PATracer » Injunctions

Court Rejects “Repair” Defense, Presumes Irreparable Harm For Preliminary Injunction

Kyle Fleming — Tue, 16 Feb 2010 19:51:23 +0000

2010-1146 BorgWarner v. Dorman Products
ED/MI 09-cv-11602
Judge John Corbett O’Meara

Dorman appeals from the preliminary injunction order entered against it by Judge O’Meara stopping sales of its regenerative air pumps, used in automobile emission controls systems, as a likely infringement of BorgWarner’s 5,527,149 and 6,422,808 patents.

The court’s rejection of the “permissible repair” defense and its use of a presumption of irreparable harm are the substantive highlights of this case.

Infringement: The asserted claims essentially all require (a) an impeller housing; (b) an impeller; (c) motor, (d) a flow chamber; and (e) a casing enclosing the impeller. Dorman’s product consisted of everything but the casing (e), and was sold to customers so that they would combine it with the casing from an original BorgWarner unit. Dorman’s defense to indirect infringement is the permissible repair doctrine.

Permissible repair is a defense derived from the first sale of a patented article that gives the buyer “an implied license to use the device for its useful life,” which includes “the right to repair the patented article and necessarily to purchase repair parts from others.” Order, p. 5 citing Kendall Co. v. Progressive Medical Tech., 85 F.3d 1570, 1573-74 (Fed. Cir. 1996). However, as the court noted, the line at which permissible repair turns to infringing reconstruction is hard to define. Id.

BorgWarner contended (un-rebutted) that the only component of its product that could fail and need repair is the motor–which can be replaced by simply removing the impeller and 4 screws. Dorman, however, was replacing not only the motor, but also the impeller, impeller housing and flow chamber. The court held the wide-spread replacement of the components to be a reconstruction of the patented article and found that the repair defense was unlikely to succeed. Order, p. 7.

PATracer Note: The court appears to be saying that Dorman could have permissibly sold just a replacement motor, but instead infringes because it included with the motor some additional components that did not need to be replaced. But why would the gratuitous and apparently unnecessary replacement of functioning parts turn an otherwise non-infringing repair into an infringing reconstruction?

Irreparable Harm: BorgWarner argued that its market share, goodwill and reputation were being injured by Dorman’s competing product, and also that it was facing price erosion. Dorman countered that there was no actual evidence presented, only conclusory allegations.

The Court nevertheless found irreparable harm because Dorman had not rebutted the presumption of irreparable harm. The court found this presumption under Smith Int’l, Inc. v. Hughs Tool Co., 718 F.2d 1573, 1581 (Fed. Cir. 1983), Atlas Powder Co. v. Ireco Chems., 773 F.2d 1230, 1233 (Fed. Cir. 1985) and Polymer Techs. Inc. v. Bridwell, H.A., 103 F.3d 970, 975 (Fed. Cir. 1996). See Order, p. 9.

PATracer Note: Of course, all of the cases relied upon by Judge O’Meara significantly pre-date the Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392-94 (2006), which rejected the presumption in permanent injunction cases. While a few Federal Circuit case post eBay avoided addressing the presumption issue vis-a-vis preliminary injunctions, Dennis Crouch at Patently-O recently covered (link) a non-precedential CAFC decision in Automated Merchandising Systems v. Crane, 2009-1158, where Chief Judge Michel (with Judges Clevenger and Dyk) held that there was no presumption.

It will be interesting to see if another panel at the CAFC reaches the same conclusion– or, for that matter, whether it gets to this issue at all.

2010-1146 PI Order

Baker Hughes Gets PI Against Nalco…Again

Kyle Fleming — Sun, 24 Jan 2010 19:20:03 +0000

2010-1124 Baker Hughes v. Nalco
SD/TX H-09-1885
Judge Kenneth Hoyt

Nalco appeals from the grant of a preliminary injunction by Judge Kenneth Hoyt against it from infringing 7,497,943, generally directed to a method of removing or transferring metals and/or amines from crude oil. This is the second PI granted in the case: the first was vacated by the Federal Circuit in September because the first order was not sufficiently supported, particularly on the issue of irreparable harm.

