Selected cases where infringement exists, but a federal judge permits ongoing infringement.
2006. June 14: z4 Techs., Inc. v. Microsoft Corp., 434 F. Supp. 2d 437, 439 (E.D. Tex. 2006)
Patents 6,044,471 and 6,785,825 disclose methods for limiting the unauthorized use of computer software, referred to as product activation. z4 Techs brought an action against Microsoft for infringement of these patents. Following a jury verdict finding infringement, z4 Techs moved for a permanent injunction.
The Court denied the permanent injunction requested by z4. In its decision the Court took into consideration the fact that Microsoft was only using the infringing technology as a small component of its own software. The Court also determined that z4 was not going to suffer lost profits, loss of brand name recognition or loss of market share because of Microsoft’s continued sale of the infringing products. The Court found that it was not difficult to calculate the appropriate royalty rate for future infringement based on the sale of Microsoft products.
There is no logical reason that a potential consumer or licensee of z4’s technology would have been dissuaded from purchasing or licensing z4’s product activation technology for use in its own software due to Microsoft’s infringement. Similarly, Microsoft’s continued infringement does not inhibit z4’s ability to market, sell, or license its patented technology to other entities in the market. Microsoft does not produce product activation software that it then individually sells, distributes, or licenses to other software manufacturers or consumers. If it did, then z4 might suffer irreparable harm in that Microsoft would be excluding z4 from selling or licensing its technology to those software manufacturers or consumers. However, Microsoft only uses the infringing technology as a small component of its own software, and it is not likely that any consumer of Microsoft’s Windows or Office software purchases these products for their product activation functionality.
In the absence of a permanent injunction against Microsoft, z4 will not suffer lost profits, the loss of brand name recognition or the loss of market share because of Microsoft’s continued sale of the infringing products. These are the type of injuries that are often incalculable and irreparable. The only entity z4 is possibly prevented from marketing, selling or licensing its technology to absent an injunction is Microsoft. As discussed in the next section, z4 can be compensated for any harm it suffers in the way of future infringement at the hands of Microsoft by calculating a reasonable royalty for Microsoft’s continued use of the product activation technology. Accordingly, z4 has not demonstrated that it will suffer irreparable harm absent a permanent injunction.
Microsoft indicated that it is phasing out all infringing products beginning with the release of its 2007 versions of Windows and Office in January of 2007. Microsoft calculates that it will then require two to three years after the release of these new products for all infringing products to be phased out of its product line. Calculating the appropriate royalty rate for any future infringement based on the sale of the older Microsoft products should not be too indefinite or difficult. Such future damages will not be based on injuries that are difficult to measure such as the loss of market share or damage to brand name recognition and good will, but will be based on a reasonable royalty for each of the infringing products sold by Microsoft. This calculation can be made based on the same reasonable royalty calculation used by the jury at trial and by referring to Microsoft’s internal records showing the number of sales for the infringing copies of software during the time period. Furthermore, it is not a legitimate concern that Microsoft would be unable to pay damages incurred by z4 through any future infringement.
Similarly, Microsoft argues that the repercussions of “turning off” its product activation system are incalculable, particularly in the likely event that the public became aware of the fact that the activation servers were deactivated. Microsoft argues that in such an event the market would be flooded with pirated software resulting in incalculable losses. Microsoft contends that without the deactivation servers it has no way of deactivating software that has been pirated and installed on multiple computers. Furthermore, Microsoft contends that when the product activation servers are “restarted” it would have no way of determining which copies of the programs installed over that period of time were legitimate legal copies of the product and which were illegal pirated versions. Microsoft claims this would inhibit it from servicing the legitimate copies with product updates and patches.
Although the arguments presented by Microsoft may be hypothetical, the scenarios Microsoft describes are not out of the realm of possibility and are in some instances quite likely. Importantly, the potential hardships Microsoft could suffer if the injunction were granted outweigh any limited and reparable hardships that z4 would suffer in the absence of an injunction.
Again, although it is impossible to determine the actual events that would follow the deactivation of Microsoft’s product activation servers, it is likely that the market would see an increase in pirated versions of the software. As a result, unsuspecting public consumers would undoubtably suffer some negative consequences.
Under both aspects of z4’s proposed permanent injunction, there is a risk that certain sectors of the public might suffer some negative effects. However, the Court is unaware of any negative effects that might befall the public in the absence of an injunction. Although these negative effects are somewhat speculative, such potential negative effects on the public weigh, even if only slightly, against granting an injunction. Accordingly, the public interest is likely to be disserved if a permanent injunction were entered against Microsoft.
2007. January 4: Sundance, Inc. v. DeMonte Fabricating Ltd., No. 02-73543 (E.D. Mich. Jan. 4, 2007)
Patent 5,026,109 relates to a segmented cover system utilizing a series of cover sections. Sundance brought an action against DeMonte for infringement of this patent. Following a jury verdict finding infringement, Sundance moved for a permanent injunction.
The Court denied the permanent injunction requested by Sundance. In its analysis of the adequacy of available remedies, the Court considered that Sundance licenses the ‘109 patent to others, and offered to license this patent to DeMonte prior to filing suit against it, which demonstrates that money damages are adequate. The Court also determined that the balance of harms favored DeMonte, which argued that a permanent injunction would affect its ability to compete with other tarp manufacturers and that it could force DeMonte out of business.
Sundance says that money damages are not adequate again because of the nature of the competition between DeMonte and Sundance’s licensees. This fact does not establish an inadequate remedy at law. Indeed, Sundance licenses the ′109 patent to others, and offered to license it to DeMonte prior to filing suit against it, thus demonstrating that money damages are adequate. Their conduct against DeMonte and others (Aero) indicates an interest only in obtaining money damages against accused infringers.
Sundance says that the hardships weigh in its favor because it has endured a trial and protracted reexamination proceedings and now has a verdict in their favor. DeMonte, however, says that it will suffer hardship if an injunction is entered, which would affect it ability to compete with other tarp manufacturers and could force it out of business. Under these circumstances, the balance of harms favors DeMonte.
2007. March 27: Praxair, Inc. v. ATMI, Inc., 479 F. Supp. 2d 440, 441 (D. Del. 2007)
Patents 6,007,609, 6,045,115, and 5,937,895 disclose embodiments of an apparatus which safely control the discharge of pressurized fluids from the outlet of pressurized tanks. Praxair brought an action against ATMI for infringement of these patents. Following a jury verdict finding infringement, Praxair moved for a permanent injunction.
The Court denied the permanent injunction requested by Praxair. The Court noted that Praxair had a burden to iterate specific reasons why infringement can not be compensated for with a money award. Based on this, the Court determined that Praxair had not explained why it may have “difficulties calculating damages going forward,” nor how money damages could not adequately compensate for “lost market share” or any “lost research opportunities.” The Court stated that “Praxair’s desire to become a monopoly supplier in its product’s market is hardly unique, and is not conclusive evidence of any factor.”
While money damages are generally considered inadequate to compensate for the violation of a patentee’s right to exclude, Praxair nonetheless had a burden to iterate specific reasons why ATMI’s infringement can not be compensated for with a money award. TiVo Inc. v. EchoStar Communications Corp., 446 F.Supp.2d 664, 669–70 (E.D.Tex.2006) (granting permanent injunction where plaintiff was “a relatively new company with only one primary product,” and the parties agreed that customers tend to remain loyal to the company from which they obtained their first DVR recorder, “shaping the market to [p]laintiff’s disadvantage and result[ing] in long-term customer loss”). Praxair has not explained why it may have “difficulties calculating damages going forward,” nor how money damages could not adequately compensate for “lost market share” or any “lost research opportunities.” (D.I. 315 at 11) Both parties cite to evidence demonstrating that the VAC®/UpTime™ sales are not critical to either party’s overall corporate success. Praxair’s desire to become a monopoly supplier in its product’s market is hardly unique, and is not conclusive evidence of any factor.
2007. July 27: MercExchange, L.L.C. v. eBay, Inc., 500 F. Supp. 2d 556, 560 (E.D. Va. 2007)
Patent 5,845,265 relates to used and collectible goods offered for sale by an electronic network of consignment stores. MercExchange brought an action against eBay for infringement of this patent. Following a finding of infringement, MercExchange moved for a permanent injunction. MercExchange renewed its request for a permanent injunction after the eBay Inc. v. MercExchange Supreme Court decision required courts to apply the four-factors test.
The Court denied the renewed motion for a permanent injunction. The Court found that the harm to MercExchange for the infringement of the ‘265 patent appeared to be compensable with money damages. The Court took into consideration MercExchange’s previous licensing activity, as well as negotiations with eBay and stated willingness to license its patents to eBay. Although the Court ultimately determined that the balance of hardship factor favored neither of the party, one of the facts weighted was the fact that “MercExchange appears to exist solely to license its patents to established internet companies that either infringe or are fearful of litigation if they potentially infringe.”
