Digital Business - Hoehn - IPLF 2007 - Post eBay

8/3/2019 Digital Business - Hoehn - IPLF 2007 - Post eBay

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2007 Leadership Forum

Irreparable Harm and InjuctionsFebruary 16, 2007

Sarah Columbia, Choate, Hall & Stewart [email protected], 617.248.5053

Edward Gold, PricewaterhouseCoopers [email protected], 202.414.1330


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February 16, 2007Slide 2

Current Situation

What have judges decided post-Ebay regarding injunctions?


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eBay Inc. v. MercExchange, LLC, 126 S.Ct. 1837 (2006)

Patent holder must show that:

(1) it has suffered irreparable injury;

(2) remedies at law (money) are inadequate to compensate

for injury;(3) considering the balance of the hardships, an injunctionis equitable;

(4) public interest would not be disserved by an injunction.


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Early Indications Post eBay: Patent Holders who arecompeting with infringer will still get a permanent injunction;

those who are not will not

Permanent/Preliminary Injunctions Granted:

- Black & Decker Inc. v. Robert Bosch Tool Corp. (N.D. Ill.)

- Rosco, Inc. v. Mirror Lite Co (E.D.N.Y.)

- Smith & Nephew, Inc. v. Synthes (U.S.A.), et al. (W.D. Tenn.)- 3M v. Avery Dennison (D. Minn)

- TiVo Inc. v. Echostar Communications Corp. (E.D. Tex) (Folsom)

- Telequip Corp. v. The Change Exchange, et al. (N.D.N.Y.)

- Wald v. Mudhopper Oilfield Servs., Inc. (W.D. Okla.)

- Am. Seating Co. v. USSC Group Inc. (W.D. Mich.)- Litecubes LLC v. Northern Light Products (E.D. Mo.)


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Early Indications Post eBay: Patent Holders who arecompeting with infringer will still get a permanent injunction;

those who are not will not

Permanent/Preliminary Injunctions Granted (Continued):

- Floe Int'l, Inc., et al. v. Newmans' Mfg. Inc., et al. (D. Minn)

- Christiana Indus. v. Empire Elec., Inc. (E.D. Mich.)

- Canon Inc. v. GCC Int'l Ltd., et al. (S.D.N.Y.)- Visto Corp. v. Seva Networks Inc. (E.D. Tex.)

Permanent Injunctions Denied:

- Voda v. Cordis Corp. (W.D. Okla.)

- Paice LLC v. Toyota Motor Corp. (E.D. Tex.)- Z4 Techs., Inc. v. Microsoft Corp. (E.D. Tex.)

- Finisar Corp. v. DirecTV Group, Inc. (E.D. Tex.)


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Irreparable Harm

Competition from infringer shown to inhibit patent-holders ability to develop

new products and relationships with customers (Smith & Nephew)

Court will not disturb patent holders determination to litigate rather than

license (3M)

Loss of market share in this nascent market is a key consideration in

finding that Plaintiff suffers irreparable harm - losing market share that it

will not have the same opportunity to capture once the market matures

(Tivo)

Loss of market share and brand name recognition incalculable andirreparable (Smith & Nephew)

Loss of market share and loss of opportunity to maintain the industry

standard and reputation for innovation (MudHopper)


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Adequacy of Remedies at Law ($$)

Damages due to lost sales might theoretically be proven withlesser or greater degree of certainty, but intangible losses,such as the loss of goodwill, can never be ascertainedaccurately (Smith & Nephew)

It is true that the jury awarded a large damages verdict.Those damages, however, are designed to compensate Vistofairly and reasonably for its past injury. Although futuredamages may compensate Visto for its approximateloss, thatdoes not make them adequate in the sense that they aresuitable proxy for injunctive relief. (Visto)


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Balance of Hardships

Patent holder has been barred from exercising its right toexclude conveyed by the patent for 20% of the limited life ofthe patent (3M)

Patented product is plaintiffs primary product; infringingproducts do not form the core of Defendants business (Tivo)

if no permanent injunction is entered, [plaintiff] will losegoodwill, potential revenue, and the very right to exclude thatis the essence of the intellectual property at issue. (Visto)


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Public Interest

The public maintains an interest in protecting the rights ofpatent holdersa permanent injunction will further consumeraccess to more competitive products from the patent holder(Smith & Nephew)

The products are not related to any issue of public health orother key interest they are related to entertainment (Tivo)


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Irreparable Harm

When does irreparable harm occur?