The key issue appears to be irreparable harm, which Judge Hoyt concluding that allowing Nalco to continue its refining process would be "potentially" irreparable and difficult to quantify. (Opinion, p. 9.)

First, the court noted that this was a two-competitor market (Baker Hughes and Nalco) and "[t]he fact that there is direct competition in a mark[et]place weighs heavily in favor of a finding of irreparable injury.”

Second, because there were only a few potential customers:

the Court finds that, absent an injunction, Baker Hughes will suffer irreparable harm through damage to its reputation in the pertinent market. Specifically, Baker Hughes presented evidence that, within this market, a company is unlikely to be able to resume elevated pricing of patented goods (after discounted sales by other parties) without suffering harm to its good name and ability to conduct business.³ Further, this damage to Baker Hughes’ business reputation could harm its ability to engage in the sale of functionally related products. These damages are (potentially) both irreparable and difficult to quantify. Such conclusions support a finding of irreparable harm.

The court doesn't describe any of the supporting evidence or go into any more detail–and, frankly, it sounds like the argument made by every patentee in every PI case–but it was apparently good enough here.

The court also finds the rest of the PI factors met.

2010-1124 PI Order

Court Maintains License Pending Coverage Dispute

Kyle Fleming — Tue, 24 Mar 2009 18:42:13 +0000

2009-1168 Fairchild Semiconductor v. Third Dimension (3D)
D/ME 08-158
Judge D. Brock Hornby

Patentee/declaratory-judgment defendant 3D appeals from the grant by Judge D. Brock Hornby of a preliminary injunction prohibiting it from terminating a patent license to Fairchild. The license relates to patent 5,216,275 and a related Chinese patent directed to superMOSFET technology for silicon semiconductors.

The parties dispute whether Fairchild's SuperFET™ products are covered by either patent, and thus whether royalties are owed under the license agreement. 3D threatened or attempted to terminate the license for failure to pay/agree.

The court employed the usual factors for a preliminary injunction (likelihood of success, etc.), and a prior claim construction from Power Mosfet Techs., LLC v. Siemans AG, 378 F.3d 1396 (Fed. Cir. 2004) and collateral estoppel factored heavily into claim construction and the infringement analysis.

For licensees there is some nice language from the court regarding irreparable harm and balance of hardships regarding terminated licenses, as well relating to the public interest prong. Fairchild did have to post a bond of $330,000 (in place from the TRO).

More reading:

Order of PI

Counsel:

Fairchild: Pierce Atwood (Portland, Maine)
Third Dimension: Shore Cahn Bragalone (Dallas); Richardson Whitman Large & Badger (Portland, Maine)

Court Grants Injunction, Then Stays Case Pending Re-Exam

Kyle Fleming — Mon, 02 Mar 2009 20:30:01 +0000

2009-1158 Automated Merchandising v. Crane
ND/WV 08-cv-97
Judge John Preston Bailey

Defendants appeal from the grant of a preliminary injunction by Judge John Bailey against the sale of their new vending machines. The 4 patents in suit relate to "optical vend detection systems" in vending machines, devices that are supposed to determine whether or not the selected item has actually dispensed and, if not, refund the money. No more rocking the machine to free stuck Frito's.

There are several facts that make this case interesting, including:

a 7 year delay by plaintiff between believing defendants were infringing and seeking the PI;
the patents are currently in re-exam; and
after granting the PI the court stayed the case pending the re-exam.

The court first addressed defendants' invalidity contentions, based on KSR. The court does not actually discuss the specifics of the obviousness contentions (or of the claims), but notes that the cited prior art was before the PTO and therefore, apparently, it cannot constitute a sufficient defense against a PI:

As such, the prior art references raised by defendants were examined by the Patent and Trademark Office prior to issuing the ‘220 and the ‘915 patents. See American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1359 (Fed. Cir. 1984). Thus, the defendant bears this additional burden:

When no prior art other than that which was considered by the PTO examiner is relied on by the attacker, he has the added burden of overcoming the deference that is due to a qualified government agency presumed to have properly done its job, which includes one or more examiners who are assumed to have some expertise in interpreting the references and to be familiar from their work with the level of skill in the art and whose duty it is to issue only valid patents. Ultra-Tex Surfaces, Inc. v. Hill Bros. Chem. Co., 204 F.3d 1360, 1367 (Fed. Cir. 2000) (quoting American Hoist, 725 F.2d at 1359). Based on the presumption accorded a valid patent under 35 U.S.C. § 103, and the added burden discussed in American Hoist, defendant has failed to overcome the presumption of validity of the ‘915 and ‘220 patents.

