Criteria For Patent Law Injunctions

(Presented at the Joint Patent Practice Continuing Legal Education Seminar in May 2018)

I. THE PERMANENT INJUNCTION STANDARD IN PATENT LAW

The Patent Act provides for granting injunctive relief at the district court “in accordance with the principles of equity,” which means that courts apply the injunction at their discretion. “The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent violation of any right secured by patent, on such terms as the court deems reasonable.”[1]

A patent owner’s right to exclude others from making, using, or selling an invention is distinct from its right to stop others from violating its patent rights. Because of this distinction, the patent owner must establish its right to a permanent injunction by meeting a four-factor test set forth by the Supreme Court in its 2006 eBay Inc. v. MercExchange, L.L.C. decision.

A plaintiff must demonstrate: (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.[2]

The eBay decision came as a surprise to some, as the Federal Circuit had stated that “the general rule is that a permanent injunction will issue once infringement and validity have been adjudged.”[3] Following this perceived general rule, patentees had confidently threatened injunctions against potential infringers. Removal of injunctions from what some thought of as a statutory requirement has given rise to several Federal Circuit cases that cast further light on applications for injunction.

II. PROOF OF ALL FACTORS REQUIRED

Nicha Corporation v. Everlight America et al. [4]

The Federal Circuit reviewed the eBay so-called four-factor test and found that it was not actually a factor test, but instead a four-element test, requiring the presence of all elements. The court acknowledged that injunctions are “one of the most essential sticks in the bundle of rights that are commonly characterized as property” but further stated that “the moving party must satisfy the court that relief is needed.”[5] In making this distinction, the Federal Circuit found that Nichia had failed to prove eBay element (1) showing irreparable harm.

With respect to this irreparable harm requirement, the Federal Circuit followed the district court’s finding of facts. “The record shows an absence of meaningful competition.” It agreed with the district court that Nichia had “failed to establish past irreparable harm, or the likelihood of irreparable harm in the future based on lost sales” or “based on price erosion,” and that Nichia’s licensing of the patents to major competitors suggested that harm from “infringement of the patents-in-suit is not irreparable.” It also found that Nichia’s licensing practices have made “multiple low-priced non-infringing alternatives from competitors available to replace the accused Everlight products if such products were not available.”[6]

The absence of meaningful competition in particular weighed heavily against Nichia because it could not show irreparable harm should Everlight continue selling the infringing products. Specifically, the Federal Circuit, following the district court’s findings of fact, found several factors dispositive of there being no irreparable harm:

• Lack of meaningful competition between the parties. The Federal Circuit found that (a) Nichia was an LED supplier and packager, and Everlight was merely a packager, and (b) although there was some competition, it was not meaningful (“a proverbial drop in the bucket”).
• No risk of future harm where there was no evidence of past harm. “Nichia did not prove that it had suffered even a single lost sale from Everlight’s infringement.”[7]
• No evidence of price erosion. Although there was some evidence of price erosion in general, “Nichia “cannot establish that Everlight was the ‘but for’ cause of its claimed price erosion.”[8]
• Licensing activities precluded a finding of irreparable harm. While evidence of licensing activities cannot establish a lack of irreparable harm per se, the Federal Circuit stated “that the fact of the grant of previous licenses, the identity of the past licensees, the experience in the market since the licenses were granted, and the identity of the new infringer all may affect the district court’s discretionary decision concerning whether a reasonable royalty from an infringer constitutes damages adequate to compensate for the infringement.”[9]

Reviewing these factors, the court found that Nichia could not show irreparable harm and having failed to meet one of the four elements of the eBay test, the district court’s denial of the injunction against Everlight was proper.

III. PRELIMINARY INJUNCTIONS STANDARDS

Mylan Institutional LLC et al. v. Aurobindo Pharma Ltd. et al.[10]

A plaintiff seeking a preliminary injunction must establish that it is likely to succeed on the merits, that it is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in its favor, and that an injunction is in the public interest.^[11] On appeal, Aurobindo challenged three district court findings related to a preliminary injunction against: 1) the likelihood that Aurobindo infringed; 2) whether Aurobindo failed to raise a substantial question of validity; and 3) whether there was irreparable harm to Mylan.