In summary, although eBay is an adjudicated infringer and apparent market monopolist, the ′265 patent is presently valid and enforceable, MercExchange discussed partnering with uBid, and eBay has not yet proven that it successfully designed around the ′265 patent, when such facts are considered in conjunction with all of the facts of this case, the court concludes that MercExchange fails to carry its burden of establishing that eBay’s infringement of the ′265 patent resulted in irreparable harm to MercExchange. Rather, MercExchange’s harm, although real, appears compensable in money damages as the timing of MercExchange’s post-trial discussions with uBid is suspicious, uBid’s proposal failed in part based upon uncertainty unrelated to whether the court issues an injunction, and MercExchange failed to seek a preliminary injunction to prevent eBay from increasing its market share yet later attempted to use eBay’s market domination against it. Furthermore, KSR reveals the Supreme Court’s reservations regarding patents similar to the ′265 patent, the PTO twice issued interim actions rejecting all claims in the ′265 patent as obvious prior to the issuance of KSR, and MercExchange has repeatedly, both publicly and privately, acted inconsistently with its right to exclude and indicated its desire to obtain money in exchange for eBay’s right to utilize MercExchange’s patents. Such public and private actions include: previously licensing its patents to several third parties; MercExchange’s website’s apparent attempt to seek out new licensees; negotiations with eBay and stated willingness to license its patents to eBay; MercExchange’s and its attorney’s statements both before and after trial indicating that MercExchange was not trying to shut down eBay but only sought a reasonable royalty; and finally, MercExchange’s failure to use the favorable jury verdict as a means to begin enforcing its right to exclude, instead choosing to license its entire patent portfolio subsequent to trial in exchange for future royalties. In the end, the burden to establish irreparable harm lies with the plaintiff, and MercExchange has failed to carry such burden. Although it is tempting to view eBay’s status as a willfully infringing market monopolist as automatically constituting irreparable harm, the Supreme Court has cautioned against just such conclusions, and this court has endeavored to carefully consider each of the unique facts underlying this complex case; careful consideration of such facts reveals that MercExchange has no reputation to protect, no goodwill or brand recognition to protect, no customer base to retain, no well-established licensing program to follow, and no current royalty stream to maximize. Furthermore, it was MercExchange that freely chose to repeatedly indicate that it was willing to forgo its right to exclude and license its patents to eBay and others. MercExchange’s strongest counterpoint to such facts is that five years after the instant suit was filed, and three years after a favorable jury verdict, a proposed, not actual, business relationship that was not even conceptualized by MercExchange establishes irreparable harm. The court disagrees, and finds that the first factor weighs against entry of an injunction.
As suggested above, money damages appear adequate to compensate MercExchange not only in the eyes of this court, but also in the eyes of MercExchange as its pre-trial negotiations with eBay, post-trial statements to the public, arrangement with Updata, and sale of its entire portfolio to uBid in 2004, reveal MercExchange’s consistent desire to obtain royalties in exchange for a license to its intellectual property. See High Tech Medical, 49 F.3d at 1557 (indicating that offering a license to the defendant made it “clear” that the plaintiff was willing to forgo the right to exclude and that any injury suffered could be adequately compensated by money damages); Illinois Tool Works, 906 F.2d at 683 (highlighting the plaintiff’s failure to establish why the infringer’s use of the patent is “any less compensable in dollars than” utilization of the patent by prior licensees). Furthermore, both presently, and at the time of trial, MercExchange has virtually no presence in the online auction industry and has little, if any, name recognition, customer base, market share or licensing program spurring patent development.24 In contrast to MercExchange’s lack of market presence, because eBay is the dominant player in the online auction industry, it appears that a royalty from eBay would compensate MercExchange for the lion’s share of infringing transactions, providing MercExchange with the monetary prize it has continually pursued through its sustained attempts to sell off its intellectual property rights. Additionally, as noted in this court’s prior opinion, eBay’s willful infringement may lead to the entry of an award for enhanced damages because although the parties dispute whether eBay successfully designed around the ′265 patent, it is undisputed that for at least some period of months, post verdict, eBay continued infringing the ′265 patent. Because, similar to punitive damages, enhanced damages are intended to punish/deter egregious conduct, it is possible that the monetary award ultimately collected by MercExchange will actually over compensate MercExchange for the value of its patent, thus making monetary damages more than adequate as a remedy. Accordingly, the court finds that in this particular case, the plaintiff has an adequate remedy at law, a factor weighing against entry of an injunction.
The third prong, balance of the hardships, favors neither party due to the uncertainty surrounding MercExchange’s ability to partner with uBid and compete in the relevant market, uncertainty involving whether eBay has designed around the ′265 patent, and uncertainty involving whether such patent will survive reexamination. On one hand, eBay is an adjudicated willful infringer of plaintiff’s ′265 patent, weakening eBay’s claim on the Chancellor’s conscience and “[o]ne who elects to [utilize a business method] found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected.”25 Windsurfing Intern. Inc. v. AMF, Inc., 782 F.2d 995, 1003 (Fed.Cir.1986). Additionally, eBay has claimed to the public and this court that it designed around the ′265 patent, and thus, taking eBay at its word, it appears that no harm would befall eBay by the issuance of an injunction. See W.L. Gore, 842 F.2d at 1282 (quoting General Electric Co. v. New England Electric Mfg., 128 F. 738, 740 (2d Cir.1904)) (“The argument in such circumstances is very simple. If the defendant be honest in his protestations an injunction will do him no harm; if he be dishonest, the court should place a strong hand upon him.”).
On the other hand, MercExchange appears to exist solely to license its patents to established internet companies that either infringe or are fearful of litigation if they potentially infringe; MercExchange’s specialization in obtaining fees through threatened litigation suggests that it will not suffer a hardship from a similar resolution of the instant matter.26 Although it is evident that an established partnership between uBid and MercExchange would have increased the severity of the harm suffered by MercExchange, the reality of the matter is that such relationship does not exist and this court is not moved by conjecture regarding the potential for such relationship, especially when the timing of the negotiations between MercExchange and uBid appear suspicious. Additionally, due to the uncertainty mentioned above, it remains unclear whether an injunction would be a significant benefit to MercExchange, other than for use as a bargaining chip, as uBid may not provide substantial compensation to MercExchange for an exclusive license because: (1) the continued validity of the ′265 patent remains in doubt, especially in light of KSR; (2) eBay may have already designed around the patent, making an exclusive license virtually worthless to uBid; and (3) uBid may not currently practice the ′265 patent, and even if it does, uBid’s non-exclusive license permits it to quadruple its revenues before it owes any royalty to MercExchange. As previously recognized, MercExchange has failed to point to damages to its reputation, goodwill, brand recognition, customer base or market share that were caused by eBay’s infringement. Although MercExchange argues that if eBay was forced to stop selling goods at a fixed price and customers shifted to uBid MercExchange would begin receiving royalties, even assuming that MercExchange could ultimately collect royalties in such manner,27 forcing *585 eBay to pay a similar royalty for its infringing sales would result in the same end: a fixed royalty to MercExchange.
In summary, the court finds that MercExchange has not established that it will suffer irreparable harm absent an injunction. Although the Supreme Court rejected the categorical rule that a patent holder’s willingness to license its patents precludes it from establishing irreparable harm, the Court did not state that such willingness was no longer a significant factor in the calculus, especially when prior licenses were not aimed at developing the patent. Considering past precedent as a guide in applying the four-factor test, as encouraged by the Chief Justice, although it is plain that injunctions were historically granted upon a finding of validity and infringement, one of the “historical” scenarios where infringers succeeded in overcoming a finding of irreparable harm was when the patent holder had engaged in a pattern of licensing its patents that was inconsistent with defending its right to exclude. See Polymer Tech., 103 F.3d at 975 (indicating that irreparable harm is clearly negated by a finding that “the patentee was willing to forgo its right to exclude by licensing the patent”). Such analysis is in accord with the traditional four-factor test because freely issuing licenses creates difficulty establishing why utilization of the patent by the infringer is “any less compensable in dollars than” utilization of the patent by the prior licensees. Illinois Tool Works, 906 F.2d at 683. Here, MercExchange not only has a track record for exacting a tax for utilizing its patents from market participants, but it publicly declared its desire to sell off its intellectual property rights, attempted to license its patents to eBay, and again acted inconsistently with its right to exclude after a favorable jury verdict by freely licensing its entire patent portfolio to a market participant that approached it to avoid the costs of litigation. Furthermore, MercExchange has no reputation or branding to protect, no customer base or goodwill to defend, and no present royalty stream to maximize. Additionally, the business method patent at issue never underwent a second look review and there is a distinct possibility that the ′265 patent will be invalidated through reexamination as two PTO interim office actions rejected all claims of the ′265 as obvious; such interim actions were issued prior to the Supreme Court’s KSR opinion which cast further doubt on the continued validity of the ′265 patent. The record also indicates that MercExchange has often acted with an eye toward litigation, and emails and other evidence suggest that MercExchange may have attempted to generate evidence of irreparable harm in order to advance its litigation position. Considering all such factors, and others discussed above, MercExchange has simply failed to establish irreparable harm or that damages at law will not adequately compensate it for eBay’s infringement. Additionally, after considering the balance of the harms, favoring neither party, and the public interest, favoring denial of plaintiff’s motion for an injunction, the court concludes that an injunction is not warranted. Accordingly, plaintiff’s renewed motion for entry of a permanent injunction is denied.
