Apple versus Samsung. Samsung unveiled its new Galaxy Tab 7.7, a new Android tablet, but had to remove it from a convention show and from its German website after a court in Germany issued an injunction against Samsung and in favor of Apple. Very brief details were contained in the Engadget September 4th post by Amor Toor. We are trying to locate the court papers and ruling for further comment.
In an excellent blog post , attorney Michael R. Greco refers to case IDG USA v. Kevin Schupp and the need to be specific when requesting an injunction and when drafting an order. This often presents a quandary in trade secret litigation because a detailed description reveals the trade secret you want to conceal. In some cases, filing under seal may be the answer.
LegalMetric Research reports that success rates on contested preliminary injunction motions in patent cases is 30% nationwide. But the success rate varies by district. California Central’s win rate is 38% and New Jersey’s win rate is 40%. Here is the link to LegalMetric. Its full report costs several hundred dollars.
The report includes:
The owner of a computer school that suffered a crippling burglary of high-tech equipment came to us after losing a trial--while he was represented by a different lawyer--against his insurance company. He had immediately sought compensation from his insurance company in order to resume operations and prevent canceling classes. After a grueling eight month insurance investigation, the insurer claimed the owner was not entitled to any payment under the policy because he allegedly misrepresented or concealed material facts during the course of the investigation. The owner sued unsuccessfully, seeking compensation for replacement equipment and business income losses. Once we were retained to replace the prior lawyer, we successfully asked the judge to grant a new trial, defeated a petition for leave to appeal that decision, and then won the second jury trial, obtaining a jury verdict of $534,000. The verdict included compensation for all losses claimed: business income loss, lost equipment and software, building repairs and extra costs incurred.
This is Part II of a post on the Amylin v. Eil Lilly Litigation. For background on the case and to read about the original TRO see Part I of the post.
Denial of Preliminary Injunction
After granting the temporary restraining order, the parties further briefed the matter and a preliminary injunction hearing was held on June 2, 2011. As a result, the Court vacated the TRO and denied the preliminary injunction.
The main thrust of the Court’s reversal comes from a more careful analysis of the irreparable harm factor. The Court did not address the remaining elements of the preliminary injunction after determining that Amylin failed to show irreparable harm:
Under Winter, Amylin “must establish that irreparable harm is likely, not just possible, in order to obtain a preliminary injunction.”
In footnote 2 of its order, the Court repudiated the presumption of irreparable harm from the original TRO. Instead, the Court examined Amylin’s injury claims: (1) harm attributable to Defendant’s misuse of Amylin’s confidential information and (2) loss of prospective customer and goodwill.
The Court found Amylin’s claim of harm—misuse of confidential information— was too speculative. “Speculative injury does not constitute irreparable injury sufficient to warrant granting a preliminary injunction.” Carribean Marine Servs.
Secondly, the Court points to Food and Drug Administration’s regulations that prohibit Lilly’s sales representatives from making any potentially misleading statement regarding Amylin’s product without adequate supporting data, including statements comparing the attributes of the other product. Amylin’s argument that the Defendant’s sales representatives would intentionally mislead consumers to the detriment of Amylin is clearly specious. The Court concluded that the sales representatives would not risk FDA sanctions to maximize sales of a competing product.
Finally, in order to prevail in a preliminary injunction, damages cannot be monetarily compensable: “[E]conomic injury alone does not support a finding of irreparable harm, because such injury can be remedied by a damage award.” Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991). The Court relied on Defendant’s economic expert who asserted money damages were sufficient to cover any harm arising from Defendant’s actions:
To the extent that Amylin would suffer from the alleged actions, the resulting loss would take the form of profits on lost exenatide sales. Losses of this nature are generally calculable through the use of standard economic analyses undertaken in the calculation of economic harm generally and, specifically, in antitrust actions. Amylin Pharmaceuticals, Inc. v. Eli Lilly and Company, Case No. 11-CV-1061 JLS (NLS) (S.D.
The courts do not enjoin actions that would result in a calculable economic injury. Accordingly, misappropriation of a trade secret can be remedied with money damages.
