Friday, April 28, 2017

CAFC denies Nichia an injunction; patentee licensing weighs against a finding of irreparable harm

The CAFC affirmed Judge Gilstrap of ED Texas in the Nichia case,
so no injunction for Nichia but infringement still stands:

Nichia Corporation sued Everlight Electronics Co.,
LTD., Everlight Americas, INC., and Zenaro Lighting,
Inc. (collectively, “Everlight”) for infringement of three of
its patents. Following a bench trial, the district court
found Everlight infringed all three patents and had not
proved them invalid. The court denied, however, Nichia’s
request for a permanent injunction against Everlight.
Nichia appeals the district court’s refusal to enter an
injunction against Everlight. Everlight cross-appeals the
court’s judgment that it infringes Nichia’s patents and
that it failed to prove the patents invalid. We affirm.

Of Everlight's cross-appeal of the infringement finding:

We review the court’s findings of fact for clear error
and its legal conclusions de novo. Allergan, Inc. v. Apotex
Inc., 754 F.3d 952, 961 (Fed. Cir. 2014).
Because we agree with the court’s construction, and
because Everlight does not challenge the court’s finding of
infringement under that construction, we affirm the
court’s finding that the accused products meet this limitation.

As to Everlight's invalidity challenge:

The court found that a person of ordinary skill would
not have considered Glenn or Sanyo to modify Hitachi
because “the different considerations in the design and
manufacture of electronic and optoelectronic [e.g., LED]
devices result in substantial differences in the manufacturing
processes and materials used in the different
technologies,” and “a change in the design or manufacture
of an LED or other optoelectronic device requires the
consideration of factors—including factors such as light
emission, and the effects of heat and emitted radiation on
different resins and other materials—that are not relevant
to the design and manufacture of electronic semiconductor
devices.” Id. at *21.


But the court found that a person of ordinary skill in
the art would have had no motivation to modify Nitta in
light of Waitl. We agree. The court found that the references
disclose different structures, resolve dissimilar
problems, and propose dissimilar solutions. Id. at *51–53.
The court’s conclusion derives further support from its
earlier finding that artisans in this field face myriad
design challenges because small design changes may
cause unpredictable results and because design considerations
often pull in multiple directions. Id. at *4. We
determine that the court’s finding on motivation to combine
is not clearly erroneous. We thus affirm the district
court’s conclusion that Everlight failed to prove the ’870
patent invalid as obvious.

As to the denial of Nichia's request for an injunction:

We review a district court’s grant or denial of a permanent
injunction for an abuse of discretion. Robert
Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1149 (Fed.
Cir. 2011). “We may find an abuse of discretion on a
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.”
Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363,
1379 (Fed. Cir. 2008) (internal quotation marks omitted).
A permanent injunction is an equitable remedy.
Weinberger v. Romero-Barcelo, 456 U.S. 305, 311 (1982).
“It ‘is not a remedy which issues as of course,’ or ‘to restrain
an act the injurious consequences of which are
merely trifling.’” Id. (citation omitted) (quoting Harrisonville
v. W.S. Dickey Clay Mfg. Co., 289 U.S. 334, 337–38
(1933) and Consol. Canal Co. v. Mesa Canal Co., 177 U.S.
296, 302 (1900)).


But an injunction in patent law must be justified like
any other: “the moving party must satisfy the court that
relief is needed.” United States v. W. T. Grant Co.,
345 U.S. 629, 633 (1953). The movant must prove that it
meets all four equitable factors. i4i Ltd. P’ship v. Microsoft
Corp., 598 F.3d 831, 861 (Fed. Cir. 2010). And it
must do so on the merits of its particular case. eBay,
547 U.S. at 391.

There was an issue that Everlight was not truly a competitor of
Nichia, and thus there was no "harm" forthcoming if there were no injunction:

We disagree, not because we question the facts as
Nichia presents them, but because the court heard these
arguments as the original finder of fact and concluded to
the contrary, carefully weighing both parties’ evidence.
The court found that Nichia is an LED chip manufacturer
as well as a packager, “while Everlight is solely an LED
packager.” Nichia, 2016 WL 310142, at *53. The court
also found that the two companies generally sell to different
parties: “Everlight generally sells to distributors
rather than directly to customers, as Nichia does.” Id.
Moreover, despite the parties’ stipulation that they competed
in the same market, J.A. 2112, ¶ 148, the court
found that Nichia failed to prove that this competition
was meaningful, Nichia, 2016 WL 310142, at *65. The
court explained that Everlight’s competition accounted for
“the proverbial ‘drop in the bucket,’” when compared to
Nichia’s total sales. Id. Nichia identified 516 sales opportunities,
with Everlight as a competitor in only 3. Id. In
light of these findings, the court noted that there was “a
very small area of possible competition,” but it concluded
that there was an “absence of actual competition.” Id

The court closed its market-competition analysis by
observing that the “justification for an injunction is remote
indeed.” Id.

