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eBay Ended Presumption of Irreparable Harm in Determining the Appropriateness of Injunctive Relief, but the Fundamental Nature of Patents as Property Rights May Not Be Ignored

October 12, 2011

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Last Month at the Federal Circuit - November 2011

Judges: Bryson (dissenting-in-part), O’Malley (author), Reyna

[Appealed from: D. Del., Judge Robinson]

In Robert Bosch LLC v. Pylon Manufacturing Corp., No. 11-1096 (Fed. Cir. Oct. 13, 2011), the Federal Circuit reversed the district court’s denial of a motion for entry of a permanent injunction and remanded for entry of an appropriate injunction.

This is a patent infringement case involving windshield wiper technology, specifically, beam-type wiper blades (“beam blades”). Part of the business of Robert Bosch LLC (“Bosch”) involves developing wiper blades, and Bosch owns patents covering various aspects of beam blade technology. In addition to its research and development efforts, Bosch sells blades to both original equipment manufacturers and aftermarket retailers. Pylon Manufacturing Corp., LLC (“Pylon”) also sells beam blades and has competed with Bosch for business from retailers such as Wal-Mart.

Bosch sued Pylon, alleging infringement of several U.S. patents relating to beam blades. The district court granted a motion by Pylon to bifurcate the issue of damages. Following a jury verdict’s that Pylon infringed valid claims of two of Bosch’s patents, Bosch moved for entry of a permanent injunction. The district court denied the motion on the ground that Bosch failed to show that it would suffer irreparable harm. The district court concluded that this is not a two-supplier market and that additional competitors exist, that wiper blades are not the core of Bosch’s business, and that Bosch failed to define a relevant market, and thus found that Bosch failed to show it would suffer irreparable harm. Finding the absence of irreparable harm fatal to Bosch’s motion, the district court denied the motion for an injunction without addressing the remaining equitable factors of the permanent injunction inquiry. Bosch appealed.

The Federal Court considered a jurisdictional dispute raised by Pylon, and analyzed the effect of eBay on injunctive relief, specifically, each of the four factors a patent owner must show for a permanent 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; (3) that, considering the balance of hardships between the plaintiff and the defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).

Regarding the jurisdictional dispute, Pylon admitted that § 1292(a)(1) provides a sound basis for jurisdiction, but contended that jurisdiction under that section has not been established, as Bosch was required to show that the order will have a serious, perhaps irreparable, consequence and that the order can be effectually challenged only by immediate appeal, citing Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370, 379 (1987), and Carson v. American Brands, Inc., 450 U.S. 79, 84 (1981). The Court, however, agreed with Bosch that the additional hurdles cited by Pylon apply only in cases involving orders that do not expressly deny an injunction, but have the effect of denying injunctive relief, and therefore held that Bosch need not make any additional showing for jurisdiction, as the district court order explicitly denied the grant of a permanent injunction. See Cross Med. Prods. v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293, 1300 (Fed. Cir. 2005).

In analyzing eBay’s effect on injunctive relief for patent infringement, the Court opined that while the Supreme Court made clear in eBay that broad classifications and categorical rules have no place in this inquiry and that courts are to exercise their discretion in accordance with traditional principles of equity, the Supreme Court did not expressly address the presumption of irreparable harm. See Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 702 (Fed. Cir. 2008) (“It remains an open question whether there remains a rebuttable presumption of irreparable harm following eBay.”). The Court opined that eBay jettisoned the presumption of irreparable harm as it applies to determining the appropriateness of injunctive relief, but that it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude. The Court stated that it has adjudicated many cases involving a practicing patentee seeking to permanently enjoin a competitor upon an adjudication of infringement, and has developed legal standards that inform the four-factor inquiry and, in particular, the question of irreparable harm. While none of those standards alone may justify an effectively irrebuttable presumption that an injunction should issue, the Court held that a proper application of the standards to the facts of this case compels the conclusion that Bosch is entitled to the injunction it seeks. The Court therefore concluded that the district court abused its discretion by ignoring those standards and supplanting them with its own.

With respect to the four-factor test, the Court held that the district court committed legal error by the weight it gave to the factors cited, and further made a clear error in judgment in its analysis of the irreparable harm factor. The Court analyzed each factor in turn.

Regarding the first factor of the four-part test, the Court held that the district court erred in relying exclusively on the presence of additional competitors and on the noncore nature of Bosch’s wiper blade business. In addition, the Court held that the district court committed a clear error of judgment when it concluded that Bosch failed to demonstrate irreparable harm in the face of overwhelming evidence to the contrary. The Court also found relevant Bosch’s evidence of (1) the parties’ direct competition; (2) loss in market share and access to potential customers resulting from Pylon’s introduction of infringing beam blades; and (3) Pylon’s lack of financial wherewithal to satisfy a judgment. The Court found that there is no basis on which the district court rationally could have concluded that Bosch failed to show irreparable harm.

Regarding the second factor of the four-part test, the adequacy of money damages, the Court agreed with Bosch that Bosch will continue to suffer irreparable harm due to lost market share, lost business opportunities, and price erosion unless Pylon is permanently enjoined, and money damages alone cannot fully compensate for these harms. The Court found important the questionable financial condition of both Pylon and its parent company, and thus that the district court’s failure to consider the extent to which a forward-looking monetary award is a viable or meaningful alternative to an injunction was error.

Regarding the third factor of the four-part test, the balance of hardships, the Court opined that a party cannot escape an injunction simply because it is smaller than the patentee or because its primary product is an infringing one, while requiring Bosch to compete against its own patented invention with the resultant harms described above, places a substantial hardship on Bosch.

Regarding the final factor of the four-part test, the public interest, the Court found that neither party offered specific arguments as to why, in this case, the public interest would be served or disserved by an injunction, and thus found this factor to favor neither party.

The Court reversed the district court’s denial of Bosch’s motion for entry of a permanent injunction and remanded for entry of an appropriate injunction. The Court held that, while normally a district court should balance these equitable considerations in the first instance, the facts of this case compel a different result. The Court further stated that, to the extent that bifurcation of the damages portion of the trial inhibited development of the record as it relates to injunctive relief, it was the result of Pylon’s doing, and remanding the action for additional hearings prior to entry of injunctive relief would punish the patentee for the district court’s decision, at Pylon’s urging, to bifurcate the trial and for the district court’s erroneous application of the law to the evidence before it.

Judge Bryson, dissenting-in-part, agreed with the majority that the district court erred in its application of the eBay factors and that the district court’s order denying an injunction should not be affirmed. Judge Bryson, however, disagreed that the record compels the issuance of an injunction, and that “there are enough open questions of fact bearing on the propriety of injunctive relief that we should not bypass the district court’s consideration of those factual issues on remand.” Bryson Dissent at 2.

Summary authored by Robert A. Hall, Esq.