Federal Circuit on finding irreparable harm for a post-eBay injunction – Federal Circuit on Damages and other Remedies

This post will delve into the irreparable harm prong of the injunction analysis post-eBay.

Injunction elements

A plaintiff seeking a permanent injunction must show (1) that it has suffered irreparable harm; (2) that remedies available at law (monetary damages) are inadequate to compensate for the harm; (3) that the balance of hardships to the parties favor the plaintiff; and (4) that the public interest would not be disserved by the injunction. Ebay v. MercExchange. The elements are the same for a preliminary injunction, except that the movant must show “a reasonable likelihood of success on the merits” in the preliminary stage. Sciele Pharma v. Lupin. The district court’s decision to grant or deny an injunction is reviewed for abuse of discretion. eBay.

Irreparable harm generally

The courts “treat the irreparable harm factor the same in both the preliminary and permanent injunction contexts.” Apple v. Samsung (2013). So I will not distinguish between the two in this analysis.

Before eBay, the Federal Circuit presumed irreparable harm for a permanent injunction after a finding of patent validity and infringement; and presumed irreparable harm for a preliminary injunction after a finding of likelihood of success on the merits of an infringement claim. Bosch v. Pylon. After eBay, that is no longer the law. id. Rather, the patentee has the burden to show that its potential losses cannot be compensated by money damages (and are therefore irreparable). Automated Merchandising v. Crane. This evidentiary showing mustn’t be speculative. Crane (vacating grant of injunction). And the district court may consider past harm to a patentee in finding irreparable harm. I4I v. Microsoft (affirming grant of permanent injunction).

“[T]he issues of irreparable harm and adequacy of remedies at law are inextricably intertwined,” Activevideo v. Verizon, so I will not write a separate post for adequacy of damages. Harms that cannot be compensated by damages are irreparable; and harms that can be compensated are reparable.

Irreparable harm factors

In making a finding of irreparable harm, the courts have considered many factors, which I will analyze in turn.

Direct competition. A party seeking an injunction must show irreparable harm to itself. When a patentee competes with an accused infringer, “the patentee suffers the harm—often irreparable—of being forced to compete against products that incorporate and infringe its own patented inventions.” Douglas Dynamics v. Buyers. Thus courts are more inclined to find irreparable harm where the parties compete directly. See e.g., Douglas (reversing denial of permanent injunction); Presidio v. Am. Technical (vacating denial of permanent injunction when the parties competed directly, even though the plaintiff didn’t practice the invention).

Indirect-and-non competition. Indirect competition may also support a finding of irreparable harm. In Broadcom v. Qualcom, the Federal circuit affirmed a permanent injunction grant, finding that defendant’s infringement would irreparably harm plaintiff’s market for a product that does not use the patented invention. In Mytee v. Harris (nonprecedential), the Federal Circuit affirmed a permanent injunction grant, finding that market harm to plaintiff’s franchisees would irreparably harm plaintiff. When the defendant does not compete with the plaintiff, but instead competes with the plaintiff’s nonexclusive licensee, a showing of irreparable harm to the licensee (eg, loss of market share) doesn’t constitute the same to the plaintiff. Activevideo (vacating grant of permanent injunction). There, the plaintiff could only lose licensing fees, which are compensable by money damages. Id. Mytee and Activevideo are in seeming tension.

Lost sales. Lost sales standing alone are insufficient to show irreparable harm because they are presumed compensable through damages. Crane (vacating grant of preliminary injunction).

Price erosion and lost market share. When defendant’s infringement would likely lead the patentee to “offer discounted rates and price concessions,” a court is more likely to find irreparable harm. Sanofi-Synthelabo v. Apotex (affirming grant of preliminary injunction). A money award would not compensate plaintiff because of the “difficulty (if not impossibility) of determining the damages resulting from price erosion.” Canon v. GCC (parenthesis in original) (affirming grant of preliminary injunction) (nonprecedential). Loss of market share may also support a finding of irreparable harm. And a plaintiff may use circumstantial evidence (instead of direct evidence) to make a showing of lost market share. Bosch (reversing denial of permanent injunction).