2008. February 1: ResQNet.com, Inc. v. Lansa, Inc., 533 F. Supp. 2d 397 (S.D.N.Y. 2008), adhered to on reconsideration, No. 01 CIV. 3578 (RWS), 2008 WL 4376367 (S.D.N.Y. Sept. 25, 2008), and aff’d in part, vacated in part, 594 F.3d 860 (Fed. Cir. 2010)
Patent 6,295,075 relates to a method of communicating between host computers and remote terminals. ResQNet.com brought an action against Lansa for infringement of this patent. Following a jury verdict finding infringement, ResQNet.com moved for a permanent injunction.
The Court denied the permanent injunction requested by ResQNet. The Court determined that ResQNet did not show sales of the infringing software were irreparable, that the remedies at law were insufficient, or that a remedy in equity is warranted given the balance of hardships. The Court imposed a reasonable royalty of 12.5% over future sales of the infringing software.
In 594 F.3d 860, 872 (Fed. Cir. 2010), the U.S. Court of Appeals, Federal Circuit, vacated the district court decision with regards to the royalty because it violated the statutory requirement that damages under § 284 be “adequate to compensate for the infringement,” and remanded to the district court for a recalculation.
ResQNet has made no showing to establish any of the four factors for a permanent injunction. There is no evidence that any injury to ResQNet by sales of NewLook is irreparable. There is no showing that remedies at law are insufficient or that a remedy in equity is warranted given the balance of hardships. Accordingly, the issuance of an injunction is not appropriate.
2009. January 6: Telcordia Techs., Inc. v. Cisco Sys., Inc., 592 F. Supp. 2d 727 (D. Del. 2009), aff’d in part, vacated in part, remanded, 612 F.3d 1365 (Fed. Cir. 2010)
Patent 4,835,763 and reissue patent 36,633 relate to telecommunications networks. Telcordia Technologies brought an action against Cisco Systems for infringement of these patents. Following a jury verdict finding infringement, Telcordia Technologies moved for a permanent injunction or, in the alternative, an order requiring Cisco to pay an ongoing royalty.
The Court denied the motion for a permanent injunction requested by Telcordia Technologies. To conclude that Telcordia Technologies will not suffer irreparable harm the Court considered the fact that it licensed the patents-in-suit to several entities, including to other defendants. The Court ordered “the parties to negotiate the terms of a reasonable royalty rate going forward.” The Court also explained that it will “permit the filing of competing proposals” should the parties fail to reach an agreement with regards to the reasonable royalty rate.
In 612 F.3d 1365 (Fed. Cir. 2010), the U.S. Court of Appeals, Federal Circuit, found that the the District Court did not abuse its discretion by directing the parties to negotiate the terms of a reasonable royalty.
Telcordia argues that it will suffer irreparable harm if Cisco’s infringement were to continue, because its “lifeblood is its ability to enforce its patents and continue to generate innovative solutions and provide patent protection for its engineers’ novel improvements and pioneering inventions.” (D.I. 367, at 2.) According to Telcordia, it’s “leverage in the market will be harmed if it cannot advise potential licensees that infringement of its patents can result in a permanent injunction.” (Id. at 3.) The court is not persuaded by Telcordia’s argument, especially given the fact that it is not supported by any evidence of irreparable harm due to Cisco’s infringement, such as lost sales, licensing, or research and development opportunities. “[I]nfringing one’s right to exclude, alone, is insufficient to warrant injunctive relief.” IMX, Inc. v. LendingTree, LLC, 469 F.Supp.2d 203, 225 (D.Del.2007) (citing eBay, 126 S.Ct. at 1840). Indeed, Telcordia’s analysis of its irreparable harm is nothing more than attorney argument.
Further supporting the court’s conclusion that Telcordia will not suffer (and has not suffered) irreparable harm is the fact that it licensed the patents-in-suit to two other defendants, Lucent Technologies, Inc. and Alcatel USA Inc. Thus, Cisco’s infringement of the patents-in-suit has not affected Telcordia’s ability to license the patents-in-suit. Telcordia’s willingness to forego its patent rights for compensation, while not dispositive, is one factor for the court to consider in its irreparable harm analysis. eBay, 547 U.S. 388, 126 S.Ct. at 1840–41. Here, however, where Telcordia has not pointed to any evidence of irreparable harm, the only evidence that the court has before it suggests that Telcordia will not suffer irreparable harm.
In the alternative, Telcordia requests the court to order Cisco to pay a market-rate royalty until the expiration of the ′633 patent. “Under some circumstances, awarding an ongoing royalty for patent infringement in lieu of an injunction may be appropriate.” Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1314 (Fed.Cir.2007). “But, awarding an ongoing royalty where ‘necessary’ to effectuate a remedy … does not justify the provision of such relief as a matter of course whenever a permanent injunction is not imposed.” Id. at 1314–15. Indeed, the Federal Circuit has noted that when a district court determines that an injunction is not warranted, it is apt to allow the parties to negotiate license terms for future infringement amongst themselves instead of awarding an ongoing royalty or compulsory license. See id. at 1315. The court finds this advice sound, declines to adopt Telcordia’s request for a compulsory license, and will order the parties to negotiate the terms of a reasonable royalty rate going forward. Should the parties fail to reach an agreement, the court will permit the filing of competing proposals.
2009. February 23. Hynix Semiconductor Inc. v. Rambus Inc., 609 F. Supp. 2d 951 (N.D. Cal. 2009)
Patents 5,915,105, 6,034,918, 6,324,120, 6,378,020, 6,426,916, and 6,452,863 relates to a dynamic random access memory (DRAM) interface technology. As part of a antitrust and patent litigation bifurcated in three phases, Rambus alleged that Hynix infringed these patents. Following a jury verdict finding infringement, Rambus moved for a permanent injunction.
The Court denied the permanent injunction requested by Rambus and instead determined that a compulsory license in the form of an ongoing royalty was more appropriate. In its analysis of the balance of harms, the Court determined that while continued infringement threatens Rambus with a slight irreparable harm, Hynix had demonstrated that a permanent injunction would decimate its business. The Court also took into consideration the fact that by the time Hynix became aware of Rambus’s asserted patents, Rambus’s technologies were entrenched in the industry standard DRAM interface. In this regards, the Court noted that the “lock-in resulted in large part because Rambus did not disclose and, in fact, did not obtain the patents-in-suit until its efforts to establish RDRAM as the industry standard faltered and the JEDEC standards had enjoyed nearly five years of success.” The Court ordered the parties “to begin negotiations regarding the terms of a compulsory license between Rambus and Hynix to permit Hynix to continue to make, use, and sell the infringing devices.”
Rambus has established that ongoing infringement by Hynix threatens Rambus with a slight irreparable harm: the loss of a possible design win, and with it some exposure to the innovation loop and the possibility of ongoing goodwill, in the case of the marginal OEM who would have selected Rambus’s proprietary XDR memory architecture over a JEDEC-design because of Hynix’s ability to supply such DRAMs. To be clear, this irreparable harm applies only to Hynix’s ongoing production of DDR2, DDR3, GDDR3, and GDDR4 SDRAM. Rambus has failed to demonstrate any irreparable harm that would result from Hynix continuing to manufacture and sell SDRAM and DDR SDRAM because those memories no longer compete for design wins.
Hynix, on the other hand, has demonstrated that an injunction would decimate its business. An injunction would [Redacted]. To be sure, “[o]ne who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected.” Windsurfing, 782 F.2d at 1003 n. 12 (emphasis added). But by the time Hynix became aware of Rambus’s asserted patents, Rambus’s technologies were entrenched in the industry standard DRAM interface. The lock-in testimony persuasively demonstrated that changing to a non-infringing technology would have cost the electronics industry hundreds of millions of dollars and many years for no reason but to avoid infringement of claims that had not yet been adjudicated valid and enforceable. The lock-in resulted in large part because Rambus did not disclose and, in fact, did not obtain the patents-in-suit until its efforts to establish RDRAM as the industry standard faltered and the JEDEC standards had enjoyed nearly five years of success. The lock-in testimony also established that no amount of unilateral effort by Hynix would have allowed it to swap out of its DRAMs Rambus’s technologies for non-infringing alternatives.
Comparing the slight possibility that Rambus may suffer an irreparable harm to the immediate and devastating harm that an injunction would deal to Hynix, the balance clearly weighs in Hynix’s favor. Informing this balance is the court’s firm conviction that Rambus’s motive in seeking an injunction is not to prevent irreparable harm but either (a) to increase its leverage in negotiating an ongoing license with Hynix or (b) to punish Hynix out of spite for its decision to contest Rambus’s infringement allegations and over a variety of other grievances involving the industry’s rejection of RDRAM.
2009. December 22: IGT v. Bally Gaming Int’l Inc., 675 F. Supp. 2d 487, 487 (D. Del. 2009)
Reissue patents 38,812 and 37,885 relate to slot machine technologies. IGT brought an action against Bally Gaming for infringement of these patents. Following a finding of infringement, IGT moved for a permanent injunction.
The Court denied the permanent injunction requested by IGT. The Court determined that the IGT had not demonstrated irreparable harm and an inadequacy of monetary damages. The court rejected the argument alleging that the money damages could not be calculated, finding that sales of the infringing product appeared to be quantifiable, as well as its profits on service and maintenance.