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Preliminary Injunction(patent case, pre-eBay)

Request for

PreliminaryInjunction

Harm and observationof events (lost sales,

price movements, etc.)

Trial with

Injunction

Harm ended and noobservation of events

1 2


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1 2 3 4 5 6 7

PERIOD

REVENUE

What makes a good PI case?

Infringement

Preliminary Injunction

But for V2

But for V1

Actual


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What factors help an irreparable harm argument?

Emerging market / technology

New product(s) launched

Rapidly changing technology

Market leader position First move advantage

Very long sales cycles

Very few, but large dollar, sales

Reputation at risk Customer relationships at risk

Intellectual property at issue is small part of whole

Price erosion


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Permanent Injunction(patent case, post-eBay)

Beginning ofinfringement

Harm and observationof events (lost sales,

price movements, etc.)

Trial

Harm withoutinjunction,

observation of events?

Appeal

Injunction?Observation of events?

1 32


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Post Trial:Compulsory License

Finisar Corp. v. DirecTV Group, Inc.

The court grants a compulsory license.

Defendants are ordered for the remaining life of the patent topay a quarterly royalty.

$1.60 per set-top box through April 2012.

The court maintains jurisdiction to enforce this portion of the

Final Judgment.


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Post Trial:Compulsory License

z4 can be compensated for any harm it suffers in the way

of future infringement at the hands of Microsoft by calculating

a reasonable royalty

An efficient method for z4s recovery post-verdict isneeded.

Court severs z4s action for post-verdict infringement

Court orders z4 to file an appropriate complaint

Microsoft is required to file quarterly sales reports to preserve

z4s rights to future monetary damages.


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Post Trial:Escrow Account

Voda v. Cordis

As our defendant has indicated, it will continue to infringe, the

court must fashion a remedy for the continuing, harm

Defendant to pay future royalties into escrow account at rate set

by jury.

The court ordered quarterly filing of sales reports until final

resolution of this action.


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Footnote in Paice v. Toyota

The Court notes that monetary relief could result in lower

licensing rates than plaintiff would desire. The Court also

recognizes that, if an injunction were to issue, Plaintiff would

have a more impressive bargaining tool. This consideration,however, does not replace the four-factor test that must be

satisfied for equitable relief.

No injunction, but no order regarding future royalties


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If Permanent Injunction is NotAwarded, What is the Remedy?

Compulsory license?

Escrow in anticipation of future damages?

Require filing of successive infringement actions?

Automatic finding of willfulness?


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Implications of Ebay to damages trends

Shift in bargaining power may reduce number of patent

infringement lawsuits filed

Defendants may be more willing to go to trial.

Compulsory license becomes extension of hypothetical

license

- Did judge / jury consider all relevant future damage issues

when deciding past damages? New potential infringer may prefer to allow jury to set rate

rather than negotiate with patent holder.


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Questions suggested by Ebay:

Should Plaintiff counsel leave some components out of

damages to argue irreparable harm post trial?

Should damages expert be prepared to say these components

left out are not calculable but components left in are? If either competitor / patent holder is only requesting royalties

as compensation, then should injunction issue?


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MedImmune v. Genentech (S. Ct. Opinion January 9, 2007)

HOLDING: A patent licensee may seek a declaratoryjudgment of invalidity or non-infringement even though it ispaying the license fee and enjoying the benefits of the license(i.e. protection from an infringement action)

Questions/Implications:

- New Landscape for Licensee: pay royalties under protestand challenge patent

- Impact on express prohibitions in licenses against validitychallenges esp. in settlement agreements

- Incentives: for patent holder to be paid up front; for licenseeto pay running or deferred royalties


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2007 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers toPricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, other memberfirms of PricewaterhouseCoopers International Ltd each of which is a separate and independent legal entity P w C

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Digital Business - Hoehn - IPLF 2007 - Post eBay