CAFC Remands Injunction Against Dismissed Party, Affirms Infringement and Validity

Asetek Danmark A/S v. CMI USA Inc.,  (Fed. Cir. Dec. 6, 2016) (Before Prost, Newman, Taranto, J.) (Prost, J, dissenting).

Asetek Danmark sued Cooler Master USA, Inc. (“CMI”) and Cooler Master Co., Ltd. (“Cooler Master”), alleging that three products infringed two of Asetek’s patents. The patent claimed systems and methods for cooling central processing units. Before trial, Cooler Master was dismissed from case by stipulation, with prejudice.  Asetek was later awarded a judgment of infringement, no invalidity, and damages in the amount of $404,941 based on a 14.5% royalty rate. In a post-trial ruling, the district court entered an injunction against both CMI and Cooler Master, prohibiting them from making, using, selling, or offering to sell the infringing products and requiring them to provide a notice of the injunction on all infringing products. CMI and Cooler Master appealed, challenging the district court’s rulings on infringement, nonobviousness, and the injunction. CMI also challenged the ruling on damages. The Federal Circuit affirmed on infringement, no invalidity, and damages, but remanded as to the injunction.

On appeal, CMI and Cooler Master argued that there was no infringement because the accused products did not have “removably attached” or “removably coupled” “heat exchanging interfaces.” Removing the interfaces would damage the products or render them nonfunctional. The Court rejected this argument because, based on the ordinary meaning of the terms, “[t]here is nothing unreasonable about finding a component ‘removably attached’ if it can be detached in such a way that the devices would function again if the component were reattached.”  Next, CMI and Cooler Master argued that the “thermal exchange chamber” recited in the claims would have been obvious over a combination of two references teaching a “sucking channel” because a sucking channel “exchanges some heat.” The Court rejected this argument. “[T]he fact that [a] ‘sucking channel’ exchanges some heat, no matter how minimal and inevitable, does not entail that it is properly considered a ‘thermal exchange chamber.’” CMI also argued that the court improperly relied on Asetek’s per-unit profit margin in calculating the reasonable royalty rate. The Court rejected CMI’s argument. “The fact that a royalty calculation relies in part on the patent owner’s per-unit profits does not ‘make it an unreasonable award’” because “[n]egotiating for a per-unit payment equal to its per-unit profit can be a logical approach for a patent owner.”

Finally, CMI and Cooler Master challenged the injunction. First, they argued that the district court was precluded from subjecting Cooler Master to the injunction because it had been dismissed from the case and was not adjudicated to be liable for infringement. The Court rejected this argument, finding that Cooler Master could be enjoined because the claim covered by the dismissal—Cooler Master’s pre-dismissal conduct—was not the same as the claim covered by the injunction—Cooler Master’s post-dismissal conduct— so there was no claim preclusion. Second, they argued that the injunction was too broad because it reached Cooler Master’s independent conduct after it had left the case.

The Court noted that there are two instances in which an injunction can reach the conduct of a party not adjudicated to be liable in the underlying case: first, the non-liable party aids the liable party in committing the infringement and second, the non-liable party is legally identified with the liable party. The second category, which was the only one at issue in the case, can include situations in which the non-liable party is in privity with the liable party, is the successor of the liable party, or if liable party’s litigation of the case is sufficiently controlled by the non-liable party. The Court declined to rule on the injunction and instead remanded the case for further proceedings to determine whether Cooler Master may be “legally identified” with CMI for purposes of an injunction.

Chief Judge Prost disagreed with the majority’s decision to remand the case for further proceedings on the injunction. She believed the Court should have vacated the injunction because the district court did not have authority to impose obligations on Cooler Master after it had been dismissed from the case, and there were no facts in the record to suggest that Cooler Master was either abetting CMI in the infringement or was legally identified with CMI.

A district court does not have authority to issue an injunction against a party not adjudicated to be liable for infringement in the underlying case unless that party aided or abetted the liable party in the infringement, or the non-liable party is legally identified with the liable party through privity or some other means. This determination requires specific findings of fact about the parties.

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