In sum, plaintiff’s case suffers from several fatal flaws. It is most problematic that plaintiff points to no documentary (or other) evidence regarding the effects of defendants’ infringement (on plaintiff). As noted previously, the court has no market data before it. Plaintiff brings its motion against a landscape of several competitors and several competitive products operating on different software platforms. There is no clear indication of a direct link between defendants’ infringing sales of ACSC Power Winners® and ACSC Power Rewards® and sales of additional products, loss of goodwill to plaintiff or, more broadly, a change in the market landscape. There is some indication that defendants’ sale to The Borgata may benefit defendants in terms of having secured State approval in New Jersey, however, the record is not compelling.
Further, there is no clear indication that money damages cannot be calculated. While it is true that history cannot now be rewritten to remove ACSC Power Rewards® and ACSC Power Winners® from the field of competition during a growth period in the bonusing systems industry, on the record at bar, defendants’ sales of ACSC Power Winners® and ACSC Power Rewards® appear to be quantifiable, as are profits on service and maintenance. (D.I.340, ex. 46) Because plaintiff has not satisfied its burden to demonstrate irreparable harm and an inadequacy of monetary damages, the court need not address the remaining equitable factors
2010. April 19: Ricoh Co. v. Quanta Computer, Inc., No. 06-CV-462-BBC, 2010 WL 1607908 (W.D. Wis. Apr. 19, 2010)
Patent 6,661,755 relates to optical disc drives. Ricoh brought an action against Quanta Computer for infringement of this patent. Following a jury verdict finding infringement, Ricoh moved for a permanent injunction.
The Court denied the permanent injunction requested by Ricoh and instead determined that a compulsory license in the form of an ongoing royalty was more appropriate. In its analysis the Court took into consideration the fact that Ricoh does no longer manufactures or sells disc drives. In its analysis of the adequacy of monetary damages, the Court considered that Ricoh has issued several voluntary licenses to other companies. Based on this, “plaintiff cannot argue persuasively that it is trying to narrowly limit the practice of its invention rather than simply maximize a potential licensing fee.” The Court also noted that Ricoh failed to point out evidence “showing that an injunction would have a greater deterrent effect than a compulsory license.” The Court also rejected the argument by Ricoh alleging that calculating an ongoing reasonable royalty was not feasible noting that Ricoh had no difficulty proposing a reasonable royalty rate to the jury for past infringement. The Court ordered the parties “to engage in negotiations regarding an appropriate royalty.”
In this case, there are few reasons to grant a permanent injunction and many that counsel against doing so. To begin with, it is undisputed that plaintiff does not practice the invention in the ′755 patent. In fact, plaintiff no longer manufactures or sells any disc drives. Tr. Tran., Vol 1C, dkt. # 446, at 35. The best case for obtaining a permanent injunction often occurs when the plaintiff and defendant are competing in the same market. In that context, the harm in allowing the defendant to continue infringing is the greatest. E.g., i4i Ltd. Partnership v. Microsoft Corp., 589 F.3d 1246, 1276 (Fed.Cir.2009). Because plaintiff is not competing with defendants for the same customers, it is more difficult for plaintiff to argue that it will be irreparably harmed without an injunction.
As defendants point out, plaintiff has not been miserly in issuing licenses for the ′755 patent for any company willing to pay for one. Plaintiff’s own witnesses testified at trial that plaintiff has issued licenses to Sony, Hitachi, Toshiba, Matsushita, Panasonic, Lite-On, BenQ, Pioneer, Phillips and IBM. Tr. Tran., Vol. 5B, dkt. # 476, at 5; Tr. Exh. 1014, at 37, attached to Prince Decl., dkt. # 533. Plaintiff even issued a license to ASUS after that company was dismissed from this case for lack of personal jurisdiction. Id. In fact, plaintiff does not identify any sellers of optical disc drives other than defendants that have not yet taken a license. Thus, plaintiff cannot argue persuasively that it is trying to narrowly limit the practice of its invention rather than simply maximize a potential licensing fee. Also, as in the hypothetical situation discussed by Justice Kennedy, plaintiff’s patent “is but a small component of the product [defendants] seek to produce,” which is another factor suggesting that “legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.” eBay, 547 U.S. at 397.
Plaintiff says that defendants’ “competitors will be encouraged to infringe the ′755 patent” and that plaintiff’s “entire licensing program worldwide will suffer because other manufacturers will be tempted to roll the dice and infringe [plaintiff’s] patents” if plaintiff does not obtain an injunction. Plt.’s Br., dkt. # 517, at 6-7. The first part of this argument assumes that there are any competitors left who do not have a license already. Further, with respect to both arguments, plaintiff fails to point to any evidence showing that an injunction would have a greater deterrent effect than a compulsory license. Plaintiff says that, absent a threat of an injunction, infringers would have nothing to lose by forcing plaintiff to sue them, but this overlooks the cost of litigation as well as the possibility of a finding of willful infringement and an award of attorney fees for asserting a frivolous position. Even if I assumed that injunctions generally have a greater deterrent effect, plaintiff fails to explain why that factor weighs more heavily in this case than in any other case in which a court must determine whether a permanent injunction is appropriate. The logical conclusion of plaintiff’s argument is to return to the view rejected by the Court in eBay that plaintiffs in patent cases are entitled to a permanent injunction as a matter of course because injunctions always serve as a better deterrent than an ongoing royalty.
With respect to the question whether plaintiff has adequate legal remedies, plaintiff argues that calculating an ongoing reasonable royalty rate is not feasible in this case because defendant “Quanta Storage does not track its total sales in the United States.” Plt.’s Br., dkt. # 517, at 10. That argument is undermined by the trial in this case, in which plaintiff seemed to have little difficulty proposing a reasonable royalty rate to the jury for past infringement.
In many cases, if an injunction is not appropriate, the plaintiff may be entitled to an ongoing royalty. Paice, 504 F.3d at 1314. Under Paice, the general rule is “to allow the parties to negotiate a license amongst themselves regarding future use of a patented invention before imposing an ongoing royalty. Should the parties fail to come to an agreement, the district court [may] step in to assess a reasonable royalty in light of the ongoing infringement.” Id. Accordingly, I will direct the parties to engage in negotiations regarding an appropriate royalty.
2010. July 23: Cordance Corp. v. Amazon.com, Inc., 730 F. Supp. 2d 333 (D. Del. 2010)
Patent 6,757,710 relates to a one-click online payment system. Cordance brought an action against Amazon.com for infringement of this patent. Following a jury verdict finding infringement, Cordance moved for a permanent injunction.
The Court denied the permanent injunction requested by Cordance. In its analysis of irreparable harm and the adequacy of monetary damages the Court took into consideration Cordance’s pre-lawsuit licensing activity, which showed its willingness to grant voluntary licenses to other entities.
Cordance has failed to establish that a direct link exists between Amazon’s infringing use of one-click technology in online transactions and either Cordance’s inability to establish itself in the digital identity market, a loss of goodwill to Cordance, or a change in the digital identity market’s landscape.
Cordance’s pre-lawsuit licensing activity also leads the court to conclude that Amazon’s infringement has not caused Cordance irreparable harm. A patentee’s willingness to forego its patent rights for compensation is not dispositive, but it is one factor the court considers in its irreparable harm analysis. In July 2002, Cordance granted XNSORG, a non-profit corporation, an exclusive license to Cordance’s database-linking patents in order to create an open internet standard necessary for widespread adoption. In exchange, Cordance received a 15–year contract to become the primary operator of a global i-name registry service. Under the license, XNSORG was free to grant third parties fully paid-up, royalty-free, worldwide, non-exclusive sublicenses. Amazon asserts that Cordance effectively “gambled away exclusive rights to [its] patents in return for a 15 year contract as the exclusive registrar.” Cordance’s decision to grant a free license to anyone willing to use its technology supports this court’s refusal to grant injunctive relief in defense of Cordance’s exclusive right to use such technology.
Cordance maintains that the harms it has suffered and will suffer as a result of Amazon’s infringement are unquantifiable and therefore no adequate remedy at law exists. Cordance asserts (1) that its loss of the opportunity to control its one-click technology and related licensing arrangements is unquantifiable and (2) that its effective exclusion from the digital addressing marketplace is also unquantifiable. The court, however, agrees with Amazon’s argument that neither of Cordance’s above assertions withstands scrutiny. First, Cordance’s pre-lawsuit licensing activity suggests that money damages will be adequate compensation for Amazon’s infringement of Cordance’s rights. Second, as explained above, Cordance’s argument that it was excluded from some undefined digital identity/addressing market by Amazon’s infringing use of one-click purchasing is unpersuasive. For these reasons, the court is confident that Amazon’s infringement can be adequately compensated for with a money award.
2011. February 28: Douglas Dynamics, LLC v. Buyers Prod. Co., No. 09-CV-261-WMC, 2011 WL 13196006 (W.D. Wis. Feb. 28, 2011)
Patents 5,353,530 and 6,944,978 relate to quick mounting snow plow assemblies. Douglas Dynamics brought an action against Buyers Products Company for infringement of these patents. Following a finding of infringement, Douglas Dynamics moved for a permanent injunction.
The Court denied the permanent injunction requested by Douglas Dynamics. The Court considered that Douglas Dynamics offered no credible reason why a monetary award, in the form of a reasonable royalty, could not remedy any continuing infringement. The Court also noted that the patented inventions were small components of the snowplow device. The Court considered that the public interest would be best served by permitting a new competitor to remain in the market when the infringed patents related to an invention that was merely a small, non-essential part of a larger product. The Court set a deadline for the parties “to enter into a licensing agreement or to each file a brief supporting their proposed reasonable, ongoing royalty figures.”
