Irreparable harm in patent law

In my prior post (The Federal Circuit Clarifies Injunction Requirements in Patent Cases), I reviewed the Titan case, but my curiosity was piqued by the Court of Appeals noting that irreparable harm, the balance of harms, and the public interest all weighed in favor of the movant; the injunction was denied only because of an unlikelihood of success. So I pulled the lower court’s opinion to see what it said on these subjects: of interest to those who can show a likelihood of success and need to argue these other factors as well.

Patent holders have an interest in not being forced to license their invention. The right to exclude is important. So many cases hold that a presumption of irreparable harm arises from infringement itself.   Most injunction cases rely on an inability to prove money damages to justify irreparable harm arguments, but patent infringement allows money damages, and permits tripling them if the infringement is willful. Why an injunction, then?

The court noted that the potential loss to the moving party may include loss of trade, sales, reputation, and goodwill, some of which may never be remedied with money damages, and the size of the parties’ relative investment.    The court spent time analyzing only a few of these elements.  

  1. The court considered delay, noting that delay in pursuing rights under a patent can negate an argument of irreparable harm, but here the movant explained the delay by its lack of knowledge of infringement, its immediate retention of counsel once discovered, and the short time that elapsed between that time and its sending the cease and desist letter, the investigation of the claims, followed by the lawsuit. The timeline satisfied the court and negated the delay argument.
     
  2. The reputation component. The inventor can select the companies he or she wants to make the product; if they do so badly, the inventor’s reputation suffers. The opponent failed to offer proof to this argument, so the court deemed that irreparable harm was proven.
     
  3. Loss of goodwill. It is difficult to quantify the costs of customer confusion. This occurs if one company is licensed to manufacture the product or if the inventor manufactures it; another similarly appearing or functioning product bleeds off sales. Why can’t this be compensated in money damages from the bleedor? The value of a one-time purchase is more than the profit from the sale. Collateral products might be purchased, or the buyer might return for later sales to the same source at a later time, and it is difficult to determine the value of those sales, all of which is captured in the concept of goodwill, damage to which is a harm that cannot easily be quantified. 
     
  4. The movant explained its great investment in developing the products based on the patent. This went unrebutted by the opponent (who could have explained how much it spent to develop its allegedly infringing product). 

The Federal Circuit clarifies injunction requirements in patent cases.

In Titan Tire Corporation v. Case New Holland, Inc, Case no. 208-1078 (June 3, 2009), the Court of Appeals for the Federal Circuit clarified confusing language from prior cases—or did it? The District Court had refused the injunction notwithstanding finding that irreparable harm, the balance of harms and the public interest favored a preliminary injunction. Why? Because the plaintiff was not likely to withstand a challenge to the validity of the patent.   Clarification was required because prior cases held that where the alleged infringer raises a substantial question of invalidity, the patentee must show that the alleged infringer’s defense lacks substantial merit, a formulation that “leaves room for different interpretations.” 

The court held that the “raises a substantial question” phrase referred to a conclusion to be reached by the trial court after considering evidence on both sides rather than a burden of production procedural step before the conclusion was reached, yet the ultimate question “remains that of the patentee’s likelihood of success on the merits” because “there is no room for making the substantial question test a substitute or replacement for the established test for injunctions. That test places the burden on the plaintiff to prove likelihood of success.”

Further clarification issued to ensure that the “substantial question” standard regarding invalidity should not be confused with the “substantial evidence” standard by which jury verdicts and administrative law matter were reviewed. The latter is not the evidentiary test to decide whether to grant or deny a preliminary injunction.

Finally, the infringer does not need to prove invalidity by clear and convincing evidence at the preliminary injunction stage, while it will have to meet that standard at the trial on the merits. Yet the trial court must keep this standard in mind at the preliminary injunction stage. “This decision process, which requires the court to assess the potential of a ‘clear and convincing’ showing in the future, but in terms of what is ‘more likely than not’ presently, rests initially in the capable hands and sound judgment of the trial court.”

Is everyone clear now?