Prior licenses. A plaintiff’s past willingness to license its patent does not per se establish lack of irreparable harm. Acumed v. Stryker. Rather, it’s a factor suggesting that a reasonable royalty would compensate for the infringement. But a district court must consider this factor among others in making the irreparable harm finding. These other factors include the identity of past licensees, the experience in the market since the license grants, and the identity of the new infringer. Id. “Adding a new competitor to the market may create an irreparable harm that the prior licensees did not.” Acumed (affirming grant of permanent injunction); but see Activevideo (vacating permanent injunction partly because plaintiff “sought to broadly and extensively license” its technology). Plaintiff’s unwillingness to license the patent supports a finding of irreparable harm. See Presidio (vacating denial of permanent injunction).

Presence of additional infringers. The “fact that other infringers may be in the marketplace does not negate irreparable harm.” Bosch. A patentee needn’t sue all infringers at once; it may, while suffering irreparable harm, sue one infringer at a time. Bosch (reversing denial of permanent injunction).

Noncore business injuries. That “an infringer’s harm affects only a portion of a patentee’s business says nothing about whether that harm can be rectified.” Bosch. “Injuries that affect a noncore aspect of a patentee’s business are equally capable of being irreparable as ones that affect more significant operations.” Bosch (reversing denial of permanent injunction).

Inability to satisfy a potential judgment. The court may consider this factor. See Bosch (reversing denial of a permanent injunction partly because the defendant could not offer assurances that it could satisfy a damages judgment).

Delay in filing suit. “[D]elay in bringing an infringement action and seeking a preliminary injunction are factors that could suggest that the patentee is not irreparably harmed by the infringement.” Apple v. Samsung (2012) (affirming the denial of a preliminary injunction).

Reputation and brand-distinction harm. In Douglas, the Federal Circuit reversed a permanent-injunction denial partly because defendant’s infringement may damage plaintiff’s “reputation as an innovator” and as a “trusted supplier of quality” products.

Litigation costs. Litigation costs, “which cause[] the patentee to divert resources from developing technology and improving its business,” are not irreparable harm. Activevideo (vacating grant of permanent injunction).

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Causal nexus

Product with many noninfringing features. In cases “where the accused product includes many features of which only one (or a small minority) infringe,” in addition to showing irreparable harm, the patentee must also show a “strong causal nexus relat[ing] the alleged harm to the alleged infringement.” Apple v. Samsung (2013). “Sales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature. If the patented feature does not drive the demand for the product, sales would be lost even if the offending feature were absent from the accused product.” Apple (2012). Thus the patentee must show a connection between the irreparable harm and the patented feature. This requirement applies to both permanent and preliminary injunctions. Apple (2013).

Addendum (subsequent relevant Federal Circuit cases):

Direct competition:

Causal nexus found where Defendant couldn’t achieve ANDA product without infringing (Mylan v. Aurobindo)

For multi-component products, causal nexus only requires some connection between the feature and product demand (Genband v. Metaswitch)

Denial of preliminary injunction is vacated as it was based on a flawed claim construction (Liqwd v. L’Oreal)

Infringement, direct competition, and past harms support permanent injunction against generics company (Endo v. Teva)

Lost profits and permanent injunction found appropriate in two-supplier market (TEK Global v. Sealant Systems)

Lost sales:

Lost profits award reversed because of non-infringing substitute; permanent injunction then vacated (Presidio v. American Technical Ceramics)

Willingness to license:

No irreparable harm where the parties don’t meaningfully compete, and where plaintiff licensed to others (Nichia v. Everlight)

Denial of permanent injunction vacated because willingness to license does not necessarily mean no irreparable harm – modified opinion – (Texas Advanced Optoelectronic v. Renesas)