The bottom line is that Buyers’ entry into the snowplow market has not resulted in any quantifiable lost market share or profits for Douglas. Indeed, Douglas was unable to point to a single lost customer sale to Buyers. An improving or at least stable market share, and an absence of any actual lost sales, weighs heavily against finding that Douglas has suffered irreparable harm by virtue of Buyers’ ongoing infringement of the ‘530 and ‘978 patents. See Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1329 (Fed. Cir. 2008) (plaintiff’s showing of lost market share resulting from defendant’s infringement supported its argument that defendant’s continued infringement would result in irreparable injury). Moreover, given the lack of any meaningful inroads, Douglas offers no credible reason why a monetary award, in the form of a reasonable royalty, could not remedy any continuing infringement.
Because these inventions are but small components on the larger snowplow, and because Douglas appears to have suffered no quantifiable monetary or non-monetary damages, a remedy at law in the form of a reasonable royalty is the more suitable remedy over a permanent injunction. In any event, Douglas has failed to show otherwise. See eBay Inc., 547 U.S. at 396-97 (J. Kennedy concurring) (“When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”).
It is true, as Douglas points out, that the public also has an interest in the judicial protection of patent rights. When the infringed patents, however, teach an invention that is merely a small part of a larger product—and a non-essential part at that—and the infringing larger product is introduced to reach a portion of the market untapped by the patent holder, the public interest may well be best served by permitting the new competitor to remain in the market. See eBay Inc., 547 U.S. at 396-97 (J. Kennedy concurring) (public interest not served by injunction when patented invention is only small component of the larger product).
2011. July 1: LG Elecs. U.S.A., Inc. v. Whirlpool Corp., 798 F. Supp. 2d 541 (D. Del. 2011)
Patent 6,082,130 relate to a dispenser of ice in a refrigerator. In a infringement lawsuit initiated by LG Electronics, Whirlpool counterclaimed asserting this patent. Following a jury verdict finding that LG Electronics infringed this patent, Whirlpool moved for a permanent injunction.
The Court denied the permanent injunction requested by Whirlpool. The Court took into consideration the fact that Whirlpool did not identified specific customers it had lost, or stands to lose, directly as a result of continued sales of the infringing refrigerators by LG Electronics. The Court suggested that the remedies available at law were adequate if LG Electronics continue to infringe the ′130 patent.
The court fails to see what hardship Whirlpool would suffer that could not be compensated through remedies at law if LG continues to infringe the ′130 patent, particularly because Whirlpool’s sales represent a small portion of its yearly earnings, and Whirlpool’s market share is over five times the size of LG’s market share.
Based on the facts of this case, the court concludes that Whirlpool has failed to meet its burden of showing that a permanent injunction is warranted. While the eBay standard establishes that past harm is relevant to the irreparable harm analysis, an injunction is by definition a prospective remedy. See, e.g., i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 861–62 (Fed.Cir.2010). In this case, the irreparable harm factor weighs against granting a permanent injunction because the “irreparable” component of the injury that Whirlpool alleges stems from LG’s past conduct, which allegedly “shaped the market” and resulted in long-term customer loss. (D.I. 409 at 10.) This harm would continue even if a permanent injunction were issued, and Whirlpool makes no allegations of prospective lost customers or harms that are truly irreparable unless the court issues a permanent injunction. On the contrary, the court concludes that Whirlpool would not benefit substantially from an injunction being issued at this stage, several years after LG’s accused product entered the market.
Moreover, there is a lack of specific evidence tying Whirlpool’s lost sales to LG’s infringement in the multi-competitor refrigerator market. See Advanced Cardiovascular Sys., Inc., 579 F.Supp.2d at 559–60. A portion of Whirlpool’s lost sales may be due to customers’ desire for other features, or sales lost to competitors other than LG.12 See, e.g., IGT v. Bally Gaming Int’l Inc., 675 F.Supp.2d 487, 489–90 (D.Del.2009) (denying permanent injunction where parties participated in multi-competitor market and evidence failed to demonstrate their relative market percentages). Whirlpool has not identified specific customers it has lost, or stands to lose, directly as a result of LG’s continued sales of the infringing refrigerators. Although Whirlpool indicates that LG introduced its infringing products to Home Depot as the innovator, Whirlpool does not contend that Home Depot refuses to carry Whirlpool’s models. (D.I. 409 at 12.) The court further notes that Whirlpool’s core business centers on a variety of home appliances and is not limited to refrigerators.
The remaining two eBay factors do not alter the court’s analysis. The court concludes that Whirlpool’s market position and the parties’ ability to sell their products would remain substantially the same regardless of whether an injunction issues. The court fails to see what hardship Whirlpool would suffer that could not be compensated through remedies at law if LG continues to infringe the ′130 patent, particularly because Whirlpool’s sales represent a small portion of its yearly earnings, and Whirlpool’s market share is over five times the size of LG’s market share. (D.I. 439, Ex. E at ¶¶ 20, 21.) Moreover, the public interest would not be substantially advanced or harmed by the issuance of an injunction. Although the public has an interest in the enforcement of patent rights, there is no strong public interest in maintaining diversity in the side-by-side refrigerator market. Cf. Advanced Cardiovascular Sys., 579 F.Supp.2d at 561 (acknowledging a strong public interest in maintaining diversity in the coronary stent market). Consequently, the court will deny Whirlpool’s motion for a permanent injunction.
2012. June 28: Fractus, S.A. v. Samsung Elecs. Co., 876 F. Supp. 2d 802 (E.D. Tex. 2012)
Patents 7,015,868, 7,123,208, 7,394,432, and 7,397,431 relate to antennas made of multilevel structures. Fractus brought an action against Samsung for infringement of these patents. Following a jury verdict finding infringement, Fractus moved for a permanent injunction.
The Court denied the permanent injunction requested by Fractus. In its analysis of irreparable harm the Court took into consideration the fact that Fractus had licensed its patents to other cell phone manufacturers. The Court also concluded that the requested injunction would severely hamper Samsung’s cell phone business and significantly disrupt related third-party businesses such as Samsung’s suppliers and customers. It would also detrimentally affect retail sellers of Samsung phones, as well as their customers.
Samsung’s sale of cell phones containing infringing antennas has not caused Fractus to suffer lost profits or market share that would have been derived from other cell phone manufacturers. At most, Samsung’s infringement has caused Fractus to lose Samsung’s business, which can be remedied with monetary damages. Fractus has licensed its patents to other cell phone manufacturers, many of which were named defendants in the instant suit. As a result of Fractus and Samsung not directly competing, Samsung’s use of Fractus’s technology does not inhibit Fractus from selling or licensing its products in the market, and Fractus’s damages can be calculated with reasonable certainty in the form of monetary damages.
On the other hand, Fractus’s requested injunction will severely hamper Samsung’s cell phone business, but most importantly, it will significantly disrupt related third-party businesses such as Samsung’s suppliers and customers. Additionally, enjoining Samsung would detrimentally affect the retail sellers of Samsung phones, as well as their customers. Though the public has a keen interest in maintaining a strong patent system, Fractus has not identified a specific public interest that would be served by entry of its requested injunction. Accordingly, the balance of hardships and public interest factors also weigh against enjoining Samsung.
2013. February 26: VirnetX Inc. v. Apple Inc., 925 F. Supp. 2d 816 (E.D. Tex. 2013), aff’d in part, vacated in part, rev’d in part sub nom. Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014)
Patents 6,502,135 and 7,490,151 relate to a method of transparently creating a virtual private network (VPN) between a client computer and a target computer. VirnetX brought an action against Apple for infringement of these patents. Following a jury verdict finding infringement, VirnetX moved for a permanent injunction.
The Court denied the permanent injunction requested by VirnetX. The Court found that Apple’s infringement had caused VirnetX to lose Apple as a licensee, which can be remedied with monetary damages. This infringement did not prevent VirnetX from selling or licensing its products to other companies in the market. The Court also considered that an injunction would not only harm Apple, but also its customers and other third parties.
In 767 F.3d 1308 (Fed. Cir. 2014), the U.S. Court of Appeals, Federal Circuit, affirmed the finding of infringement for many of the asserted claims of the ‘135 and ‘151 patents, reversed the findings with regards to other patents, vacated the damages award and remanded for further proceedings. This decision did not address the permanent injunction denied by the District Court.
Here, Apple’s infringement has caused VirnetX to lose Apple as a licensee, which can be remedied with monetary damages. VirnetX is not excluded from selling or licensing its products to other companies in the market and has not suffered any loss of good will, lost profits or market share. Accordingly, VirnetX has not demonstrated that it will suffer irreparable harm absent a permanent injunction and that monetary damages are an insufficient remedy.
VirnetX has not demonstrated that Apple’s infringement is responsible for VirnetX’s failure to enter and be successful in the marketplace. Apple’s sale of infringing products has not restricted VirnetX’s ability to approach other companies or sell its products to consumers. Additionally, while a licensing agreement between Apple and VirnetX may have boosted VirnetX’s position in the market, there is no evidence demonstrating that VirnetX lost goodwill because of Apple’s infringement.
