Latest Federal Court Cases, 10/31/22
ABC Corp. v. Tomoloo Official, Appeal Nos. 2021-2277, -2355, -2150 (Fed. Cir. Oct. 28, 2022)
ABC Corp. v. eBay, Inc., Appeal No. 2022-1071 (Fed. Cir. Oct. 28, 2022)
The following summary covers two decisions issued the same day, dealing with preliminary injunctions issued from the U.S. District Court for the Northern District of Illinois in a single litigation. In one of those decisions, the Federal Circuit examined the notice requirement under FRCP 65(a) and held it was not met. In the other decision, the Federal Circuit examined the merits of the preliminary injunction, and reversed the district court based on its erroneous application of the “likelihood of success on the merits” factor.
ABC Corp. owns four design patents related to hoverboards. Appellants sell Gyroor-branded hoverboards. ABC brought suit against appellants claiming that products sold by appellants infringed ABC’s patents. Plaintiffs sought a preliminary injunction, which the district court granted (the “2020 Preliminary Injunction”). The 2020 Preliminary Injunction included named defendant Gyroor-US, though it had not yet been served with process and was not given advance notice under Federal Rule of Civil Procedure 65(a) of the request for a preliminary injunction. The 2020 Preliminary Injunction also covered certain defendants listed in Schedule A.
ABC later filed a motion reflecting their concern about infringing activity by entities that were not named in Schedule A, and were not directly subject to the 2020 Preliminary Injunction, but that ABC had reason to think were affiliates of or in active concert with those already named in Schedule A. Specifically, plaintiffs moved to amend Schedule A to add various entities to it, including GaodeshangUS, Fengchi-US, and Urbanmax (together with Gyroor-US, the “Appellants”). The district court then granted ABC’s motion to amend Schedule A (“May 24 Order”). The newly added defendants were not served with process until June 25, 2021, more than thirty days after the entry of the May 24 Order. Once served, the Appellants filed motions with the district court to set aside the 2020 Preliminary Injunction, raising issues regarding the procedural propriety of the injunction, after which the district court permitted ABC to file a renewed motion for a preliminary injunction. That renewed motion was granted (the “2021 Preliminary Injunction”).
In the first decision, the Federal Circuit addressed whether the district court erred by subjecting the Appellants to the Preliminary Injunction because the Appellants had had not yet been served with process and were not given advance notice under FRCP 65(a) of the request for a preliminary injunction. The Federal Circuit concluded that the district court did err, vacating the Preliminary Injunction from its issuance and vacating the district court’s May 24 Order to the extent it subjected the Appellants to the Preliminary Injunction.
The Federal Circuit first addressed its jurisdiction to hear the Appellants’ appeals, concluding that it had jurisdiction. The Federal Circuit found that (1) all three notices of appeal were timely because the Appellants had no obligation to take an appeal before proper service; (2) an error in GaodeshangUS’s notice of appeal was not fatal because the intent to appeal from a specific ruling could be inferred and ABC was not misled or prejudiced; and (3) the May 24 Order was a modification of the 2020 Preliminary Injunction and it had jurisdiction over such modifications of injunctions (as opposed to orders interpreting injunctions).
Turning to the notice issue, the Federal Circuit found that the May 24 Order and the 2020 Preliminary Injunction violated the notice requirement under Rule 65(a). The Federal Circuit reasoned that no advance notice or opportunity to oppose was given to the Appellants. In so holding, the Federal Circuit rejected ABC’s argument that Rule 65(a) was satisfied when Amazon notified Gyroor-US that it was freezing Gyroor-US’s account. The Court also rejected ABC’s argument that GaodeshangUS was on notice because it was later represented by the same attorney as Gyroor-US—a named, though not yet served, defendant at the time ABC moved for the preliminary injunction.
The opinion can be found here.
In Appeal No. 2022-1071, the Federal Circuit addressed whether the district court failed to meet the requirements of FRCP 65(d) and the Court’s precedent in finding that ABC was likely to succeed on the merits en route to granting the 2021 Preliminary Injunction. The Federal Court held that the district court did err in four independent respects.
First, the Federal Circuit found that the district court applied, at least in part, the wrong legal standard. In particular, the district court erred by finding that the need for trial to resolve a dispute between experts supported a finding that ABC was likely to succeed on the merits. The Federal Circuit explained that an injunction cannot be granted simply on the grounds that a trial is required or that the accused products are not “sufficiently dissimilar” or “plainly dissimilar” from the patented design.
Second, the district court was required, but failed, to conduct the ordinary observer analysis through the lens of the prior art. In other words, where a patented design and an accused product were not “plainly dissimilar,” as was the case here, the district court needed to conduct a three-way analysis comparing the accused product, the patented design, and the prior art. Instead, the district court engaged in a conclusory discussion that provided no indication that it conducted the required analysis.
Third, the district court failed to apply the ordinary observer test on a product-by-product basis, which was necessary in light of significant differences among the accused products.
Finally, the Federal Circuit found that the 2021 Preliminary Injunction was overbroad. Specifically, the district court erred by not specifically enjoining the accused products. According to the Federal Court, injunctions that by their terms apply to any device within the scope of the patent claims fail to meet the specificity requirement of Rule 65(d).
The opinion can be found here.
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This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.
- Of Counsel