Arguably because KSR ‘altered’ the TSM test to include ‘obvious to try’ in the definition of obviousness, the prior art cited by the defendant, although, reviewed by the Patent and Trademark Office when examining the ‘915 and ‘220 patents, could lead the Patent and Trademark Office to a new conclusion as to obviousness after KSR (i.e. in reexamination). This possibility, however, does not rise to the level of a “substantial question” as to the validity of the patent.

[The court follows Judge Newman's opinion in Abbott v. Sandoz, 2008 WL 4636167 (Sept. 21, 2008) that evidence of vulnerability to invalidity should be considered in conjunction with all other evidence to assess "likelihood of success on the merits.']

After rejecting defendants' obviousness defense, the court then engages in claim construction and concludes that the accused vending machine likely infringes claim 28 of 7,343,220.

The court runs through the remaining PI factors, finding that the delay in this case did not preclude the issuance of PI. Defendants had apparently been selling vending machines with allegedly infringing optical systems since 2001, but had only recently introduced such a vending machine with refrigeration–a much sought after feature in the market–that appears to have hurt plaintiff's sales. The court was not troubled by the delay because the accused machine was just introduced, thus providing a newly arisen irreparable harm.

Motion to Stay

The court then granted defendants' motion to stay the case pending the re-examination…a motion apparently filed well before the PI was granted. The court noted it had control over its docket, the case was in its early stages, and waiting for the PTO to decide matters would conserve judicial resources. The court did not mention the potential unfairness to defendants by issuing the injunction and then staying the case.

More reading: PI Order

Counsel:

Automated: Bowles Rice McDavid (Martinsburg, WV); Davidson Berquist Jackson (Arlington, VA)
Crane/Seaga: Munck Carter (Dallas); Reinhart Boerner (Milwaukee); Spilman Thomas (Morgantown, WV).

Post Infringement Reasonable Royalty

Kyle Fleming — Fri, 27 Feb 2009 19:57:23 +0000

2009-1154 Amado v. Microsoft
CD/CA 03-242
Judge David Carter

Plaintiff Amado appeals from the order of Judge David Carter setting the reasonable royalty for Microsoft's post-verdict sale of infringing products and reducing the number of units for which the royalty is owed.

The case is on remand from the Federal Circuit decision [517 F.3d 1353 (2008)] generally affirming infringement by Microsoft but remanding for for determination of the post-verdict royalty for infringing sales following the grant of the (stayed) permanent injunction. The key language employed by Judge Carter from the CAFC's Amado decision is:

When a
district court concludes that an injunction is warranted, but is
persuaded to stay the injunction pending an appeal, the assessment of
damages for infringements taking place after the injunction should take
into account the change in the parties' bargaining positions, and the
resulting change in economic circumstances, resulting from the
determination of liability-for example, the infringer's likelihood of
success on appeal, the infringer's ability to immediately comply with
the injunction, the parties' reasonable expectations if the stay was
entered by consent or stipulation, etc.-as well as the evidence and
arguments found material to the granting of the injunction and the stay.

Microsoft argued for a $0.04 royalty, which is what the jury awarded for pre-verdict infringement, noting that it has since (during the stayed injunction period) easily removed the infringing functionality. Amado argued for $2.00/unit, which is amount Microsoft agreed to escrow during the stay pending appeal.

The court settled on $0.12/unit, or treble the jury award. The court's reasoning is fairly well detailed. The court expressly rejects use of the Georgia-Pacific factors in post-verdict reasonable royalty calculations, finding that the CAFC implicitly rejected these factors by not mentioning them in the first Amado decision.