With respect to Apple, while throughout the trial it attempted to minimize the importance of the infringing features in its products, Apple still bears a considerable burden to comply with the proposed injunction. The most recent estimates project the cost to comply at $50.8 million. Docket No. 653, Ex. 2 at 2; Id., Ex. 3 at 3. Additionally, though VirnetX only seeks to enjoin the use of the infringing feature and not the entire devices, an injunction would not only harm Apple, but also its customers and other third parties. Although the Court is concerned about the great disparity between Apple’s proposed costs to comply with an injunction presented at trial and those presented post-trial, the balance of hardships weigh against enjoining Apple.
2014. March 06: Apple, Inc. v. Samsung Elecs. Co., No. 11-CV-01846-LHK, 2014 WL 976898 (N.D. Cal. Mar. 6, 2014)
Patents 7,469,381, 7,844,915 and 7,864,163 relate to embodiments of a touchscreen user interface software feature. Apple brought an action against Samsung for infringement of these patents. Following a jury verdict finding infringement, Apple moved for a permanent injunction.
The Court denied the permanent injunction requested by Apple. According to the Court, Apple failed to demonstrate that Samsung’s inclusion of the patented features made Samsung’s products “significantly more desirable.” Because there was no evidence that the patented features caused consumers to make their purchasing decisions or otherwise drove consumer demand, the Court found that Apple did not met its burden of proving the requisite causal nexus to establish irreparable harm. Although the Court determined that “damages for the irreparable harm Apple alleges are difficult to quantify,” that conclusion was “ultimately of little help to Apple because the Court will not issue a permanent injunction based on irreparable harm that Samsung’s infringement did not cause, even if monetary remedies will not compensate Apple for that irreparable harm.” Therefore, the Court found “that—despite Apple’s apparent unwillingness to license the patents-in-suit to Samsung—monetary remedies would more appropriately remedy the injury arising out of Samsung’s infringement of the utility patents-in-suit than would an injunction.”
The Federal Circuit held that the question of the causal nexus to Apple’s irreparable harm is “one of degree, to be evaluated by the district court.” Apple IV, 735 F.3d at 1368. After careful examination of all the evidence, the Court finds that Apple has failed to demonstrate that Samsung’s inclusion of the patented features made Samsung’s products “significantly more desirable,” such that Samsung’s infringement caused Apple irreparable harm. Apple IV, 375 F.3d at 1364. Smartphones and tablets are complex devices embodying hundreds of features, inventions, and components. Dr. Hauser’s survey evidence provided results for only six of those elements, in a form that he readily concedes may not be extrapolated to the real market. See, e.g., Retrial Tr. at 591:8–13. Nor does the rest of the evidence supplement or otherwise corroborate Dr. Hauser’s results in a way that would allow Apple to meet its burden. The various consumer surveys presented to the Court, including Dr. Hauser’s survey, do no more than confound the Court’s efforts to determine whether—of the many smartphone and tablet features such as the camera, screen quality, operating system, and screen size—the three patented features at issue here drive consumer demand. Put another way, the evidence shows that the three patented features may add to a device’s appeal, but Apple has not shown that these specific features are among several that “cause consumers to make their purchasing decisions” or otherwise drive consumer demand. Apple IV, 735 F.3d at 1364. Accordingly, Apple has not met its burden of proving the requisite causal nexus to establish irreparable harm.
The Court concludes that damages for the irreparable harm Apple alleges are difficult to quantify. Although the Court in its previous determination found that Apple’s past licensing behavior indicated that legal remedies could provide adequate compensation, the Federal Circuit’s recent guidance and this Court’s further examination of the evidence lead to a different conclusion here. Apple’s past licensing behavior demonstrates a reluctance to license the utility patents-in-suit to Samsung, and several factors distinguish Apple’s licenses to IBM, HTC, and Nokia from the present circumstances.
This conclusion, however, is ultimately of little help to Apple because the Court will not issue a permanent injunction based on irreparable harm that Samsung’s infringement did not cause, even if monetary remedies will not compensate Apple for that irreparable harm. To prevail on the inadequacy of legal remedies eBay factor, Apple needs to show that the irreparable harm established in the first eBay factor is not compensable through monetary remedies. See eBay, 547 U.S. at 391 (listing as the first two factors a patentee must show for an injunction “(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 ”) (emphasis added). The Federal Circuit in Apple IV also highlighted that an injunction should not issue without a finding that Samsung’s infringement caused Apple irreparable harm when it held that “[o]f course, if, on remand, Apple cannot demonstrate that demand for Samsung’s products is driven by the infringing features, then Apple’s reliance on lost market share and downstream sales to demonstrate the inadequacy of damages will be substantially undermined.” Apple IV, 735 F.3d at 1371. Apple, in other words, cannot obtain a permanent injunction merely because Samsung’s lawful competition impacts Apple in a way that monetary damages cannot remedy. To award an injunction to Apple in these circumstances would ignore the Federal Circuit’s warning that a patentee may not “ ‘leverage its patent for competitive gain beyond that which the inventive contribution and value of the patent warrant.’ ” Apple IV, 735 F.3d at 1361 (quoting Apple II, 695 F.3d at 1374–75). For that reason, the Court ultimately finds that—despite Apple’s apparent unwillingness to license the patents-in-suit to Samsung—monetary remedies would more appropriately remedy the injury arising out of Samsung’s infringement of the utility patents-in-suit than would an injunction. Accordingly, the second eBay factor favors Samsung.
2014, March 31: Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., No. CIV.A. 09-290 (W.D. Pa. Mar. 31, 2014), rev’d in part, vacated in part, 807 F.3d 1283 (Fed. Cir. 2015)
Patents 6,201,839 and 6,438,180 relate to methods, devices, and systems for improved accuracy in the detection of recorded data when certain types of errors are likely due to the recording medium and reading mechanism. The inventions disclosed in these patents were supported by the National Science Foundation under Grant ECD-8907068. Carnegie Mellon University, holder of these patents, brought an infringement action against Marvell Technology Group. Following a jury verdict finding infringement, Carnegie Mellon moved for a permanent injunction.
The Court denied the permanent injunction requested by Carnegie Mellon and granted a compulsory license in the form of an ongoing royalty for future infringement. In its analysis of the irreparable harm the court rejected the “collection risk” theories proposed by Carnegie Mellon because the university did not presented direct evidence showing that Marvell will not pay the judgment, or that it will be unable to meet its future obligations to pay an ongoing royalty stemming from the continuing infringement. The Court also took into consideration the fact that the chips made by Marvel were “multi-feature products which have many valuable non-infringing aspects,” and noted that according to estimates the non-infringing aspects “have collectively generated more profit for Marvell, (i.e., $1.66 per chip), than the addition of the patented methods, (i.e., $0.50 per chip).” In its analysis of the public interest, the Court determined that “downstream effects of any such injunction could be very significant, as increased prices set by the market leader would be passed down the stream of commerce to the ultimate end-purchaser of computers and like equipment containing the subject chips.” The Court also took into consideration that “the imposition of an injunction may force semiconductor businesses like Marvell completely offshore which would not be in the best interest of the public.” The Court set the reasonable ongoing royalty at $0.50 per accused chip.
In 807 F.3d 1283 (Fed. Cir. 2015), the U.S. Court of Appeals, Federal Circuit, affirmed the judgment finding patent infringement by Marvell; affirmed the royalty awards, past and ongoing, in part; but vacated and remanded in part the royalty awards to determine whether the chips were sold in the in the United States. In 2016 Marvell and Carnegie Mellon reached a settlement for $750 million.
For all of these reasons, the Court finds that CMU’s “collection risk” theories are unproven and do not support a finding that it will be irreparably harmed without the imposition of a permanent injunction. See Robert Bosch, 659 F.3d at 1153–56. CMU has presented no direct evidence that Marvell will not pay the judgment or that Marvell has a history of dilatoriness in paying its debts and the Court has already determined that it is sufficiently capitalized to withstand the current judgment (including the enhancement). The Court is likewise not persuaded that Marvell will be unable to meet its future obligations to pay an ongoing royalty such that CMU will be unable to collect additional monies stemming from the continuing infringement.28 As such, CMU has therefore failed to meet its burden to demonstrate that it will be irreparably harmed without the imposition of a permanent injunction due to the alleged inability of Marvell to pay a money judgment. Apple III, 735 F.3d at 1359.
While CMU has continually and repeatedly touted its invention as “must have” for Marvell and its customers, the Court need not look much farther than the damages evidence to conclude that these are multi-feature products which have many valuable non-infringing aspects. On the other hand, as the Court recounted in its JMOL opinion, Marvell did not introduce evidence at trial valuing these other components of its read channel chips, for reasons unknown to the Court. (See Docket No. 901). In any event, Ms. Lawton engaged in an “excess profits” analysis to value the patented methods in this case, resulting in her opinion at trial that the infringement was worth $1.16 billion. (Docket No. 713 at 11). Her “excess profits” analysis started with calculating the price-per-chip ($4.42) and operating profit-per-chip ($2.16) based on Marvell’s internal sales data. (Id.). She then compared the sales of Marvell’s chips to certain customers (Maxtor and Toshiba) for which she had information from the same time period (2003) where products were sold with and without the addition of the allegedly infringing MNP detector, resulting in a range of between $0.06 and $0.72 per chip. (Id.). She ultimately opined that the reasonable royalty would be near the high end of this range, $0.50, based on the opinion of Dr. Christopher Bajorek that the patented methods were “must have” for Marvell and its customers because of the increased performance of the chips. (Id.). But, Ms. Lawton’s opinions make clear that Marvell otherwise met its profit margin goal of fifty percent of the total revenue generated by the sales of the Accused Chips, even with paying its “excess profits” attributable solely to the inclusion of the patented methods to CMU. So, while there is evidence that the patented methods made the Accused Chips “more desirable,” it cannot be said that there is no value to the numerous other features in the chips which are not addressed by the patented methods and those features have collectively generated more profit for Marvell, (i.e., $1.66 per chip), than the addition of the patented methods, (i.e., $0.50 per chip), even with the “must have” valuation of the patents by Ms. Lawton.
