Fresh From the Bench: Precedential Patent Cases From the Federal Circuit
The Circuit issued a single precedential patent decision this week – the Genband v. Metaswitch case where the Circuit vacated the denial of a motion for preliminary injunction out of concern that the district court applied too strict of a test for irreparable injury.
Genband US LLC v. Metaswitch Networks Corp., Fed. Cir. Case 2017-1148 (July 10, 2017)
Relying on its injunction decisions in the Apple v. Samsung cases, the Circuit vacates the denial of a motion for permanent injunction, noting that the patented feature needs to only be one of the reasons why an infringing product is purchased; that is, it does not need to be the only feature driving the demand for the product.
Genband sued Metaswitch for infringement of several patents directed to voice communications over the internet (VoIP). After a jury found claims of the patents infringed and not invalid and awarded over $8 million in damages, Genband moved for a permanent injunction. Judge Gilstrap of the E. D. of Texas denied the motion, concluding that Genband had not established irreparable harm. The panel is troubled, however, that the court’s conclusion may have relied on too stringent an interpretation of the requirement that the alleged irreparable harm is being caused by the infringement.
Judge Gilstrap declared that Genband had to prove that “the patented features drive demand for the product,” citing the Circuit’s two 2012 Apple v. Samsung opinions (Apple I and II). According to the panel, the “drive demand” formulation is susceptible to different interpretations, some stricter, some more flexible, in situations where the product at issue has multiple features that different purchasers might assign different weights in their purchasing decisions. For example, the “drive demand” formulation could require that the infringing feature be “the driver” of purchasing decisions, even requiring proof that no or almost no buyers would buy the product but for the infringing feature. Or it could require less, e.g., that the infringing feature be “a driver” of decisions by a substantial number of consumer decision-makers considering multiple features.
Here, Genband argued for a standard on the less stringent side of the spectrum, and the panel notes that it has been clear since Apple III in 2013 that a standard of the less demanding variety— a standard based on “a driver” as opposed to “the driver,” applied in the multi-consumer, multi-feature context—is the governing one. Thus, rather than show that a patented feature is the exclusive reason for consumer demand, the patentee must show some connection between the patented feature and demand for the infringer’s accused products. Described another way in the Circuit’s 2015 Apple IV decision, the causal-nexus requirement “just means that there must be proof that the infringement causes the harm” that the patentee alleges is irreparable—in that case, “damage to the patentee’s reputation as an innovator, lost market share, and lost downstream sales.”
In addition to its causal-nexus determination, the district court deemed the delay in filing suit and Genband’s choice not to seek a preliminary injunction to weigh against a finding of irreparable injury. Genband correctly points out that, when a patent owner postpones suit and forgoes a preliminary injunction, there may well be reasons for the patent owner’s actions independent of any implied concession that the infringement-caused injury is not actually irreparable: for example, the competitive threat may initially be small, or the merits may be much better presented through full litigation than through abbreviated preliminary-injunction proceedings. But Genband has not justified a per se rule making the patent owner’s choices about when to sue and whether to seek interim relief legally irrelevant. In this case, the timing of Genband’s suit and Genband’s decision not to ask for preliminary relief call for an evidentiary judgment to be handled by the district court on remand.
Comment: Given the panel’s focus on the Apple v. Samsung decisions in its causal-nexus discussion, it is significant that the latest decision, Apple IV, may be accepted for certiorari. The Apple cases show that the standard to be applied to injunctions in patent cases is continuing to evolve in the Circuit. Also, as demonstrated in the recent Metalcraft v Toro decision affirming the grant of a preliminary injunction and WBIP v. Kohler vacating the denial of a permanent injunction, the Circuit has been stressing the public’s interest in enforcing patent rights. The Supreme Court may take Apple IV and use it to remind the Circuit that eBay ruled there should be no special injunction tests for patent cases.