Authored by D. Brian Kacedon and John C. Paul
Historically, a patent owner who proved validity and infringement was virtually assured of obtaining an injunction preventing the infringer from continuing to make and sell infringing products. The threat of being put out of business by an injunction provided infringers with greater motivation to settle on terms more favorable to the patent owner. But the Supreme Court changed all that in eBay Inc. v. MercExchange, L.L.C., requiring courts to perform the same analysis applied in all other cases when determining whether a party is entitled to an injunction. This analysis includes determining whether a patent owner will suffer irreparable harm in the absence of an injunction.
Since the Supreme Court decision in eBay, several questions have lingered about the standards for obtaining an injunction, specifically whether the patent owner should be entitled to a presumption of irreparable harm given the exclusionary nature of patents. The Federal Circuit recently addressed this issue in Robert Bosch LLC v. Pylon Manufacturing Corp., No. 11-1096 (Fed. Cir. Oct. 13, 2011).1 The Federal Circuit expressly ruled that eBay eliminated the presumption of irreparable harm, but urged courts to acknowledge that the fundamental nature of patents as property rights grants the owner a right to exclude.
The case involved patent infringement over Bosch's windshield wiper technology, specifically beam-type wiper blades. The patented technology allowed for more evenly distributed pressure across the blade and improved performance during inclement weather. Bosch filed a complaint in the District of Delaware, alleging infringement of four patents by Pylon. The jury ultimately found two patents valid and infringed. As a result, Bosch asked the court to grant a permanent injunction. But the district court denied the request for an injunction, ruling that Bosch failed to prove it would suffer irreparable harm without an injunction, and noting that irreparable harm was a prerequisite to obtaining an injunction.
In its analysis, the district court noted the struggle to balance the absence of a presumption of irreparable harm with a patentee's right to exclude. The court cited other courts' focus on the competition between parties in the relevant market and the adequacy of money damages. The court also found a tendency to award permanent injunctions where the patent owner practiced its invention, the patent owner was a direct market competitor of the infringer, or the patented technology constituted the patent owner's core business. With these observations in mind, the district court found Bosch failed to prove irreparable harm. The district court weighed against Bosch the failure to define the relevant market, the absence of a two-supplier market because of additional competitors, and the non-core nature of Bosch's wiper blade business in relation to its overall business. Bosch timely appealed the denial of an injunction.
The Bosch Decision
The Federal Circuit began its review with the principles enunciated by the Supreme Court in eBay, requiring a patentee seeking a permanent injunction to show: (1) that the patentee would suffer irreparable harm; (2) that the remedies at law were inadequate; (3) the balance of hardships warranted a remedy in equity; and (4) the public interest would not be disserved.
The Federal Circuit noted that, before eBay, an express presumption of irreparable harm existed once the plaintiff showed a likelihood of success on the merits of patent infringement. But the Supreme Court, in eBay, did not expressly address this presumption of irreparable harm, nor have subsequent Federal Circuit decisions. In Bosch, the Federal Circuit "put the question to rest and confirm[ed] that eBay jettisoned the presumption of irreparable harm as it applies to determining the appropriateness of injunctive relief." Though abolishing the general rule, the Federal Circuit stated that the pendulum did not swing in the opposite direction. Instead, courts should acknowledge the fundamental nature of patents as property rights granting the owner the right to exclude.
After reviewing these legal standards, the Federal Circuit applied the four eBay factors. On the issue of irreparable harm, the Federal Circuit noted several errors made by the district court. First, irreparable harm does not disappear if the patent owner has more than one competitor in the marketplace; while the existence of a two-player market strongly supports an injunction, the converse is not automatically true, especially where a patentee seeks to enforce its rights against other infringers in the market. Second, the district court erred in relying on the "non-core" nature of Bosch's wiper blade business. An infringer's harm affecting only a portion of a patentee's business has no bearing on whether that harm can be rectified. Third, the district court erred in its judgment of the evidence. The Federal Circuit pointed to undisputed evidence of direct competition in each marketplace identified by the parties, unrebutted evidence of loss of market share and access to potential customers, and a possible inability to satisfy a monetary judgment. The Federal Circuit felt the district court failed to address any of this evidence, and concluded there was no basis to rationally conclude that Bosch failed to demonstrate irreparable harm.
The Federal Circuit turned next to the remaining equitable factors, finding they also favored a permanent injunction. The second factor, whether remedies at law such as monetary damages were adequate, favored an injunction. The court found that lost market share, lost business opportunities, and price erosion would continue without an injunction. Further buoying the inadequacy of monetary damages was the questionable financial condition of both Pylon and its parent company. The court also found the third factor, the balance of hardships, favored Bosch and dismissed Pylon's arguments about the size of the parties. The final factor, the public interest, was found to be neutral by the court.
Due to the undisputed evidence conclusively supporting permanent injunctive relief, the Federal Circuit found a remand inappropriate. As a result, 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.
Judge Bryson dissented in part to the decision, agreeing that the district court erred in the denial of an injunction, but disagreed that the record compelled the issuance of an injunction.
Strategy and Conclusion
When seeking a permanent injunction, a patent owners must be prepared to prove that they would be irreparably harmed if the court did not enjoin the infringers from continuing to infringe the asserted patents. The Bosch decision focused on the district court's legal errors regarding the nature of the competition between parties, as well as the "non-core" aspect of the business to the patentee. Though the absence of a two-player market and non-core business did not disprove irreparable harm, the Federal Circuit pointed out the converse does strongly support irreparable harm. A patent owner would be wise to emphasize strong direct competition between the parties and the importance of a business line when arguing irreparable harm. Additional supporting evidence regarding the financial solvency of an accused infringer may further support a patent owner's argument.
While the Federal Circuit jettisoned the presumption of irreparable harm, it did require courts to consider the fundamental nature of patents as property rights. The Federal Circuit, however, left open the question of the extent to which courts must consider this fundamental nature and provided little guidance on how courts may properly address this consideration.
1 The Bosch decision: http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1096%20errata.pdf
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