As CMU has failed to convince this Court that Marvell would be unable to pay the judgment, the Court finds that CMU has not articulated any appropriate reason as to how or why the proposed permanent injunction would benefit it. Again, CMU stands to be paid in excess of $1.5 billion for past infringement and will be due any additional royalties for continuing infringement, as is discussed in the following section of this Opinion. See § IV.B., infra. Any injunction barring future infringement of the patented methods would cut off continuing infringement and stop what could be a significant revenue stream to CMU. This revenue stream will likely exceed an additional $100 million annually on top of the already substantial judgment to be entered in this case. It is certainly well in excess of the “highly speculative forecast” of two million dollars annually which CMU’s Technology Transfer Office forecasted in 2006. (Def.Ex. 272). Additionally, there is no competition between the parties; CMU does not practice the methods; and, it has no licensing arrangements for these patents outside of its DSSC program, under which its members such as Seagate have free “use” rights.29 Therefore, CMU is presently in a position where it can either license the patents to Marvell for a handsome royalty or not license them at all.
In contrast, if an injunction were granted, there could plainly be harm to Marvell beyond the costs of redesigns, lost future commercial successes and sunk development costs, although Marvell has and will continue to incur such expenses as it proceeds with its redesign of future chip lines. I4i, 598 F.3d at 862. As has already been discussed, the Accused Chips are multi-feature products with many non-infringing features and any injunction would bar these non-infringing features as well as the infringing ones. The Court has also concluded that CMU’s “must have” evidence alone is not sufficient to meet the clarified standards for obtaining a permanent injunction of these types of products under the Apple v. Samsung line of cases. Further, CMU cannot meaningfully contest that an immediate injunction would significantly impair Marvell’s customers, as Marvell’s lengthy sales cycle would preclude it from generating redesigned products for over a year, leaving its customers without chips to incorporate into their hard drives and other devices. (Docket No. 828 at 16, at Ex. 3). Moreover, the process of disenabling the infringing features of the more than 2 billion chips that have already been sold is basically impossible and the cost of disenabling the infringing features in existing chips that have yet to be sold would be significant. (Id.). Finally, based on CMU’s infringement theory presented at trial, any injunction which would only bar the use of the simulators rather than the chips themselves would effectively stop production of all of Marvell’s chips and cause the same type of harm that has already been discussed.
The Court recognizes that there is a strong public interest in enforcing CMU’s patent rights because this technology was sponsored, in part, by public funding. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 815–16 (1945). However, the scope and effect of the proposed injunction in this case would in all likelihood cause significant harm to all of the companies which unwittingly participate in some fashion in the production and distribution of Marvell’s read channel chips. Marvell is the dominant leader in the production of these types of chips and has approximately a sixty percent (60%) market share. (Docket No. 707 at 122). The downstream effects of any such injunction could be very significant, as increased prices set by the market leader would be passed down the stream of commerce to the ultimate end-purchaser of computers and like equipment containing the subject chips. Distribution delays would likewise have a dramatic effect on the hard drive manufacturers, like Seagate, computer manufacturers and the retailers of same. Ultimately, the imposition of an injunction may force semiconductor businesses like Marvell completely offshore which would not be in the best interest of the public. It would also undermine what Dr. Kryder explained was one of the primary purposes of the National Science Foundation’s support of the establishment of the DSSC at CMU, i.e., to promote domestic research and production of this type of technology and to prevent such business from moving to other countries. (Docket No. 682 at 27–28).
With these findings, and after weighing the relevant Georgia–Pacific factors, the Court holds that a post-trial hypothetical negotiation between CMU and Marvell would result in the parties agreeing to a reasonable ongoing royalty of $0.50 per Accused Chip. Accordingly, CMU’s motion is granted to the extent that an ongoing royalty of that amount will be ordered for the ongoing infringement. The Court will further order that Marvell make periodic, quarterly accountings of its continuing sales to CMU; that the parties meet and confer to reach agreement on pertinent sales data and continuing damages from the ongoing royalty; and, provide the Court with status reports outlining same going forward.
2015. March 30: Ateliers de la Haute-Garonne v. Broetje Automation-USA Inc., 85 F. Supp. 3d 768 (D. Del. 2015)
Patents 5,011,339 and 5,143,216 relate to a process for distributing pieces such as rivets. Ateliers de la Haute-Garonne brought an action against Broetje Automation for infringement of these patents. Following a jury verdict finding infringement, Ateliers de la Haute-Garonne moved for a permanent injunction.
The Court denied the permanent injunction requested by Ateliers de la Haute-Garonne. The Court found that Ateliers de la Haute-Garonne “failed to show that the injury it has suffered, and any it may suffer going forward, are not adequately repaired by money damages.” On the other hand, the Court determined that “Broetje would be somewhat harmed from an injunction that complicates its marketing efforts (among other things) and is in some respects vague and overbroad.”
AHG has failed to show that the injury it has suffered, and any it may suffer going forward, are not adequately repaired by money damages. AHG did not prove that it has suffered loss of goodwill or harm to its reputation. Nor does the balance of hardships favor AHG, particularly given the lack of evidence from AHG relating to loss of goodwill or harm to its reputation in the absence of an injunction, while Broetje would be somewhat harmed from an injunction that complicates its marketing efforts (among other things) and is in some respects vague and overbroad. Under these circumstances, the public interest does not favor precluding Broetje from proceeding in the manner it intends to proceed.
2016. January 25: Nichia Corp. v. Everlight Elecs. Co., No. 02:13-CV-702-JRG (E.D. Tex. Jan. 25, 2016), aff’d sub nom. Nichia Corp. v. Everlight Americas, Inc., 855 F.3d 1328 (Fed. Cir. 2017)
Patents 7,432,589, 7,462,870 and 8,530,250 relate to a light-emitting diode (LED). Nichia Corp brought an action against Everlight for infringement of these patents. These patents were found to be infringed and Nichia Corp moved for a permanent injunction.
The Court denied the permanent injunction requested by Nichia. In its analysis of the irreparable harm factor the Court considered the licensing activity of Nichia, which shows that the plaintiff had entered into agreements with the suppliers of 41% of the global LED market. Therefore, “the mere existence of such licenses indicates that the harm for any infringement of the patents-in-suit is not irreparable, but rather can be addressed through other compensatory means.” Based on Nichia’s licensing practice the Court also concluded that monetary compensation can address the harm for any infringement of the patents-in-suit.
In 855 F.3d 1328 (Fed. Cir. 2017), the U.S. Court of Appeals, Federal Circuit, affirmed the denial of a permanent injunction requested by Nichia.
Plaintiff’s licensing of the patents-in-suit to the suppliers of 41% of the global LED market also precludes a finding of irreparable harm. Several of these licensees are significant competitors and considered “major threats” to Nichia’s flagship 757 LED product. Plaintiff claims it has been selective in licensing the patents-in-suit, yet the mere existence of such licenses indicates that the harm for any infringement of the patents-in-suit is not irreparable, but rather can be addressed through other compensatory means.
Further, Plaintiff has failed to present any evidence suggesting a reasonable royalty and/or lost profits would not be adequate to compensate Plaintiff for the harm caused by Defendants’ limited U.S. competition. See FF411–FF451. Plaintiff has already licensed several large competitors in the U.S. Plaintiff claims it has been selective in the consideration it receives for licensing the patents-in-suit, but the existence of the licenses indicates that monetary compensation can address the harm for any infringement of the patents-in-suit.
2016. March 31: EMC Corp. v. Zerto, Inc., No. CV 12-956(GMS) (D. Del. Mar. 31, 2016), aff’d, 691 F. App’x 623 (Fed. Cir. 2017)
Patents 7,577,867, 7,647,460, 7,603,395 and 7,971,091 relate to several embodiments of a data protection system. EMC Corporation brought an action against Zerto for infringement of these patents. Following a jury verdict finding infringement, EMC Corporation moved for a permanent injunction.
The Court denied the permanent injunction requested by EMC Corporation. The Court was not persuaded by the argument that Zerto harmed EMC Corporation’s reputation as an innovator and that Zerto may not be able to pay the judgment. The Court also took into consideration the fact that the competitive harm EMC Corporation may suffer for infringing used was quantifiable. The Court suggested that the parties “could surely use their experience in the market to project other lost downstream revenue and determine a compensation algorithm,” and noted that EMC Corporation had licensed the patents at issue to several competitors. This weighted against the argument that monetary damages were inadequate. With regards to the balance of hardship factor, the Court considered that an injunction would compromise the entirety of Zerto’s business, while the lost sales EMC identifies represent about 0.001% of its annual revenues. In its analysis of the public interest factor, the Court said that “the public has an interest in promoting innovation and enforcing patent rights” but also that this interest “would also be served through a compulsory license.”