The court also reduced by 75% the number of units subject to the royalty in light of Microsoft v AT&T, 127 S.Ct. 1746 (2007) [discussed here by Patently-O], related to overseas copies of the software for which there is no liability pursuant to 35 U.S.C. § 271(f). An interesting aside, the court several times references Microsoft's refusal to provide detailed sales or financial information to Amado as if there was nothing that could be done to compel such production.

More reading: Order

Counsel:

Amado: Morrison & Foerster (LA)
Microsoft: Arnold & Porter (DC, LA)

Amgen Scores TKO On EPO

Kyle Fleming — Mon, 01 Dec 2008 13:45:33 +0000

2009-1020 Amgen v. Hoffman-La Roche
D/MA 05-12237
Judge Willam Young

Roche appeals from the judgment of Judge William Young finding that it infringes U.S. Patent Nos. 5,441,868, 5,547,933, 5,618,698, 5,621,080, 5,756,349,
and 5,955,422 relating to Amgen’s recombinant
erythropoietin (“EPO”). The Court also entered a permanent injunction.

The Court's Order checks in at 150 pages so, rather than summarizing it myself, I thought I would let the Court do its own
summary.

Amgen Inc. (“Amgen”) sought declaratory relief to prevent F. Hoffmann-LaRoche Limited, Roche Diagnostics GmbH, and Hoffmann-La Roche Inc. (collectively, “Roche”) from marketing a drug that infringes U.S. Patent Nos. 5,441,868, 5,547,933, 5,618,698, 5,621,080, 5,756,349, and 5,955,422. These patents relate to Amgen’s recombinant erythropoietin (“EPO”), a naturally occurring protein that stimulates the production of red blood cells. Amgen, Inc. v. Hoechst Marion Roussel, Inc., 3 F. Supp. 2d 104, 106 (D. Mass. 1998). The jury found for Amgen across the board, upholding the validity of the claims-in-suit for the ‘422, ‘933, ‘868, ‘698, and ‘349 patents and finding that Roche literally infringed all of the claims-in-suit except for claim 12 of the ‘933 patent, which it found infringed by the doctrine of equivalents. Jury Verdict [Doc. No. 1542] at 2-3. The Court writes to explain its rulings on various pre-trial motions for summary judgment, specifically its findings and rulings that the Amgen patents survive Roche’s obviousness-double patenting contentions, to resolve various post-trial motions, and to explain the decision to grant Amgen’s request for a permanent injunction.

Due to the sheer number, the Court will not be able to address every motion.¹ Therefore, all motions not already granted and not resolved herein are denied. After explaining the grant of summary judgment on the issue of obviousness-type double patenting, the Court will address post-trial motions in three groups: validity, infringement, and injunctive relief. Regarding validity, the Court will write to explain three decisions. Primarily, the Court concluded that the source “purified from mammalian cells grown in culture” limits claim 1 of the ‘422 patent. As shall be discussed, the undisputed record revealed that none of the prior art, including the Goldwasser study, satisfied this limitation. Second, sufficient evidence supported the jury’s finding that the term “human erythropoietin,” found in claim 1 of the ‘422 patent and claims 3, 7, and 9 of the ‘933 patent, is not indefinite, even though the specifications do not specify whether the glycoprotein described therein would be 165 or 166 amino acids in length.

¹ With well over 1,000 pages of post-trial briefing, responding to
every issue would be an inappropriate use of judicial resources. The
Court will focus on those issues that the parties raised at the
February 28 hearing. All of the parties’ remaining contentions have
been considered and found wanting. Because the jury’s verdict will
stand, Roche’s antitrust claims are moot.

Next, the Court will write to explain its grant of summary judgment to Amgen with respect to infringement of claim 1 of the ‘422 patent, see Electronic Order August 28, 2007, and the decision to uphold the jury’s finding that Roche literally infringed claim 3 of the ‘933 patent. See Jury Verdict at 2. As shall be discussed below, Amgen patented recombinant EPO by reference to a specific amino acid sequence. See Amgen, Inc. v. F. Hoffmann-La Roche Ltd., 494 F. Supp. 2d 54, 63 (D. Mass. 2007) [hereinafter “Amgen Markman”]. Pegylation – the chemical reaction that attaches PEG to EPO via a single bond to form CERA, the active ingredient in MIRCERA – does not alter EPO’s amino acid sequence. See Trial Ex. 53, Roche’s Biologic License Application at 00004027 [hereinafter “Roche BLA”]. The attachment of PEG to EPO does not place MIRCERA beyond the boundary of the claims because “the specification expressly contemplates that additional molecules may be attached to ‘human erythropoietin.’” Amgen Markman, 494 F. Supp. 2d at 63 (emphasis omitted). Thus, any minor modification of EPO that does not alter the specific amino acid sequence – such as the displacement of a single hydrogen atom – is immaterial and does not preclude a finding of infringement.