Finding no irreparable harm, the Court ended its analysis.
By Jay Lewis
Amylin Pharmaceuticals, Inc. v. Eli Lilly and Company, Case No. 11-CV-1061 JLS (NLS) (S.D.
Background
Amylin Pharmaceuticals (“Amylin”) and Eli Lilly (“Defendant”) entered into a business relationship in 2002 to develop and commercialize exenatide, a drug used for treatment of type-2 diabetes. In early 2011, Defendant announced that it was entering a similar alliance with Boehringer Ingelheim GmbH (“Boehringer”) to develop and commercialize linagliptin, also a drug used for treatment of type-2 diabetes. Amylin and Boehringer are direct competitors so needless to say, Amylin was opposed to Defendant’s entering into the second agreement.
Amylin and Defendant held private negotiations regarding the Boehringer alliance. The parties were unable to resolve the matter so Amylin filed for a temporary restraining order (“TRO”) and preliminary injunction. Amylin requested the Court to restrain and enjoin Defendant and others acting in concert from 1) disclosing any of Amylin’s confidential information; 2) using the same sales force used for Amylin’s drug; and 3) falsely describing Amylin’s products.
Legal Standard
The Court applied the appropriate legal standard, citing Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008) for the general factors a plaintiff must show to obtain a preliminary injunction:
The Court further applied the 9th Circuit’s sliding scale balancing test as articulated in Alliance for Wild Rockies v. Cottrell, 622 F.3d 1045 (9th Cir. 2010). Under this test, a stronger application of one factor may offset a weaker application of another.
Original TRO
The Court granted Amylin’s request for a TRO but would later deny all of Amylin’s requests in a subsequent hearing. The Court’s analysis in the original TRO decision was focused on Amylin’s likelihood of success on the merits. Specifically, the Court found that Amylin would likely prove that the Defendant-Boehringer alliance would violate the confidentiality clause in Defendant-Amylin’s existing agreement. The Court reasoned that the sales force for Defendant was already privy to Amylin’s confidential information and to task that same individuals with the sale of the Boehringer drug ostensibly puts Amylin’s confidential information in the hands of its competitor.
After finding a likely success on the merits, the Court briefly discussed irreparable harm by reiterating the risk of loss of confidential information to a competitor. The Court quoted TMX Funding, Inc., v. Impero Technologies, Inc., 2010 WL 1028254, at *8 (N.D. Cal. March 18, 2010), “
Part II will discuss the subsequent denial of the preliminary injunction.
By Jay Lewis
The following are links to several current emergency litigation matters:
Apple escalates patent war claiming Samsung is slavishly copying Apple's products. Apple claims Samsung is violating iPad and iPhone hardware and software patents.
Court of Appeals in Manila denies motion to lift preliminary injunction. "The Court of Appeals has denied the plea of the Banco Filipino Savings and Mortgage Bank for the lifting of the writ of preliminary injunction that had stopped what could have been a P25-billion assistance package for the beleaguered bank." The Court wrote, "[A]llowing the case a quo to proceed will prevent the [Monetary Board] from, or hamper their functions in, exercising regulatory functions over private respondent, which in turn, would work great injustice and cause irreparable injury to the general public,”
Vermilion cancels single-sex classes. "A second attempt at getting a preliminary injunction to halt single-sex classes at Rene Rost Middle School in Kaplan is now moot because of the Vermilion Parish School Board's decision to discontinue the classes."
Medical marijuana injunction hearing starts Monday in
Judge grants
Rhode Island Supreme Court upholds eviction of homeless from
By Jay Lewis
Hold-Separate Conditions
In order to maintain Roche’s rights, the lower Court set forth conditions for MAS and Alere’s sale to move forward. The hold-separate portion of the order contained the following:
The ten conditions above, however, did not address MAS and Alere’s agreement preventing MAS from incurring substantial liabilities before a completed purchase. Under the agreement, MAS could not allow its assets to become subject to liens, sell new stock or acquire new business, dispose of intellectual property, or incur debt other than in the ordinary course of business prior to close. The Appellate Court added an additional condition to appease Alere’s concerns.