Of interest, the CAFC did disagree with ED Texas on a point
about licensing:

Nichia further contests the court’s findings with respect
to Nichia’s licensing activities. Nichia argues that
the court wrongly found that its licensing activities precluded
a finding of irreparable harm. Nichia argues that
the court’s decision is contrary to settled law, as it applies
a categorical rule that licenses preclude irreparable harm.
To the extent the court adopted a categorical rule, we
agree with Nichia; such a rule would run afoul of our
precedent. We have explained, for example, that “[a]
plaintiff’s past willingness to license its patent is not
sufficient per se to establish lack of irreparable harm if a
new infringer were licensed.” Acumed LLC v. Stryker
Corp., 551 F.3d 1323, 1328 (Fed. Cir. 2008) (citing eBay,
547 U.S. at 393).
But to the extent that the court found that Nichia’s
prior licenses weighed against a finding of irreparable
harm, we countenance that approach. While evidence of
licensing activities cannot establish a lack of irreparable
harm per se, that evidence can carry weight in the irreparable-harm
inquiry. We have previously explained that
“[t]he fact of the grant of previous licenses, the identity of
the past licensees, the experience in the market since the
licenses were granted, and the identity of the new infringer
all may affect the district court’s discretionary decision
concerning whether a reasonable royalty from an infringer
constitutes damages adequate to compensate for the
infringement.” Id.

Of confusion about the "four factors" of eBay(ie, must all four factors be shown?)

**note the 2006 article by L. Ebert, which includes the text about the Weinberger case relied upon by the eBay court:

The Weinberger case does not enumerate a four factor test for consideration in granting a permanent injunction. In fact, the Weinberger case was not strictly about the grant of a permanent injunction because the ultimate merits were to be resolved in the permit application. The decision in eBay v. MercExchange about the presence of a four factor test for permanent injunctions may have unintended consequences. In ZEN INVESTMENTS, 2006 U.S. Dist. LEXIS 37171 (decided June 2, 2006), the court noted: "The Third Circuit has been unsettled n5 on whether a plaintiff must prove irreparable harm to receive a permanent injunction, as opposed to a preliminary injunction which always requires a showing of irreparable harm." The eBay decision squarely brings back "irreparable harm" into the permanent injunction calculus without giving much guidance on how to evaluate irreparable harm. The immediate impact will be more uncertainty.

Ironically, the cite to a non-existent four factor test by the eBay court resonates with certain questionable citation practices in the Weinberger case. For example, the appropriateness of citations of the Weinberger court to other cases which appear on page 312 has been questioned by legal academics. Thus, Douglas Laycock wrote of Weinberger in the Harvard Law Review in 1990 (103 Harv. L. Rev. 687):

The Court said it "has repeatedly held that the basis for injunctive relief in the federal courts has always been irreparable injury and the inadequacy of legal remedies." It then cited Rondeau v. Mosinee Paper Corp., a mootness case; Sampson v. Murray, a case about preliminary relief and deference to administrative agencies; Beacon Theatres, Inc. v. Westover, a jury trial case; and Hecht Co. v. Bowles,
a case that does not even mention the irreparable injury rule. Weinberger itself is about undue hardship and deference to the military. Each of these cases is cited in a different section of this Article; they have almost nothing in common except the phrase "irreparable injury." Hecht does not even have that; Hecht denied an injunction on the ground that it would be futile. The Court miscited it in Weinberger. Perhaps the law clerk assumed that any case that denied an injunction and mentioned discretion must have been an irreparable injury case.

Thus, the cases cited in the Weinberger decision, which was utilized to justify eBay v. MercExchange, don't really justify the proposition about "repeatedly held that the basis for injunctive relief is ...." Further, there is no four-facter list enumerated in the Weinberger case. Arguably, Weinberger v. Romero-Barcelo, 456 U.S. 305, 311 (1982) taught that an injunction will not "'restrain an act the injurious consequences of which are merely trifling'" (quoting Consolidated Canal Co. v. Mesa Canal Co., 177 U.S. 296, 302 (1900)), an issue quite distinct from that faced in eBay v. MercExchange.

Although the unanimous decision in eBay is characterized as a narrow decision reiterating previous law, it has the possibility of creating more uncertainty in the area of the application of the concept of "irreparable injury" to the calculus for permanent injunctions.

Other aspects of the eBay case were discussed in Los Angeles Times Gets Facts Wrong in Discussion about Supreme Court case, eBay v. MercExchange

Considering that the Thomas opinion cites the still valid 1908 Continental Paper case against the reasoning of the district court eBay opinion, the analysis of the four factors made by the Court of Appeals for the Federal Circuit in this case might still be valid, and a permanent injunction might still issue. So, ironically, for all the smoke, MercExchange may still get its permanent injunction and we may almost obtain "business as usual" in the use of permanent injunctions in patent law, even as greater uncertainty is injected into other areas.


**note the 2005 post on IPBiz

Which is the first post-eBay district court injunction case?


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