It turns out there’s still life in what was once one of the most powerful weapons in a patent case: the permanent injunction.
Five years ago, the U.S. Supreme Court effectively decommissioned the permanent injunction, in the view of many practitioners, in eBay v. MercExchange. The Court held that injunctions could no longer be issued automatically in infringement cases.
But in the past few months, several federal judges have handed out injunctions. A recent one came from Judge Raymond Jackson of the Eastern District of Virginia, who ordered a permanent injunction against Verizon Communications Corp. on Nov. 23 for infringing ActiveVideo Networks Inc.’s patents. He also ordered that Verizon pay $66 million in royalties over the course of six months. Not only that, Jackson refused to stay the penalty pending appeal (although the Federal Circuit stepped in to grant a temporary stay). He was one of the federal judges who handed out permanent injunctions in October and November.
The rulings came on the heels of an Oct. 13 ruling by the U.S. Court of Appeals for the Federal Circuit that applied eBay‘s tougher standards for permanent injunctions but clarified that courts still have the authority to issue injunctions in appropriate circumstances. In Robert Bosch LLC v. Pylon Manufacturing Corp., a split panel found that the eBay test had been met because of “overwhelming evidence” that Bosch had suffered irreparable harm from its competitor’s infringement of its patents for windshield-wiper blades.
“[Bosch] points out that [a patent is] a property right and it needs to be respected,” said Tom Lewry, who heads the litigation group at Southfield, Mich.-based IP firm Brooks Kushman. “That’s something that had been lost for a while under eBay.”
In eBay, the justices rejected automatic injunctions for patent infringement and held that courts must use a four-pronged test: there must be irreparable harm; straight money damages would be insufficient recompense; the balance of hardships favors an injunction; and an equitable remedy is in the public interest.
In Bosch, Judge Kathleen O’Malley wrote for the majority. She cited the direct competition between the parties, Bosch’s loss of market share and potential customers and the fact that Pylon couldn’t pay a financial judgment. “Even though a successful patent infringement plaintiff can no longer rely on presumptions or other short-cuts to support a request for a permanent injunction,” she observed, “it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.”
“Bosch really helped provide a roadmap to how a patentee can show irreparable harm when seeking an injunction,” said Michael Albert, co-chairman of the litigation group at Boston’s Wolf, Greenfield & Sacks. The increased threat of an injunction could also be “a powerful motivator for a defendant to settle,” said Albert, who wasn’t involved in any of the cases.
Since Bosch, injunctions and related orders have been popping up in district courts. In the Verizon case, for example, Jackson made note of a patent owner’s right to exclude infringers: “While there no longer exists a presumption that an injunction will issue when a patent is infringed, the right of the patent holder to exclude others from its patent is grounded in the Constitution and is still an important factor in the court’s inquiry.”
“The Bosch case reaffirmed that, certainly in cases involving competition, [an] injunction was not only possible but expected,” said Dan Johnson, Active­Video’s lead counsel and a San Francisco litigation partner at Morgan, Lewis & Bockius. Jackson’s analysis of the litigants’ various market segments also helps, Johnson said. There clearly were market segments in which Bosch and Pylon were not direct competitors, “but the loss of sales in a particular market segment was viewed by the court as some indicator of irreparable harm.”
ActiveVideo and Verizon likewise are indirect competitors, due to ActiveVideo’s agreement with CableVision Systems Corp., which competes with Verizon’s FiOS. Jackson noted that while Verizon sells to consumers and ActiveVideo licenses to companies, the infringement wounded ActiveVideo’s business. “Verizon’s unlawful infringement unquestionably impedes upon the portion of the market share which CableVision could have, and thus it impedes upon ActiveVideo’s ability to introduce its patented technology to the portion of the market that Verizon controls,” Jackson wrote.
Johnson observed: “It’s fair to say injunctive relief is going to remain viable in cases where you have business entities as opposed to those entities that are troll-like where they don’t have any actual business operations.”
Verizon spokesman Bob Varettoni said the company was “confident it will prevail on appeal.” Hunton & Williams of Richmond, Va.; Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington; and New York’s Simpson Thacher & Bartlett represented Verizon in the case.
Other injunction rulings referencing Bosch also involved competitors. On Nov. 7, U.S. District Judge Carol Jackson in St. Louis cited eBay and Bosch in ordering a default judgment and permanent injunction against Brent Hargrove and H&H Farms in Anson, Texas. In that case, Monsanto Co. v. Hargrove, Jackson found that the defendants had violated Monsanto’s patents for Roundup Ready cotton seeds. The suit, filed in September 2009, accused the defendants of intentionally planting and saving the seed without authorization from Monsanto since 2008. “Plaintiffs have demonstrated irreparable injury that cannot be redressed through legal remedies because the nature of defendants’ infringement, if left unchecked, has the potential to cause widespread proliferation of plaintiffs’ technology in a way that is almost impossible to monitor and redress,” Jackson wrote.
Jackson ordered the defendants to pay more than $1.1 million in damages, including $736,751 in enhanced statutory damages and $368,367.50 in reasonable royalties.
Daniel Cox, a partner at Thompson Coburn in St. Louis who represented Monsanto, declined to comment specifically about the case. Speaking generally, he doubted Bosch would change the injunction analysis in most cases. Courts must continue to apply eBay’s four-prong test and respect “the fundamental nature of patents as property rights,” he said. “In doing so, I think courts will continue to find irreparable harm, almost as presumptively as before, because unrestrained infringement will continue to result in the unauthorized use of technologies that can be impossible to account for and atone.”
In Boston, U.S. District Judge Nathaniel Gorton has rebuffed several attempts by defendants to overturn his Oct. 28 preliminary injunction in Momenta Pharmaceuticals Inc. v. Amphastar Pharmaceuticals Inc. In a Nov. 23 ruling, Gorton acknowledged that his initial application of the presumption of irreparable to the plaintiffs had been “ill-advised.” But citing Bosch and eBay, he affirmed his initial conclusion “that although some of the harm alleged was compensable through money damages, allegations of price erosion, loss of goodwill and reputational injury likely were not.”
Momenta and Sandoz Inc. had alleged in September that Amphastar International Medication Systems Ltd. and Watson Pharmaceuticals Inc. had infringed its rights to an anticoagulant drug. Momenta’s licensing agreement called for Sandoz to develop a generic version of the drug. The defendants’ Federal Circuit appeal is pending.
The plaintiffs’ lawyers at Boston’s Choate, Hall & Stewart declined to comment. McDermott Will & Emery also represented Sandoz, and did not respond. The defendants’ lawyers at New York’s Proskauer Rose declined to comment. Akin Gump Strauss Hauer & Feld and Stradling Yocca Carlson & Rauth of Newport Beach, Calif., which also represented the defendants, did not respond.
Injunctions in pharmaceutical cases “can be very costly,” said Lewry of Brooks Kushman. “There’s hundreds of millions of dollars at stake.”
Sheri Qualters can be contacted at email@example.com.