Finally, Amgen has satisfied all four factors necessary for a permanent injunction set forth in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). Failure to issue a permanent injunction would cause irreparable, immeasurable harm, for which there is no adequate remedy at law. Given that Roche infringes Amgen’s valid patents, and in light of the harms that will be discussed, the balance of hardships clearly favors Amgen. Moreover, the Court has concluded that “the public interest would not be disserved by a permanent injunction.” Id. at 391. The record compiled over the course of a four-day evidentiary proceeding reveals no benefit to patient health or the public coffers so great as to outweigh the public’s interest in a robust patent system.

More reading:

Order (still nearly 300k)

Image from Wikipedia

Qualcomm Sanctioned For Contempt Of Injunction

Kyle Fleming — Tue, 18 Nov 2008 19:46:54 +0000

2009-1015 Broadcom v. Qualcomm
CD/CA 05-467
Judge James Selna

Qualcomm appeals from the Order of Judge James Selna finding it in contempt of Court for failing to make certain Sunset Royalty Payments to Broadcom under the terms of the Permanent Injunction. The royalties related to the Q-Chat technology and Broadcom's 6,389,010 patent.

In September, the Federal Circuit upheld the findings of infringement on the '010 and another Broadcom patent, but reversed the infringement verdict on the 5,657,317 patent and found it invalid. The oral argument was covered by us here.

The court required Broadcom to prove contempt by clear and convincing evidence. The court noted that a party should not be held in contempt if it took reasonable steps to comply or achieved substantial compliance.

However, the court found that Qualcomm was in contempt of the '010 Sunset Royalty–having paid nothing on the Q-Chat version 3.0 despite having received more than $93 million in payments from Sprint since the verdict. The court readily rejected Qualcomm's arguments:

Qualcomm’s principal defense is that Broadcom received full compensation under the verdict, and thus is not entitled to further compensation in view of the implied license conferred. King Instrument Corp., 814 F.2d at 1564. The Court disagrees. Broadcom could not have presented evidence of future revenues which did not then exist prior to commercialization. Some of the post-commercialization services were not contracted for until after the entry of the Injunction on December 31, 2007. (Ex. 75.) Tellingly, even as of the date of recent discovery which the Court allowed on this Motion, Qualcomm officials could still not predict the future revenue flow under the Sprint agreement. (Ex. 52, p. 52 [Vrechek].) The present situation is simply not akin to supplying spare parts for repair. King Instrument Corp., 814 F.2d at 1564.

and

Qualcomm argues that there has been no sale since the verdict, so that the royalty provision does not come into play. Given the Court’s revisions to the ‘010 royalty provision to include “revenues received from pre- and postcommercialization development fees and licenses,” this linguistic gamut fails. Moreover, the language in footnote 7 to the sunset provision would, under Qualcomm’s logic, render the sunset provision a complete nullity from the outset.

The court did find that Qualcomm was not in contempt with respect to Q-Chat versions 3.1 and 3.2, finding that Qualcomm was entitled to attempt design arounds and that Qualcomm did not have the burden to prove non-infringement of those versions.

For sanctions, however, the court awarded Broadcom its reasonable attorney's fees and expenses plus gross profits on the revenues from the infringing Q-Chat.

