A tale of two orders

It was with some excitement that Volterra Semiconductor Corporation announced that U.S. District Court Judge Joseph Spero granted its motion for a preliminary injunction against Infineon Technologies AG, Infineon Technologies North America Corporation and Primarion Inc. (Infineon/Primarion) in its patent infringement lawsuit. (Case No. 08-cv-05129-JCS (N.D. Cal.).

Commentators note that this is a rare decision because, since the Supreme Court’s ruling in eBay, Inc. v. Mercexchange, L.L.C., which eliminated the presumption of irreparable harm in the context of permanent relief, it has been difficult to win injunctions in patent infringement cases. 

Thus, Volterra was obviously pleased and stated that “"[w]e believe this ruling signals the likelihood of success on the merits of our case against Infineon/Primarion, and validates the strength of our intellectual property position."

While the Judge orally ruled on the issue of granting the preliminary injunction, a formal order has not yet been issued. Instead, the court directed the parties to both file briefs on the amount of the bond and submit proposed orders. Not surprisingly, the parties’ proposed orders are vastly different. The language of an injunction order is important because it defines who is to be restrained, what acts are to be restrained, and essentially protects a judge from an embarrassing appeal. Fed. R. Civ. P. 65 (d) dictates what each order must contain:

  1. The reasons the court issued the injunction: Volterra’s proposed order states that a preliminary injunction is appropriate because the Company proved all the necessary elements, including that “Volterra is likely succeed on the merits of its patent infringement claims.” Conversely, Infineon’s proposed order simply notes that the preliminary injunction is “warranted.” While I understand why Infineon would probably not want to elaborate on the reasons why the Court granted the injunction, unfortunately, the language in its proposed order does not adhere to the mandate of Rule 65.
  2. The persons or entities to be restrained: Volterra and Infineon’s orders are fairly similar in that they restrain the defendants and the defendants’ affiliates. However, Infineon’s order would exempt third parties, who have either purchased or have already contracted to purchase enjoined products.
  3. The acts to be restrained: Volterra’s order would halt all sales, manufacturing or marketing of any product that contained its patents. Conversely, Infineon’s order is much more liberal and would not enjoin the defendants from:

    1. shipping enjoined products that have already been sold to customers or have already been promised to customers
    2. providing support for enjoined products that have already been sold or otherwise provided
    3. selling enjoined products that have been manufactured, but not yet sold.

Infineon’s order also cautions that any relief not granted in the order is denied.

 

  1. Bond: Volterra’s order does not speak to bond. Infineon’s order, on the other hand, would have Volterra post a $20 Million Bond.
  2. The date and hour of issuance: Infineon’s order states that the order shall not take place until the Plaintiff has posted bond. Infineon’s order also states that the order shall not take effect until 60 days until after the entry of the Order, so as to give the defendants time to review the Court’s Order and to explore a potential design-around.
  3. The order’s expiration date: Infineon’s order states that the injunction shall run until trial, unless there is an earlier order modifying, terminating, or vacating the order. Volterra’s order simply contains standard language stating that the order shall remain effect until further order of the Court.

The parties are currently briefing the issue of the proper bond amount. (As is the case in patent litigation, most portions of the briefs are redacted, and the exhibits are sealed). Judge Spero is expected to issue a formal order soon, and I will let you know when he does, as it will be interesting to see which order was more persuasive.

Antitrust TRO: mandatory injunctions and hold orders

My prior two posts noted that in Hart Intercivic, Inc. vs. Diebold, Inc., the District Court for the District of Delaware denied a request for a TRO but ordered discovery and scheduled a hearing for a preliminary injunction in a case in which one voting machine company challenged a merger between its dominant competitor and another failing company. 

The court’s opinion noted that the plaintiff requested the mandatory relief of undoing a merger. And the plaintiff did request in part an order of divestiture and the appointment of a trustee or receiver. 

But the plaintiff also requested a hold order by which the assets, personnel, accounts, customers, technology and intellectual property of the acquired company would be kept separate from the acquired company while the litigation pended. Based on Federal Trade Comm’n v. Weyerhaeuser Co., 665 F.2d 1072, 1075 n. 7 (D.C. Cir. 1981), a hold order keeps the acquired unit as a separate entity during the litigation to keep the assets “unscrambled” while the litigation pends, making divestiture easier if the plaintiff is successful after the final trial. Perhaps the court will consider this in more depth at the preliminary injunction hearing.