1. Likelihood of Infringement

Mylan asserted three patents against Aurobindo, two claiming a process for making a compound, and one claiming the actual compound. Aurobindo did not appeal the preliminary injunction with respect to the infringement analysis of the compound claim patent, and thus it only considered the process claiming patents in determining the likelihood of infringement.[12]

To establish a likelihood of success on the merits for a patent infringement claim, a patentee must show that it will likely prove infringement of the asserted claims and that its infringement claim will likely withstand the alleged infringer’s challenges to patent validity and enforceability.^[13] A preliminary injunction should not issue if the accused infringer “raises a substantial question concerning either infringement or validity.^[14]

As a matter of perspective, the Federal Circuit acknowledged that there are few cases where a preliminary injunction was granted where the infringement asserted was under the doctrine of equivalents, and even fewer in the field of chemical materials. This paucity of precedent is due to “the fact that equivalents cases are “highly factual inquir[ies] [that] rarely come[ ] clear on a premature record.”[15]

Despite a lack of precedence, the district court applied the function-way-result (FWR) test in its doctrine of equivalents analysis for the process claims, looking to whether Aurobindo’s product performs “substantially the same function in substantially the same way to obtain the same result”[16] over its alternative doctrine of equivalents insubstantial differences test (whether the accused product or process is substantially different from what is patented).[17]

The Federal Circuit found that the FWR test in chemical cases was lacking because there is often no “function” or “way” for a claim limitation. “Especially when evaluating an equivalents dispute dealing with chemical compositions having many components, chemical compounds with many substituents (which are usually claimed as separate limitations), and those having a medical or biological use, it is often not clear what the “function” or “way” is for each claim limitation.”[18] It went on to conclude that although the “result” can be easily identified, simply finding identity in the result is not how the Supreme Court mandated application of the FWR test. “The “result” of using a claimed compound may be more easily evaluated, as the structure and uses of one compound may be directly compared with those of another. But…that is not how infringement under FWR is determined. It must be determined on a limitation-by-limitation basis.”[19]

When reviewing the district court’s application of the FWR test, the Federal Circuit found that it misapplied the test and ignored the “way” prong. “Aurobindo argued before the district court that the “function” prong of the FWR test was not met because of the difference in oxidation strength between silver oxide and manganese dioxide. But the court did not seem to address that argument, which in actuality related to the “way” component of the FWR test.”[20]

The court concluded that the district court abused its discretion in granting the preliminary injunction of the process patents because of this flaw in its infringement analysis and suggested that the district court consider the substantial differences infringement test on remand. This infringement holding did not affect the single remaining patent with the compound claim—for that, Aurobindo relied on an invalidity argument.

2. Validity

Mylan’s ‘050 patent claim 1 states:

A compound N-[4-[[4-(diethylamino)phenyl] (2,5-disulfophenyl)methylene]-2,5-cyclohexadien-1-ylidene]-N-ethylethanaminium, sodium salt having a purity of at least 99.0% by HPLC.[21]

Aurobindo argued that prior art rendered the claims invalid as anticipated and obvious, and also that “by HPLC” was indefinite.

The Federal Circuit deferred to the district court’s anticipation and obviousness analysis because Aurobindo argued that the district court made a factual error. “Aurobindo points to no legal error in the district court’s analysis of the record evidence; rather, it argues only that the court erred in ‘misreading the factual content of the prior art.’ However, what the prior art teaches is a question of fact that we review with deference, especially at the preliminary injunction stage. We do not ‘reweigh evidence on appeal.’”[22]

The Federal Circuit also agreed that the district court properly rejected Aurobindo’s assertion that “by HPLC” was indefinite. “The [district] court found that the phrase ‘by HPLC’ was a ‘common and well understood way of designating purity in publications and patents that are relied upon by the scientific and technical community.’…The court found that ‘numerous sources’ support that determination.”[23]
Based on this, the Federal Circuit upheld the district court’s conclusions regarding the ‘050 compound claim as not invalid.

3. Irreparable Harm

The Federal Circuit finally turned to whether the district court erred in finding a likelihood that Mylan would sustain “substantial and immediate irreparable injury” without preliminary relief. Aurobindo argued that the district court erred in finding a causal nexus between Mylan’s alleged harm and the patented features. Aurobindo contends that the patented features are the use of silver oxide to oxidize isoleuco acid, and that the ISB employed in the finished drug product is at least 99.0% pure by HPLC. Aurobindo argued that there was no evidence that the consumer demand for Mylan’s product arises from the fact that the ISB it contained was synthesized using silver oxide or that the ISB is at least 99.0% pure.

The Federal Circuit, however, did not find clear error in the district court’s findings that Aurobindo’s causal nexus argument was flawed because it improperly focused on a subset of the relevant customers (physicians) and ignored all others (active pharmaceutical ingredient (“API”) suppliers, pharma companies, hospitals, the FDA, etc.). Mylan maintained that its harm was directly caused by Aurobindo’s infringement because ample evidence showed that Aurobindo gained a competitive advantage by copying its patented process.