The Court has finds that the contempt for failure to pay the ‘010 sunset royalty is egregious. As Broadcom contended at oral argument, payment, even with interest, merely requires Qualcomm to do what is should have done in the first place. (Tr. 24.) The Court agrees that there was more than a “failure to pay”: so long a Qualcomm did not pay the royalty it was using technoloy it had no right to use. In formulating a remedy, the Court finds the district court’s approach in Brine, Inc. v. STX, L.L.C., 367 F.Supp. 2d 61, 71 (D. Mass. 2005), instructive. There the court was searching for the appropriate punishment for a second infringement violation of its injunction, and concluded that gross profit was an appropriate measure. The court considered awarding net profits from the infringing activities, but concluded that gross profits were a better measure for two reasons:

1. As is recognized in other areas of the law, there are evidentiary difficulties inherent in calculating net profit (i.e. profit after all expenses, depreciation and tax). Given such uncertainty, there is increased risk that the plaintiff will not be made whole. In a contempt proceeding, the need to ensure that the plaintiff is fully compensated and that the defendant is deterred, is acute.

2. While an award of gross profit may overcompensate [the plaintiff] Brine, it will do so in an amount which bears a direct relationship to the degree of infringement: the more X2+s that were sold, the greater the award. As such, a sanction in the amount of gross profit from the sales of the X2+ provides a natural means of imposing a penalty that is proportionate to the severity of the contempt.

More reading:

Contempt order

Medtronic, Abbott, Both Have Something To Appeal

Kyle Fleming — Mon, 17 Nov 2008 17:07:40 +0000

2009-1014, -1038 Advanced Cardiovascular v. Medtronic
D/DE 98-80-SLR
Judge Sue Robinson

Both sides appeal from the verdicts, orders and judgment from Judge Sue Robinson's court finding that Medtronic infringes the so-called Lau patents (including 6,432,133), there was no inequitable conduct in procuring the Lau patents, but also declining to enter a permanent injunction. The case involved various expandable, bare-metal stents.

This case has had a little bit of everything, including two previous trips to the CAFC, party realignment, and an arbitration. But hey, its only been pending 10.5 years.

Medtronic, the original plaintiff, sued defendants claiming infringement of various stent patents and asserting some state law claims. Defendants counterclaimed, asserting the Lau patents against Medtronic. The court granted summary judgment of non-infringement to defendants, a finding affirmed on appeal (2005-1280). The parties were then re-alligned for trial of the Lau patents.

A jury trial in 2005 found that Medtronic infringed the Lau patents, which were also found valid. A 2005 bench trial addressed Medtronic's inequitable conduct claim, that certain prior art references were not disclosed. In 2007 the court denied Medtronic's post-trial motions and found no inequitable conduct. An arbitration was then conducted regarding whether Medtronic had a license with respect to one of its products, with the arbitrator concluding that it did not.

Medtronic tried to appeal before (2007-1365), but it was dismissed as premature pending determination of Abbott's request for a permanent injunction—which the court just denied.

Injunction

In denying the injunction, the court found that monetary damages would suffice and that Abbott had not shown irreparable harm. On the former, the court noted that Abbott had been willing to license others in the same market, thus showing a willingness "to forego its exclusive rights for some manner of compensation."

The court also noted that, despite ACS (Advanced Cardiovascular System, now part of Abbott) losing significant market share after Medtronic entered the fray, other competitors clouded the issue and it "could not identify any specific customers it had lost, or stands to lose, directly as a result of Medtronic's continued sales of infringing stents."

The court further relied on the public's strong interest in maintaining a diversity of stents and on some doctor's preference for Medtronic's stents versus ACS's.

More reading:

Inequitable conduct order

Permanent Injunction order

Counsel:

Abbott: Richard Layton & Finger (Wilmington, DE); Finnegan Henderson Farabow Garrett & Dunner (DC).

Medtronic: Morris, Nichols, Arsht & Tunnell (Wilmington, DE); McDermott Will & Emory (DC; Irvin, CA)

Abuse Of Discretion Returns To Preliminary Injunction Review, At Least For One Case

Kyle Fleming — Mon, 03 Nov 2008 14:57:32 +0000

For those that followed our previous posts on the Federal Circuit's unsettled review of preliminary injunction appeals (here, here, here and here), the Court's recent decision in Abbott Labs v. Sandoz, sheds some more light on the conflict within the CAFC. Perhaps more than any other current patent issue, a PI appeal may hinge almost completely on which panel members you draw.

