The 2006 Supreme Court opinion in eBay v. MercExchange held that patent cases are no different from other civil cases when it comes to obtaining an injunction. “Irreparable harm”—that is, harm not easily measured in money—is a necessary condition for getting an injunction. As a practical matter, that result made it much harder, if not impossible, for a business that does not practice its patent to obtain injunctive relief. If you don’t make or sell a product that practices your patent, then a reasonable cash royalty is all you are entitled to expect from successful patent litigation.
But, as the Federal Circuit reminds us in an opinion this week, even “non–practicing entities” can obtain injunctive relief—here, a preliminary injunction—in the right circumstances. What made the circumstances right in the case of Trebo Manufacturing v. FireFly Equipment is that both parties are direct competitors in the very small market for very expensive sod harvesters. Patent–owner Trebo and accused infringer FireFly are two of only three market players, and Trebo only sells eight harvesters per year. Therefore, the Federal Circuit found that, with infringement likely, a sale by FireFly was highly likely to be a lost sale by Trebo. Under these rare circumstances, it did not matter that Trebo’s harvester did not practice the patent. Trebo owned the patent; FireFly likely infringed it; and Trebo lost sales of its competing (non–practicing) harvester as a result. That represented to the appellate court a compelling recipe for a preliminary injunction.
If you’ve had the regrettable experience of being sued in a lawsuit; you’ve (hopefully) had the experience of implementing a litigation hold notice.
Not a pleasant task under any circumstances. But what if the complaint provides the sort of bare–bones “You have a website; we have a patent” allegation that we’ve frequently complained can survive a motion to dismiss because it complies with the Model T of federal procedure forms, Form 18, notwithstanding that it may not comply with Supreme Court pleadings standards? How do you draft a litigation hold when you know little about the actual accusations in the lawsuit?
In one recent case to keep an eye on (hat tip: IP Law Alert), Judge Rebecca Doherty of the Western District of Louisiana issued an opinion finding spoliation when the defendant failed to comply with an overly–broad litigation hold notice, which had been “refreshed” several times, even though defendants later issued a narrower hold notice specifically limited to the accusations in the case at bar. The facts of In re Actos (Pioglitazone) Products Liability Litigation may not be immediately recognizable to ecommerce companies, but the takeaway that a Court may strictly interpret the terms of a written litigation hold, is worth pausing over.
Having just reported on a customer–friendly outcome in the Federal Circuit regarding the not–infrequent patent litigation problem of patent asserters suing end–users for the implementation of third–party technology, the Federal Circuit has taken a different tack in the case of Microsoft v. DataTern.
(We leave for another day any comment as to whether the outcome of your case at the Federal Circuit might just depend on the constitution of your panel).
Finding that the district court had jurisdiction over some, but not all, of Microsoft’s declaratory judgment challenges to the patent–in–suit, the panel’s opinion gave, as pointed out in Judge Rader’s dissenting opinion, a potential road–map for how patent asserters can sue end–users without allowing the 800–lb gorilla behind the technology to defend its technology:
“The court determines in this case that jurisdiction is not available over Microsoft’s action on the ’402 patent because DataTern ‘cite[d] exclusively to third party—not Microsoft–provided—documentation for several key claim limitations’ in its charts. Majority Op. at 10. For this reason alone, the court denies Microsoft declaratory judgment jurisdiction to resolve these issues in a single focused lawsuit. This lone detail, within the control of the patent owner, should not defeat an otherwise valid declaratory judgment action. The practical effect of this holding creates a roadmap to allow DataTern and its successors to keep Microsoft on the sidelines while running up wins against customers, who are often smaller and less–equipped to defend themselves” (Rader, J., dissenting in part).
Good news for businesses (such as retailers) accused of infringing patents on products they buy from manufacturers (such as software or computer services) from the Federal Circuit Court of Appeals.
American Vehicular Sciences LLC, a subsidiary of the publicly–traded patent–enforcement and licensing company Acacia Research Inc., sued a number of Toyota entities and Gulf States Toyota, Inc., a Toyota dealer, for patent infringement in the Eastern District of Texas. Toyota and Gulf States moved to sever the case against Gulf States (the customer) from the case against Toyota (the manufacturer); to stay the case against Gulf States; and to transfer the case against Toyota to the Eastern District of Michigan. That motion was denied by the trial judge. In that ruling, the district court, adopting a recommendation of the magistrate judge, addressed the motion to transfer first, concluding that the Michigan forum was not clearly more convenient than the Texas forum. Having reached that decision, the judge then denied the motion to sever and stay, given that the whole case was to go forward in Texas. Toyota and Gulf States filed a petition for a writ of mandamus to the Federal Circuit.
