Want to Preliminarily Enjoin the Sale of an Infringing Device? Be Prepared to Show the Value of Your Patent

September 3, 2015

By Nikola L. Datzov

value of patent

In what appears to be the first decision from the District Court of Minnesota with a developed analysis on the subject, The Honorable Ann. D. Montgomery recently denied a patent holder’s motion to preliminarily enjoin the sale of an infringing device because the patentee failed to show a sufficient nexus between the allegedly infringing technology and lost sales. See Rudolph Techs., Inc. v. Camtek Ltd., No. 15-1246 (ADM/BRT), 2015 WL 5039295, at *14 (D. Minn. Aug. 26, 2015).

The Standard for Preliminary Injunctive Relief in Patent Litigation

Patent holders seeking to enjoin the sale of infringing devices at the beginning of a litigation must demonstrate the universally-applicable preliminary injunction factors: (1) likelihood of success on the merits; (2) irreparable harm; (3) balance of the equities favor an injunction; and (4) public interest favors an injunction. See, e.g., Apple, Inc. v. Samsung Elecs. Co., Ltd. (Apple I), 678 F.3d 1314, 1323 (Fed. Cir. 2012). With respect to the second factor, however, a patent holder must also demonstrate “a sufficiently strong causal nexus relates the alleged harm to the alleged infringement.” Apple, Inc. v. Samsung Elecs. Co., Ltd. (Apple II), 695 F.3d 1370, 1374 (Fed. Cir. 2012). In other words, “[t]he patentee must [] show that the infringing feature drives consumer demand for the accused product.” Id. at 1375. “Sales lost to an infringing product cannot irreparably harm a patentee if consumers buy that product for reasons other than the patented feature.” Id. at 1374 (internal quotation marks omitted).

How Valuable is a Preliminary Injunction?

Enjoining a competing device at an early stage in the litigation is sometimes critical. Even if ultimately successful in the litigation, a patent holder may never be able to recapture lost market share, customers, or goodwill. Whether the infringing device can continue to be sold while the litigation is ongoing is also a major consideration in litigation strategy. Rudolph argued that it would suffer irreparable harm for the reasons above: once customers purchased the infringing device, they would be unlikely to switch to the patented product because of the substantial switching costs. Rudolph, 2015 WL 5039295, at *14. Thus, even if ultimately successful in the litigation, Rudolph believed it would lose market share and customers it could not regain. Id.

What Must a Patent Holder Show to Get One?

Judge Montgomery denied Rudolph’s preliminary injunction motion because Rudolph failed to provide any customer-based evidence indicating the patent at issue “influences customers’ purchasing decisions or makes the product significantly more desirable.” Id. at *15. Expert testimony on the importance of the infringing feature was insufficient. Id. Judge Montgomery also reasoned that “the sizeable disparity [in price between the two products] suggest[ed] price difference would play a significant role in the purchase decision.” Id.

Undoubtedly, the required showing is a tough standard to meet. Not only must a patent holder show the value of the infringing functionality but also that the other functionality of the infringing device is not as important to a consumer, i.e., the infringing feature is why consumers buy the product, though it need not be the sole reason. For complex devices with many features, this is particularly difficult. Expert testimony alone—from the patent holder or otherwise—to validate the value of the functionality is unlikely to pass muster. A defendant’s touting of the infringing functionality may also not be enough. See, e.g., Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 2015 WL 604582, at *2 (N.D. Cal. Feb. 12, 2015). Even awards for the patent technology, without more, may not be enough. Id. at *3. Relying on publicly-available guides, blogs, or reviews is also not likely to be persuasive. See Apple II, 695 F.3d at 1376-77. Rather, like Judge Montgomery, courts thus far appear to look for some evidence from the horse’s mouth—they want customer-based evidence.

In any litigation, advancing a general “parade of horribles” is unlikely to persuade a court for the need of preliminary injunctive relief. In patent litigation, it is even more crucial that a party seeking such relief develop a targeted and supported argument for irreparable harm through reliable and persuasive evidence of consumer demand for the patented feature. Though challenging to win, given the potential for a preliminary injunction to change the landscape of a patent dispute, even the marketplace, a strategic and developed approach for pursuing a preliminary injunction can be well worth the effort.

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