If MAS and Alere meet conditions one through eleven, they would be allowed to move forward with the sale. Once the arbitrator makes a final deicison as to Roche’s right of first refusal, the sale would either close or die on the vine, but either way, Roche’s rights would not be harmed prior to the completion of the arbitration.
Bond
In dicta, the Court addresses the lower court’s decision not to require Roche to post a bond. Although the Roche-MAS contract waives the parties’ entitlement to an injunction bond, the Court cautions judges to take care in setting a bond, “[P]reliminary injunctions…are more likely to be erroneous than injunction issued at the close of the litigation. A party injured by an erroneous preliminary injunction is entitled to be made whole.” The Court also stated, “Judges therefore should take care that the bond is set high enough to cover the losses that their handiwork could cause.”
The Court attempted to hedge any potential mistake in entering a conditional injunction by asking Roche to promise to pay for MAS the same amount as Alere. “[I]f Roche eventually acquires the shares it will pay the investors at least $43 million plus interest from the time the MAS-Alere deal originally was scheduled to close.”
By Jay Lewis
Roche Diagnostics Corporation v. Medical Automation Systems, Inc; Gregory A. Menke; and Kurt M. Wassenar, Case No. 11-1446 (7th Cir. May 24, 2011)
Facts
Roche Diagnostics (Roche) is a glucose monitor manufacturer. Medical Automation Systems (MAS) is a software company. Roche and MAS entered into a contract whereby MAS would supply software for Roche’s glucose monitors. During the course of the contract, MAS agreed to sell its stock and assets to Alere, Inc. (“Alere”), one of Roche’s competitors. Roche claimed a right of first refusal under the contract. MAS denied that the right of first refusal was effective because the sale was scheduled to close after the expiration of the contract. Roche filed for injunctive relief. On February 23, 2011, the Southern District Court of Indiana allowed the sale to move forward subject to hold-separate conditions. Roche appealed. The Seventh Circuit affirmed the lower court’s ruling with an additional condition.
Arbitration Clause
The Roche-MAS contract contained an arbitration clause covering any disputes over the right of first refusal. The clause allowed either party to seek equitable relief pending arbitration. The Court acknowledged this clause and refrained from discussing the merits of the contract dispute. Instead, the Court focused solely on the equitable relief. Specifically, the Court examined the potential for irreparable harm to the parties should the sale take place prior to a resolution in arbitration.
Balance of Harms
Roche’s right of first refusal would be damaged or eliminated if MAS was allowed to move forward with the sale of its assets. It would be incredibly difficult to unravel a sale if the arbitrator later decided Roche had a right to buy the company. However, enjoining the sale could harm MAS by killing the deal or diminishing its value should the arbitrator decide that Roche has no right of first refusal. The Court decided to set aside the uncertainty in the arbitrator’s decision and examine who faces the greater harm.
The Court found that Roche faced the greatest harm. Should an unbridled sale go forward, the parties would be completely unable to “unscramble the eggs.” Changes to the corporate structure and management, disclosure of intellectual property, sell-off of assets, and alterations in strategy all create a potential impossibility of restoring the status quo ante. Additionally, MAS has two potential purchasers and any uncertainty will be resolved when the arbitrator decides who gets to buy it. Ultimately, the Court decided that the sale could continue on the condition MAS and Alere were separately maintained during arbitration.
Part II will delineate the Hold-Separate Conditions.
A judge issued a preliminary injunction last week in a lawsuit against the city of Enid, preventing the use of a construction manager at-risk contract for the Enid Renaissance Project.
Plaintiffs withdraw their request for a preliminary injunction preventing the sale of Lubrizol to Berkshire Hathaway. The plaintiffs have opted to allow the shareholders to vote on whether to sell rather than seek a preliminary injunction.
Judge denies a taxicab company's request for an injunction to stop the city of
Catholic Charities filed an emergency injunction against the
Daytona Beach-based insurance agency, Brown & Brown, seeks to temporarily shut down a rival company formed by former executives.
Tiffany & Co. won a temporary restraining order June 7 against a Michigan jewelry store it claims is selling counterfeit Tiffany rings on eBay.
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