In an order issued today, the Federal Circuit pressed the reset button by granting the defendants’ petition. First, the Federal Circuit concluded that the transferee forum, Michigan, was clearly more convenient than the transferor forum, Texas, because, even according to the Texas court, “nothing favors the transferor forum, whereas several factors favor the transferee forum. The analysis may not show that the transferee forum is far more convenient. But that is not what is required. With nothing on the transferor–forum side of the ledger, the analysis shows that the transferee forum is clearly more convenient” (quotation and citation omitted).
Because the Texas court denied the motion to sever and stay based on the false premise that transfer was not appropriate, the Federal Circuit directed that court to reconsider the motion to sever–and–stay the case against Gulf States “on the premise that, putting Gulf States aside, Toyota has a clear right to transfer….If the district court severs the claims against Gulf States, the remainder of the case must be transferred.” That is, if the suit against the manufacturer should be in another forum, the court has to consider that fact in assessing whether to allow the suit against a customer to go forward.
A patent–heavy day in the Supreme Court today:
The Court heard oral argument in Alice Corp. v. CLS Bank, a case with the potential to provide clarity (and possibly an end to) computer–implemented patents. Early reports suggest a potential for conflict within the high court over whether to decide the case narrowly on the merits of Alice’s asserted patent claims or attempt to craft a clearer rule of broader application that might address the plague of patent troll litigation against e–commerce companies who sell or offer goods or services online. (We represent a coalition of retailers who argued in an amicus brief for a clear rule that computer–implementation cannot create patent eligibility.)
Also today, the Supreme Court granted cert. in Teva Pharmaceuticals v. Sandoz, a case that presents another equally vexed question: How much (if any) deference should the Federal Circuit Court of Appeals afford a district court on issues of claim construction? Under the current de novo standard of review—no deference—the Federal Circuit routinely reverses trial judges on claim construction, very often the decisive issue. The frequency of Federal Circuit reversal generates a great deal of uncertainty among litigants over whether a victory (or defeat) at trial is real or a mirage. By agreeing to hear this case next term, the Supreme Court has once again signaled its interest in and concern about the state of U.S. patent law.
As a district with one of the largest patent caseloads, the District of Delaware is a mover and shaker when it comes to patent litigation. (Given the number of companies incorporated in Delaware, as venue rules tighten, Delaware is a popular destination for plaintiffs). Recently, Judge Sue L. Robinson published a general letter to counsel in pending patent cases, as follows:
“As a direct result of the lively and informative discussions Judge Stark and I have had through the Court’s Patent Study Group (“PSG”), I have determined to change the way I process patent cases… Any non ANDA patent case that has had a scheduling order entered in the past six months will presumptively be switching to the new process, keeping to the extent possible the pretrial and trial dates, but probably having to add and/or change other status and hearing dates…I apologize for the inevitable confusion and inefficiencies that come from these modifications. Clearly, however, the very nature of patent litigation has changed, and the message sent by virtually all participants in the PSG was that my process could better adjust to those changes. Judge Stark and I thank all the PSG participants for their candid observations, and I thank as well my colleagues for being supportive of my first efforts at putting the PSG lessons into practice.”
We can only imagine the “lively and informative discussions” in the PSG, and look forward to a more streamlined approach in Delaware.
A tip of the hat to our friends at Holland & Knight for alerting us to the “Main Street Patent Coalition,” an impressive roster of trade associations that have banded together to, what else, fight patent trolls.
The Main Street Patent Coalition calls on Congress to:
1. Eliminate trolls’ ability to hide behind shell corporations
- Require patent owners that threaten and sue to disclose who is really lurking in the shadows and will financially benefit from the scheme
2. Disarm trolls by improving patent quality and providing a way to fight bad patents
- Fully fund the Patent Office so there is closer scrutiny of patent applications
- Expand inexpensive review opportunities for unwisely-issued patents so trolls think carefully before threatening main street with patents that never should have been approved
3. Make it easier to punish trolls that send fraudulent and abusive shakedown demand letters
- Sharpen FTC authority to stop fraudulent and deceptive demand letters
- Trigger automatic reviews of patents abusively exploited by trolls
4. Protect end users from troll lawsuits based on infringements by intermediary manufacturers and producers
- Require trolls to sue the party that is actually responsible for infringement, not the end users who had no input into the product
5. Make trolls pay when they sue companies frivolously and stop runaway litigation costs
- Require courts to assess sanctions against trolls that file baseless lawsuits