Judge Newman, writing for the majority (Newman, Archer: Gajarsa dissenting), starts with the standard of review:

On appellate review of the grant of a preliminary injunction, the question "is simply whether the issuance of the injunction constituted an abuse of discretion." Doran v. Salem Inn, 422 U.S. 922, 932 (1975). "It is well settled that the granting of a temporary injunction, pending final hearing, is within the sound discretion of the trial court; and that, upon appeal, an order granting such an injunction will not be disturbed unless contrary to some rule of equity, or the result of improvident exercise of judicial discretion." Deckert v. Independence Shares Corp., 311 U.S. 282, 290 (1940). Abuse of discretion is established "by showing that the court made a clear error of judgment in weighing relevant factors or exercised its discretion based upon an error of law or clearly erroneous factual findings." Novo Nordisk of North America, Inc. v. Genentech, Inc., 77 F.3d 1364, 1367 (Fed. Cir. 1996). See Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc) (“A district court abuses its discretion when its decision is based on clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary or fanciful.”). [Opinion, p. 4.]

While reciting this standard might not be newsworthy, actually following it is.

While the case specific portion of the opinion is interesting, the real thrust is in the discussion of the conflicting precedent within the CAFC on preliminary injunctions, in particular the level of "vulnerability" to validity that must be raised (or disproven) as part of the likelihood of success factor. The court concludes this section as follows:

To summarize my concern for the conflict that is here continued, I again point out that the dissenting opinion, despite its initial recitation of the correct four-part criteria for deciding the grant or denial of a preliminary injunction, then applies the different and incorrect criterion of whether the defendant raised a “substantial question” that may render the patent “vulnerable”. That standard conflicts with precedent of the Supreme Court and all of the regional circuits, all of which require that likelihood of success on the merits be determined and weighed along with the equitable factors. It is not the law that raising a “substantial question” will “negate the patentee’s likelihood of success.” Diss. op. at 3. Raising a substantial question may avoid dismissal on the pleadings, but contrary to the view of the dissent, establishing that there is an issue for trial is not the same as establishing the likelihood of prevailing at trial. [Opinion, pp. 50-51.]

This portion of the opinion also contains a rather lengthy review of the preliminary injunction factors employed by the Supreme Court and the CAFC's sister circuits, and it seems to us that the whole issue is building towards en banc review–perhaps this is the case.

More reading:

2007-1300 Decision

This is the CAFC's third decision on a preliminary injunction concerning these patents, see also Abbott Laboratories v. Andrx Pharmaceuticals, Inc., 473 F.3d 1196 (Fed. Cir. 2007) and Abbott Laboratories v. Andrx Pharmaceuticals, Inc., 452 F.3d 1331 (Fed. Cir. 2006).

“Let’s a-go!” Nintendo Appeals $21 Million Judgement And Injunction

Kyle Fleming — Thu, 14 Aug 2008 03:23:19 +0000

2008-1500 Anascape v. Microsoft
ED/TX 06-cv-158
Judge Ron Clark

Nintendo appeals from the orders and judgment of Judge Ron Clark affirming a jury’s verdict that Nintendo’s GameCube controller, GameCube Wavebird wireless controller, and Wii Classic controller connected to the Wii remote controller infringes claims of 6,906,700. The claims were also found valid and, after a bench trial, not unenforceable due to inequitable conduct. The jury awarded $21 million and Judge Clark granted a permanent injunction (stayed due to some serious bonds posted by Nintendo).

To the relief of kids everywhere (including a couple at my house), the Wii remote connected to the Wii Nunchuk was found to not infringe. The parties also stipulated to summary judgment of non-infringement as to certain claims of the ‘700 and 6,222,525 based on claim construction.

Michael Smith down at EDTexweblog has several posts on this case, including here.

The patents are generally directed to video game controllers, and court described the ‘700 as "focus[ing] on the possibility of using the invention in controllers operable in six degrees of freedom (hereinafter “6 DOF”). Having 6 DOF means that movement can occur on three linear axes: 1) forward/backward, 2) up/down, 3) left/right, and on three rotational axes: 1) yaw, 2) pitch, and 3) roll."

