trespass on property rights is removal of the trespasser.

Indeed, it is axiomatic that when one trespasses on property the proper outcome is a removal or the trespasser and an order forbidding future trespass. That is property law 101. But the Federal Circuit did not stop here. Rader went on to say:

This historical practice of protecting the right to exclude through injunctive relief is not surprising given the difficulties of protecting this right solely with monetary relief. Indeed, a calculating infringer may thus decide to risk a delayed payment to obtain use of valuable property without prior negotiation or the owner’s permission.While a patentee is not entitled to an injunction in every case, it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.

But wait, there is more. The Chief Judge Rader also explained that the district court put too much weight on the fact that the patentee did not practice the invention embodied in the ‘356 patent. He wrote:

Even without practicing the claimed invention, the patentee can suffer irreparable injury. Direct competition in the same market is certainly one factor suggesting strongly the potential for irreparable harm without enforcement of the right to exclude.

In this case the patentee plaintiff did sell capacitors, although the patent that was being infringed related to capacitors different than those being sold by the patentee plaintiff. So even though the patentee plaintiff did not practice the invention of the ‘356 patent the patentee plaintiff and infringing defendant did compete in the same market.

Importance of the Decision

The Federal Circuit again points out that district courts must not ignore the fundamental nature of patents, which is a right to exclude, when they consider the four-factor injunction test. If district courts really do consider that in their analysis we will see a reversal of the rate of permanent injunctions. Not every case will result in a permanent injunction, but more often than not a permanent injunction should issue.

This case is also important because it point blank says that even a non-practicing patentee who competes in the same market should be entitled to prevail on the all important irreparable injury consideration. Again, if district courts follow this that should mean that patentees who are competitors should be granted permanent injunctions because the four-factor test will tip heavily in their favor. Again, a sensible approach to the issue of permanent injunctions that recognizes the exclusive rights granted in a patent and the fact that a patent is a wasting asset. Stopping competitors for the term of the patent is the whole point of obtaining a patent. Of course there will be irreparable harm when patentee and infringer compete!

Lastly, this decision is important for Apple. If they have not yet already done so they will almost certainly be filing a motion to reconsider in their battle with Samsung. In that case Apple and Samsung directly compete and Apple does practice the invention infringed. Thus, based on the decision in Presidio Components, it is clear that Apple should have been awarded a permanent injunction.  At least it is clear to me and I suspect it will be equally clear to the Federal Circuit on appeal.

This is a good decision for patentees who sue competitors and prevail. It brings sanity back to the permanent injunction inquiry. Thank you Chief Judge Rader, Judge Plager and Judge Wallach!

HAT TIP AND THANKS… to Paul Ackerman of The Point of Novelty for bringing this case to my attention.

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Posted in: Apple, Companies We Follow, Federal Circuit, Gene Quinn, IP News, IPWatchdog.com Articles, Patent Litigation, Patents

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

8 comments
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  1. I would love to hear MaxDrei’s take on this important (and precedential) case.

  2. Gene,

    Did the district cite Justice Kennedy’s concurring opinion in eBay. In citing eBay, Rader’s opinion cites primarily to the Opinion of the Court (written by Justice Thomas) and once to Chief Justice Robert’s brief concurring opinion; that’s telling to me. District courts, in particular, that cite to Juistice Kennedy’s bizarre concurring opinion tend to deny permanent injunctions; that was true of the z4 Technologies v. Microsoft (ED Texas 2006) which was the first case I saw that applied the eBay ruling to deny a permanent injunction, and cited specifically to Kennedy’s concurring opinion to do so.

  3. Ah – someone from my generation! Great Twisted Sister reference to aid effective legal commentary. (Q: “What’s that, a Twisted Sister pledge pin? . . . .What do you want to do with your life?” A: “I wanna rock.”).

  4. If the so-called intellectual property owner has no right to exclude infringers from his property, we need to re-name all of this stuff as “intellectual royalty right” and forget the “property” moniker.

    Of course, if no-injunction becomes the prevailing wisdom, “intellectual” is also called into doubt.

  5. Finally a few are getting things really right for a change! Why would I bother to spend the money, and especially the Time to acquire a patent, unless I thought it was really going to be worth something some day? Your remarks about patents being wasting assets really rang a bell for me, which expression I had never heard of before. Going after a valid patent is a leap of faith in some respects, hoping that it might actually be worth something some day in the future. Prior art, bad court decisions, and market conditions can render a patent virtually worthless. even after you have done all of the heavy lifting to make something new actually work as advertised to the world eventually.

    Gone with the stroke of a gavel in some cases, so I hope to never have to be there. I asked my patent agent about what might happen during possible litigation, and he said something like;

    “Why would we ever want to appear in a court of law?” The proverbial ounce of prevention being the unspoken message.

    Stan~

  6. BTW- I understand that patent agents are not licensed to represent you in a court of law, which means that I would have to hire an attorney if things ever had to go to a court dispute. In these uncertain times, I can imagine that contingency representation is going to be harder to find, and will probably be more expensive if I can find it at all.

    Stan~

  7. Stan-

    Contingency representation in patent cases was once upon a time completely unheard of. It is still not at all common, but it is far more common than it used to be. Those who are involved with working with inventors, either on a contingency basis or in partnership, tell me that they take about 1% of what they are approached with. That number seems quite reasonable and suggests that contingency representation is alive and well. Most inventors think they have great patents and convince themselves that things that are not infringing are infringing. So there are just a lot of bad cases that inventors want to pursue. In my experience overwhelmingly those who want contingency representation have a very shaky case. There are also situations where infringement might be straight forward but there isn’t much in the way of damages. You just can’t take a contingency case in those circumstances.

    For inventors with a solid patent and widespread infringement there will likely be patent litigators who would be willing to take a matter on a contingency, or companies that will partner on enforcement, such as Acacia. But in these deals the split is typically at best 60-40, but more commonly a 50-50 split after expenses are paid. This may be the only route to go though because those who are infringing may not be willing to talk about a license as long as an inventor is going it alone.

    The other alternative is to try and sell the patent. While that leads to upfront money it is a lot less than what most inventors would like to obtain.

    Cheers.

    -Gene

  8. Thanks for the very interesting answer Gene. I am tending towards an exclusive licensing arrangement, with perhaps turn-key tooling all ready to go. If my patent is Presumed to be Valid, it might help my case out quite a bit.

    Otherwise I could just skip the whole patent concept, and just be there first with the best, but the market would probably evaporate pretty quickly, I am supposing. Different strategies for different fields I tend to think.

    Have you voted for your favorite IP blog yet? I like it a lot here, as the discussions tend to be very elightened. and lacking in rudeness for the most part. The odd loose cannon can usually just be ignored, and wisdom and education can be pursued without undue interference.

    But then again there are now derivation proceedings instead of interference proceedings. Looks as if it might take several years to figure that whole thing out. Why is that even neccesary? To align our patent system with other folks overseas? Why should an American inventor care about that even slightly?

    Meanwhile our duly elected representatives are all too happy to sell my IP rights to the highest bidder. In this case IT and phone innovations, which might only be valid for about another 8 years. What then in re patent law?