A finding of irreparable harm requires a causal nexus between the patent infringement and the alleged injury. The nexus analysis is a flexible, fact-based inquiry. Apple, Inc. v. Samsung Elecs. Co., 809 F.3d 633, 641 (Fed.Cir.2015). A patent owner can show a nexus by providing evidence that infringing features make the defendant’s product more desirable. Id. at 642. The court finds a causal nexus exists between Zerto’s infringement and EMC’s harm. Zerto markets some of the patented features as advantages of its product. (D.I. 229, Ex G at EMC _7162, Ex. V at EMC _195721, Ex. R at EMC _ 194852.) Although these features may not be the main drivers of product sales, it is enough that they are one factor in a potential customer’s decision.
The court is unpersuaded by EMC’s final arguments that Zerto has harmed its reputation as an innovator and that Zerto may not be able to pay the judgment. The record does not support either contention. Considering all of these facts, the court finds the irreparable harm factor weighs slightly in favor of EMC.
EMC argues that a monetary award would be inadequate to compensate it for its loss. The court disagrees. EMC’s supporting evidence for this factor largely overlaps with the evidence used to show irreparable harm. Although EMC does suffer competitive harm, this harm is quantifiable. For example, a per-virtual machine royalty structure would account for any lost licensing revenue from additional sales. The parties could surely use their experience in the market to project other lost downstream revenue and determine a compensation algorithm. Although EMC tends not to grant patent licenses, the evidence shows it has licensed the patents at issue to several of its competitors. (Tr. at 701:11–703:3, 727:9–729:8.) Overall, the court finds that money damages would be adequate to compensate EMC for its injury. This weighs against awarding an injunction.
As for the third factor, the balance of hardships clearly favors Zerto. In determining the balance of hardships, the court considers “the parties’ sizes, products, and revenue sources.” i4i Ltd. v. Microsoft Corp., 598 F.3d 831, 862 (Fed.Cir.2010). The products EMC targets with this injunction comprise the entirety of Zerto’s business. In contrast, the lost sales EMC identifies represent about 0.001% of its annual revenues. This factor weighs strongly against awarding an injunction.
The final factor, public interest, weighs slightly in EMC’s favor. In any patent case, the public has an interest in promoting innovation and enforcing patent rights. This interest would also be served through a compulsory license. This public policy, however, is not strong enough to carry an injunction here. Considering and weighing all of the factors, the court finds that a permanent injunction is not warranted in this case.
2016. June 14: Tzu Techs., LLC v. Winzz, LLC (C.D. Cal. June 14, 2016)
Patent 6,368,268 describes a method and device for interactive virtual control of sexual aids using digital computer networks. Tzu Technologies brought an action against Winzz for infringement of this patent. This patent was found to be infringed and Tzu Technologies moved for a permanent injunction.
The Court denied the permanent injunction requested by Tzu Technologies. The Court rejected the arguments that Tzu Technologies cannot be compensated with damages and or that the remedies available at law were inadequate.
These facts are not sufficient to show that Plaintiff has suffered an irreparable injury. Plaintiff can be compensated with damages. There is no showing that Plaintiff cannot measure damages, in part, based on the nature and location of any sales by Defendant.
Plaintiff must show that “remedies available at law, such as monetary damages, are inadequate to compensate” for the injury arising from an infringement. Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 736 F.3d 1239, 1249 (9th Cir. 2013). Plaintiff argues that such remedies are inadequate because the nonmonetary terms of its licensing agreements are significant. Dkt. 39 at 11. Plaintiff states that its “current licenses have restrictions on the types of services or products each licensee may sell; prohibitions on sub-licenses entirely for certain licensees; prohibitions on sub-licenses to certain direct competitors of licensees to preserve the premium end of the market; the termination of licenses for breach and a plethora of non-monetary commercial terms.” Id. Plaintiff argues that these non-monetary licensing terms, “are crucial to [Plaintiff’s] economic model for encouraging compliance and maximizing revenue.” Id. Thus, “without the three tier model of licensing, and the ability to prevent certain players from competing, Plaintiff cannot encourage more hardware manufacturers and continue to derive revenue from the premium pay per view segment.” Id. at 12. Once again, these conclusory assertions are not sufficient to make the necessary showing. Further, upon the entry of judgment and efforts to enforce its monetary provisions, Plaintiff will have additional opportunities to communicate with Defendant. This could lead to an agreement to terms that will address the matters now claimed to be at issue.
2018. October 26: EcoServices, LLC v. Certified Aviation Servs., LLC, 340 F. Supp. 3d 1004 (C.D. Cal. 2018)
Patent 9,162,262 relates to an automated system and method for washing turbine engines. EcoServices brought an action against Certified Aviation Services for infringement of this patent. Certified Aviation Services. Following a jury verdict finding infringement, EcoServices moved for a permanent injunction.
The Court denied the permanent injunction requested by EcoServices. In its analysis of the adequacy of monetary damages, the Court found that Certified Aviation Services “demonstrated a willingness to license its patents,” including with pre-suit licensing letters sent to the defendant. This willingness to license “supports a finding that monetary damages are adequate.” The Court also determined that “the damages in this case are quantifiable” considering, among other facts, that the jury was able to impose a royalty rate of $400 per wash for past infringement.
Here, as Defendant points out, it is the expired ‘860 Patent’s use of atomized water that has driven competition, and there is no evidence of a demand for the ‘262 Patent. Plaintiff argues that even if the claimed features of the ‘860 Patent are the primary draw for customers, those features are dependent on the features of the ‘262 Patent for using the Cyclean system. Plaintiff relies on TransPerfect Global, Inc. v. MotionPoint Corp., No. C 10-2590 CW, 2014 WL 6068384, at *6 (N.D. Cal. Nov. 13, 2014), where the court found causal nexus based on testimony that infringing features of “implicit navigation” and “single action translation” were “integral parts of the system” and “impossible to use” without them. However, Plaintiff provides no evidence that the Cyclean is impossible to use without the ‘262 features. Nor has Plaintiff shown any consumer demand for the ‘262 features. As such, Plaintiff has failed to make the requisite showing as to a causal nexus. See Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., No. C 09-5235 MMC, 2015 WL 604582, at *4 (N.D. Cal. Feb 12, 2015)(finding no causal nexus between plaintiff’s alleged lost sales and infringing feature because the accused products contain other features that ‘attract customers’).
The facts weigh against Plaintiff on this factor. For example, Plaintiff has demonstrated a willingness to license its patents. Plaintiff tried to send two pre-suit licensing letters to Defendant to license its patents. See Order re Def,’s Mot. for Partial Summ. J., 25:6-15, ECF No. 177 (“In these letters … Plaintiff discusses patents, including the ‘860 Patent, that are available for licensing.”). While the letter did not list the ‘262 Patent, Plaintiff’s President Mr. Welch testified that the ‘860 Patent is the most valuable, see Trial Tr. 6/27/18 at 71:13-16, thus a willingness to license the ‘860 Patent demonstrates Plaintiff finds monetary compensation adequate in comparison to its patent rights. Further, in a recent press release discussing the jury verdict in this case Mr. Welch stated that Plaintiff “welcome[s]… interested parties to discuss licensing opportunities” over the use of Plaintiff’s patents. See Def.’s Opp’n, Ex. 3, ECF No. 282-4. Plaintiff’s willingness to license its patents to both Defendant and other competitors supports a finding that monetary damages are adequate. See Cave Consulting Grp., LLC v. Optuminsight, Inc., No. 5:11-CV-00469-EJD, 2016 WL 4658979, at *21 (N.D. Cal. Sept. 7, 2016)(finding that where a patent holder is willing to “forego its patent rights for compensation,” “monetary damages are rarely inadequate…”)(citation omitted); ActiveVideo, 694 F.3d at 1339(finding Plaintiff sought to “broadly and extensively license [its] technology … including a campaign to secure a license from [Defendant] itself”).
Moreover, contrary to Plaintiff’s arguments, the damages in this case are quantifiable. Mr. Lettiere stated in his expert report that “[i]f [Defendant] is found liable, reasonable royalty compensation would be the appropriate measure of damages in this matter.” Def.’s Mot. to Exclude, Ex. D, Mr. Lettiere Expert Report, 2, ECF No. 144-4. See Conceptus, Inc. v. Hologic, Inc., No. 09-cv-02280, 2012 WL 44064, at *2 (N.D. Cal. Jan. 9, 2012)(finding harm quantifiable, and that “it would be disingenuous” for patent holder to argue otherwise because patent holder’s expert argued for the reasonable royalty rate that the jury awarded). While Plaintiff argues it lost customers such as Jet Blue, and had to lower prices as to Southwest, both are forms of quantifiable harm compensable by monetary damages. See ActiveVideo, 694 F.3d at 1338 (finding that when an infringer pays the patent holder a monthly royalty, the patent holder is adequately *1027 compensated). After hearing Mr. Lettiere’s expert testimony and viewing the entire record of evidence, the jury decided to impose a royalty rate of $400 per wash—the same amount Mr. Lettiere recommended. See Pl.’s Mot. Ex. C at 16-20. Plaintiff has not made a sufficient showing such a royalty rate is inadequate.