Tuesday, July 11, 2017

CAFC addresses permanent injunctions in Genband. Apple III and Apple IV mentioned.

The outcome was remand:

Appellant Genband US LLC sued Metaswitch Networks Corp. and Metaswitch Networks Ltd. (together, Metaswitch) for patent infringement. After a jury found that Metaswitch infringed various claims of several of Genband’s patents, and that the claims at issue had not been proven invalid, Genband sought a permanent injunction. The district court denied the request, concluding that Genband had not established irreparable harm from the infringing activities. That conclusion, however, may have relied on too stringent an interpretation of the requirement, for an injunction, that the allegedly irreparable harm is being caused by the infringement. Based on the district court’s opinion and the briefing in this court, moreover, we cannot be confident of the answer to the causation question under the standard properly governing the inquiry or whether there is any independent ground for finding no irreparable harm or otherwise denying an injunction. Accordingly, we vacate the denial of the injunction and remand for reconsideration

At ED Texas:

The [ED Texas] court also denied Genband’s request for a permanent injunction. Id. at 894–95. The district court rested its denial entirely on the determination that Genband failed to show that it would suffer irreparable harm from Metaswitch’s continued infringement. The court gave two reasons, without indicating that the second reason independently supported its determination. First, the court held that Genband did not demonstrate a causal nexus between the alleged irreparable harm (based on lost sales) and the presence of the infringing features in Metaswitch’s infringing products. Id. at 894–95. In so ruling, the district court stated that “it is Genband’s burden to demonstrate that the patented features drive demand for the product.” Id. at 894. The court borrowed certain language from this court’s decision in Apple, Inc. v. Samsung Electronics Co. (Apple II), 695 F.3d 1370, 1375 (Fed. Cir. 2012) (“The patentee must . . . show that the infringing feature drives consumer demand for the accused product.”), which in turn relied on similar language in Apple, Inc. v. Samsung Electronics Co. (Apple I), 678 F.3d 1314, 1324 (Fed. Cir. 2012) (“If the patented feature does not drive the demand for the product, sales would be lost even if the offending feature were absent from the accused product.”). Before reiterating the “drive demand” principle, the district court quoted this court’s statement in Apple, Inc. v. Samsung Electronics Co. (Apple III), 735 F.3d 1352, 1364 (Fed. Cir. 2013), that “this inquiry should focus on the importance of the claimed invention in the context of the accused product, and not just the importance, in general, of features of the same type as the claimed invention.” Genband, 211 F. Supp. 3d at 894. The district court then noted Genband’s arguments that certain stringency-reducing explanations of “drive demand” are found in both Apple III, 735 F.3d at 1365 and Apple, Inc. v. Samsung Electronics Co. (Apple IV), 809 F.3d 633, 641–42 (Fed. Cir. 2015), cert. denied, 136 S. Ct. 2522 (2016), petition for cert. filed, 85 U.S.L.W. 3460 (U.S. Mar. 10, 2017) (No. 16-1102). But the court did not indicate agreement with Genband that those explanations state the governing law. Genband, 211 F. Supp. 3d at 894.

Of the error:

The district court’s opinion, however, leaves us uncertain whether the court relied on too stringent an interpretation of the causal-nexus requirement. The court declared that Genband had to prove that “the patented features drive demand for the product.” Genband, 211 F. Supp. 3d at 894; see id. (quoting Apple II’s reference to “drives consumer demand”). But we cannot be sure that the district court, in demanding such proof, used the standard for causal nexus now established to be the governing standard. The “drive demand” formulation, on its face, is susceptible to importantly different interpretations, some stricter, some more flexible, at least in situations where the product at issue has multiple purchasers and multiple features that different purchasers might assign different weights in their purchasing decisions. For example, as the district court in Apple III had assumed, the “drive demand” formulation could require that the infringing feature be “the driver” of decisions by consumers treated collectively as a kind of unit, 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 individual consumer decision-makers considering multiple features

The CAFC referenced a "standards" issue:

In the present case, Genband specifically invoked the standards laid out in Apple III and Apple IV that we have just summarized. The district court, however, referred to those standards only by stating that Genband “argue[d]” for them. Genband, 211 F. Supp. 3d at 894. In these circumstances, we see no sufficient basis for inferring that the district court actually used those standards, rather than an unduly stringent test, to interpret and apply the “drive demand” standard. The clarified standards set forth in Apple III and Apple IV govern the causal-nexus inquiry, at least in a multi-purchaser, multi-component situation in which only a component of a larger product or system is covered by the patent in suit.2 The formulations in those decisions avoid a too-demanding causal-nexus requirement that might be attributed to the “drive demand” language. The standard prescribed by Apple III and Apple IV, as appropriate to the multi-purchaser, multi-component context, lies between the unduly stringent “sole reason” standard we rejected in Apple III and Apple IV and the unduly lax “insubstantial connection” standard we rejected in Apple II. The standards seek to reflect “general tort principles of causation,” Apple III, 735 F.3d at 1361, and to make proof of causal nexus practical “from an evidentiary standpoint,” Apple IV, 809 F.3d at 641, in a multipurchaser, multi-component setting.


We conclude that a remand is needed. We are not in a position to conclude that applying the Apple III/Apple IV standards would make no difference to the district court’s finding of no causal nexus and, hence, no irreparable injury. In its application of the “drive demand” formulation, the district court included just one paragraph, making only a summary reference to Genband’s evidence, without explaining in that paragraph why that evidence was deficient. See id. at 894–95. And in this court, Genband has not only argued about the evidence the district court mentioned in that paragraph but also pointed to extensive additional evidence, not discussed in that paragraph, as relevant to the inquiry. Given the roles of fact-finding and discretion in the inquiry, it is for the district court, not for this court, to undertake application of the proper causal-nexus standard to the full record in this case.


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