Antitrust TRO: Delay in Seeking a TRO

My prior post noted that in Hart Intercivic, Inc. vs. Diebold, Inc., the District Court for the District of Delaware denied a request for a TRO but ordered discovery and scheduled a hearing for a preliminary injunction in a case in which one voting machine company challenged a merger between its dominant competitor and another failing company that would result in the merged company controlling 68% of the market for voting machines.

The defendant effectively argued the plaintiff’s delay, stating the following:

  1. ”On September 11, 2009, eight days after the public announcement of the Transaction, [Plaintiff] filed its initial complaint. That complaint never was served upon [Defendant]. Three days later, on September 14, 2009, [plaintiff] filed an amended complaint. Again, [Plaintiff] chose not to serve the pleading.”
  2. ”On September 23, 209, some twenty (20) days after the Transaction was publicly announced, Plaintiff suddenly was struck with a sense of urgency and filed its Motion for TRO. The following day, [Defendant] received by Federal Express a copy of the Amended Complaint, a request to waive service, the Motion for TRO and supporting papers. Two days later, without contacting Defendants’ counsel, [Plaintiff’s] counsel apparently contacted the Court and arranged for a hearing to be held on Tuesday, September 29, 2009.”

The title for this section was “Plaintiff’s Schizophrenic Litigation Approach.”

When an injunction is not an injunction--Part II

Continuing our discussion of the Illinois Appellate Court case Santella v. Kolton, in the second part of the opinion, the court determined that it lacked jurisdiction to hear the appeal of a trial court order requiring the return of bonus money paid to the individual defendants who were officers of a close corporation.

The order requiring the return of bonus money was found to be an injunction but the appellate court declined to assert jurisdiction on this aspect of the order as well. Rule 307(a)(1) only grants jurisdiction for appeals of injunctions “that merely preserve the status quo pending a decision on the merits, conclude no rights, and are limited in duration, in no case extending beyond the conclusion of the action.” As the mandated return of money altered the status quo and did not provide for the return of the money to the defendants, it was a permanent injunction and jurisdiction was not available under Rule 307(a)(1). The court refused jurisdiction under Rule 304, which provides for appeal of final judgments that do not dispose of an entire proceeding, because the trial court did not provide the requisite finding that no just reason exists to delay enforcement or appeal of the order.

Parties seeking to appeal injunction orders now need to be especially vigilant to ensure that the order has the necessary language that it is temporary, that is, that it lasts only until a further order or to the end of the case. The court’s decision that Rule 307 does not permit the appeal of mandatory injunctions will cause problems. Parties will argue over whether the injunction was mandatory or prohibitory. What should be a fast vehicle to review the propriety of a preliminary injunction will morph into arguments over the meaning of the rule. If this cannot be changed by another appellate opinion, the rule itself should be amended.

When an injunction is not an injunction

In Santella v Kolton, a derivative and individual action alleging corporate waste and mismanagement of a close corporation, the plaintiff filed an emergency motion to enjoin the defendants from dissipating assets of the company and remove the m as officers pursuant to Illinois Business Corporation Act § 12.56. After an evidentiary hearing, the trial court ordered the defendant officers replaced and three years of their bonuses returned to the company. The defendants then appealed the trial court’s order under the Illinois rule permitting an interlocutory appeal from orders “granting, modifying, refusing, dissolving, or refusing to dissolve or modify an injunction.”

The appellate court never reached the merits. It held that under Rule 307(a)(1), the order removing the officers was not appealable for these reasons:

  • Removing the individual defendants as officers and directors did not operate in personam as they were not required to do or refrain from doing a particular thing.
  • Their removal was a statutory remedy that changed their legal status within the corporation.
  • Requiring the return of bonus money lacked a temporal scope and thus was permanent and not temporary.

Preliminary injunction orders that lack a temporal scope are often deemed overbroad; they should be written to end upon the conclusion of the trial on the merits or some other event. In support of its determination that there was no injunctive action in removing the officers and directors, the court cites a treatise and the CJS for the proposition that the removal of officers or directors cannot be done through an injunction. 

While removal of the officers is a statutory remedy, the statute also provides that injunctions can be entered to enforce its provisions. This may be the first case that decided that the Act provided a remedy easier to obtain than an injunction and impossible to appeal as an injunction. The statements about the lack of in personam jurisdiction ignored that they were removed from their positions and restrained from exercising their rights as officers. 

The other half of the opinion will be commented upon tomorrow.