With one patent surviving the noninfringement argument, all patents not found invalid, and with evidence of irreparable harm, the Federal Circuit upheld the preliminary injunction, with respect at least to the compound-claiming ‘050 patent.

IV. PROVING IRREPARABLE HARM’S CASUAL NEXUS RELATING THE ALLEGED HARM TO THE ALLEGED INFRINGEMENT

Genband US LLC v. Metaswitch Networks Corp.^[24]

A plaintiff seeking a preliminary injunction must show that it has suffered irreparable harm. The irreparable harm requirement can be met when “a sufficiently strong causal nexus relates the alleged harm to the alleged infringement.”[25] The irreparable harm requirement can further be met with “some causal nexus between [defendant’s] infringing conduct and [patentee’s] alleged harm” and “a causal nexus linking the harm and the infringing acts.”[26]

The Federal Circuit found that the district court relied on a too stringent interpretation of the causal-nexus requirement “[b]ut we cannot be sure that the district court, in demanding such proof, used the standard for causal nexus now established to be the governing standard.”[27] The standard the district court relied upon was the “drive demand test” that requires proof of a relationship between a claim feature and sales of an accused product.

The challenge of the “drive demand” test is that it may be open to different interpretations, “some stricter, some more flexible, at least in situations where the product at issue has multiple purchasers and multiple features that different purchasers might assign different weights in their purchasing decisions.”[28]  The “drive demand” formulation could require that the infringing feature be “the driver” of decisions by consumers treated collectively as a kind of unit, even requiring proof that no or almost no buyers would buy the product but for the infringing feature. Or the infringing feature may be “a driver” of decisions by a substantial number of individual consumer decision-makers considering multiple features.

The Federal Circuit clarified that the correct standard is based on “‘a driver’ as opposed to ‘the driver,’ as applied in the multi-consumer, multi-feature context.”[29] Rather than show that a patented feature is the exclusive reason for consumer demand, a patentee must show some connection between the patented feature and demand for the infringer’s accused products. There might be a variety of ways to make this required showing, for example, with evidence that a patented feature is one of several features that cause consumers to make their purchasing decisions. It might also be shown with evidence that the inclusion of a patented feature makes a product significantly more desirable. Conversely, it might be shown with evidence that the absence of a patented feature would make a product significantly less desirable.[30]

The district court, however, referred to the standards only by stating that Genband argued for them and the Federal Circuit saw “no sufficient basis for inferring that the district court actually used those standards, rather than an unduly stringent test, to interpret and apply the ‘drive demand’ standard.” Given this unclear reasoning, the Federal Circuit vacated the permanent injunction and remanded the case for further consideration.

If you have questions, contact me.

[1] 35 U.S.C. 283.
[2] 547 U.S. 388, 391 (2006).
[3] MercExchange, LLC v. eBay Inc.,401 F. 3d 1323, 1338 (Fed. Cir. 2005).
[4] 855 F.3d 1328 (Fed. Cir. 2017).
[5] Id. at 1341.
[6] Id. at 1342-1343.
[7] Id. at 1343.
[8] Id.
[9] Id.
[10]Mylan Institutional LLC v. Aurobindo Pharma Ltd., 857 F.3d 858 (Fed. Cir. 2017).
[11] Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20, (2008).
[12] Mylan at 861–62 and U.S. Patent 8,969,616.
[13] Sciele Pharma, Inc. v. Lupin Ltd., 684 F.3d 1253, 1259 (Fed. Cir. 2012) (citing Amazon.com, 239 F.3d at 1350).
[14] Mylan at 866.
[15] Jeneric/Pentron, Inc. v. Dillon Co., Inc., 205 F.3d 1377, 1384 (Fed. Cir. 2000).
[16] Graver Tank & Mfg. Co. v. Linde Air Prod. Co., 339 U.S. 605, 608-609 (1950).
[17] Mylan at 866–67.
[18] Mylan at 868.
[19] Id.
[20] Id.
[21] U.S. Patent 9,353,050.
[22] Mylan at 870.
[23] Mylan at 871.
[24] 861 F.3d 1378, 1379 (Fed. Cir. 2017).
[25] Apple, Inc. v. Samsung Electronics Co. (Apple II), 695 F.3d 1370, 1374-5 (Fed. Cir. 2012).
[26] Apple, Inc. v. Samsung Electronics Co. (Apple III), 735 F.3d 1352, 1364 (Fed. Cir. 2013) and Apple, Inc. v. Samsung Electronics Co. (Apple IV), 809 F.3d 633, 641–42 (Fed. Cir. 2015) respectively.
[27] Genband at 1381.
[28] Id.
[29] Genband at 1382.
[30] Apple IV.