TEK Global v. Sealant Systems was decided on March 29, 2019 on appeal from the Northern District of California. The patent related to tire repair kits. At trial, the jury found some claims not invalid, and awarded plaintiff TEK $2,525,482 in lost profits and $255,388 in the form of a reasonable royalty. After trial, the district court denied defendant Sealant’s motion for JMOL on invalidity and noninfringement. The district court further denied Sealant’s motion for JMOL with respect to the lost profit award, granted it with respect to the reasonable royalty, and granted TEK’s motion for a permanent injunction. Sealant appealed.
The Federal Circuit vacated the validity judgement, remanded for a new trial on validity, and affirmed the lost profit and permanent injunction judgments “in the event the [patent] is found not invalid following the new trial.”
Under the Panduit test, a patentee is entitled to lost profits if it can show: “(1) demand for the patented product, (2) absence of acceptable, non-infringing alternatives to the patented product, (3) manufacturing and marketing capability to exploit the demand for the patented product, and (4) that the patentee would have made a profit if it had made the infringer’s sales.” Only the third and fourth factors were contested.
Substantial evidence supports the jury award of lost profits. The market appeared to have been “limited to two suppliers at the time” Sealant made its infringing sales, and several witnesses testified to this. “In [a] two-supplier market, it is reasonable to assume, provided the patent owner has the manufacturing and marketing capabilities, that it would have made the infringer’s sales.”
Substantial evidence supports the jury finding that TEK has the manufacturing and marketing capability to exploit the demand for the patented product. The “jury could reasonably infer manufacturing capacity from TEK’s prior activities.” Moreover, the inventor of the patent and TEK’s damages expert testified that “TEK had the capacity to make the sales that [Sealant] made.” Substantial evidence supports the jury finding that TEK would have made a profit if it had made Sealant’s sale. TEK’s damages expert “testified that she calculated TEK’s lost profits by multiplying [Sealant’s] sales base to TEK’s incremental profit margin.” She further testified “that TEK lost $2,525,483.00 of profit from [Sealant’s] infringing sales.”
The district court did not abuse its discretion in granting a permanent injunction. To obtain a permanent injunction, a plaintiff must show: “(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.”
The district court did not err in finding that TEK showed a causal nexus between the alleged infringement and the lost sales for irreparable harm. To show causal nexus, “the patentee must show that the infringing feature drives consumer demand for the accused product.” Driving demand, however, “does not require a patented feature to be the only basis of consumer demand.” It was enough for TEK to show that “a significant reason consumers bought its device was the presence of the patented features.” The requirement was me there. For example, a TEK customer required the claimed apparatus be present in its tire repair kits. A Sealant employee testified that a customer’s purchase of the product from Sealant “was contingent on [Sealant] meeting those requirements.”
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The district court did not err in finding a lack of remedies available at law. Testimony evidences that the tire repair kit “TEK’s central product at the time” of Sealant’s infringing sales. Moreover, the evidence supports that TEK lost market share to Sealant. “The inherent difficulty of quantifying loss of market share, brand recognition, and customer goodwill and of estimating monetary damages indicates that remedies at law are inadequate.”
The district court did not err in finding that the balance of the hardships favored an injunction. “[P]ast harm to a patentee’s market share, revenues, and brand recognition is relevant for determining whether the patentee ‘has suffered an irreparable injury.” The district court found, and the record supports, that Sealant and TEK were competing for the same customers in the same market, that Sealant won business over TEK, and that TEK was susceptible to lowered market share due to this loss of business. “Head-to-head competition and lost market share tend to evidence irreparable harm.” “Moreover, and more importantly, [Sealant] has not argued that it would suffer any harm from the injunction itself.”
The district court did not err in finding that public interest favored the injunction. “The touchstone of the public interest factor is whether an injunction, both in scope and effect, strikes a workable balance between protecting the patentee’s rights and protecting the public from the injunction’s adverse effects.” Here, the injunction’s well-crafted sunset provision, permitting nine months of sunset sales to existing qualifying Sealant customers, “mitigates any negative effects on end users and [Sealant’s] customers due to the injunction.” Moreover, Sealant is free to design around the patent during the nine months.
TEK Glob., S.R.L. v. Sealant Sys. Int’l, 920 F.3d 777 (Fed. Cir. 2019)