JMOL: The court summarily dismissed Nintendo’s arguments for JMOL and/or a new trial on arguments related to infringement, claim construction and damages. The only topic generating much explanation was on invalidity (although infringement is discussed in the remittitur, below).

Invalidity. The court found enough evidence to support the jury’s finding the patent not invalid–the issue turned on whether the asserted references were, in fact, prior art which, in turn, hinged on whether the ‘700 was entitled to priority based an earlier application. Did the earlier application provide support for controllers with more than one input member movable in 6DOF? The court described the evidence as a "classic ‘battle of the experts’" where the jury chose to believe Anascape’s expert that the earlier application would convey to one skilled in the art that the inventor possessed a controller with more than one input member movable in 6DOF.

Remittitur: The court also rejected Nintendo’s motion for remittitur for damages or a new trial on damages. Its theory was that Anascape’s expert did not break damages out by accused products, and the award from its partial victory on 3 of the 4 accused products was excessive and not support by the evidence.

The court turned the argument around against Nintendo. First, the court rejected that the jury was inflamed by prejudice, passion or bias because, in part, it found for Nintendo on the Wii Nunchuk despite knowing it was the "big money-maker." Indeed, the court found this part of Nintendo’s trial strategy on infringement:

Nintendo hammered on its theme that the patentee wrote claims specifically to cover its Gamecube controller. Tr. at 363:21 – 365:21. As the jury was instructed, writing claims to cover a product is perfectly legal. Jury Instructions, [Doc. #350, p. 13]; Tr. at 1569:12 – 20. It is not surprising that the jury would find infringement as to the Gamecube. The Wavebird and the Wii Classic are very similar to the Gamecube. Minor enhancements and additions to an infringing product do not constitute a design-around that avoids infringement. Nintendo’s choice to emphasize that the patentee had “copied” the Gamecube was a legitimate trial tactic to try and turn the jury against him. However, that perfectly legitimate trial tactic was a double-edged sword, and leaves Nintendo with no room to complain of passion, prejudice, or a lack of evidence to support the infringement findings.

As to the damages award, the court noted that the jury awarded less than 1/2 of the amount demanded by Anascape–again, not showing (to the judge) any passion or prejudice against Nintendo. As to the imprecision in the damages evidence, the court blamed Nintendo:

It may be true that there was not an exact breakdown of the precise number of Wii Remote sales associated with sales of the Wii Classic, but whose fault is that? Nintendo chose not to present an expert on damages or to explain to the jurors how to best segregate sales of Wii Remotes with the Wii Nunchuk should they choose to do so. This cleverly avoided setting a floor for damages for the Gamecube etc., but waived the opportunity to present contravening evidence on damages.

The court concluded:

It appears to the court that Nintendo made some skillfully calculated decisions regarding trial tactics to protect the Wii Nunchuk with Remote. Sales revenue to date from the Wii Nunchuk totals more than the revenue from the other three products combined. In terms of an on-going royalty or compulsory license, that is where substantial future damages would have been. Having virtually admitted that three “old school” products infringe, and having made no serious attempt to rebut Anascape’s damage calculations, Nintendo is not in a good position to argue that the jury’s verdict is the result of passion or prejudice, or even that it is disproportionate to the injury sustained. The court finds that the jury’s verdict on damages is not against the great, nor the greater weight of the evidence, and, to the contrary, finds that the verdict is supported by sufficient evidence.

More reading:

Order on Remittitur
Order on JMOL
Final Judgment and Permanent Injunction

Counsel:

Anascape: McKool Smith (Douglas A Cawley, Samuel Franklin Baxter, Anthony Matthew Garza, Christopher Thor Bovenkamp, Jamie Mozola Shouse, Steven Chase Callahan, Theodore Stevenson, III ) and Parker, Bunt & Ainsworth, Tyler TX (Charles Ainsworth, Robert Christopher Bunt, Robert M Parker).

Nintendo: Wilmer Cutler Pickering Hale & Dorr (Robert J Gunther, Jr) and Nixon & Vanderhye, Arlinton, VA (Joseph S Presta, Robert W Faris) and Germer Gertz, Beaumont, TX (Lawrence Louis Germer, Charles W Goehringer, Jr, ) and Kaye Scholer (James S Blank).