Genband v. Metaswitch (Federal Circuit 2017)
At the close of trial, a jury found for the patentee Genband-ruling that Metaswitch infringed all of the asserted claims found in the eight asserted VoIP patents.[1] However, the District Court denied the patentee’s request for an injunction to stop the ongoing infringement. In its refusal, the District Court noted the lack of proof of a causal nexus between the ongoing infringement and the patentee’s allegedly irreparable harm of lost sales. Here in particular, focus is not on whether competition resulted in lost sales, but rather whether the inclusion of the infringing features caused the lost sales. As in the Apple and Samsung cases, this is a situation where the patents cover a few components of a multi-component product. The District Court also noted that the patentee’s delays in filing its infringement action also tended to support its conclusion of no irreparable harm.
On appeal, the Federal Circuit has vacated the injunction denial, holding that it is unclear whether the District Court properly applied the nexus requirement outlined by the Federal Circuit in its Apple v. Samsung decisions.[2]
In what the court is calling Apple II, Federal Circuit wrote that the irreparable harm calculus can be met when “a sufficiently strong casual nexus relates the alleged harm to the alleged infringement.” In Apple III and Apple IV, the court further developed its statement, requiring “some causal nexus between [defendant’s] infringing conduct and [patentee’s] alleged harm” and “a causal nexus linking the harm and the infringing acts” respectively. Here however Federal Circuit suggests that the District Court may have applied to stringent of a nexus requirement when it demanded proof that “the patented features drive demand for the product” before finding irreparable harm. In particular, the appellate court suggested that a patentee need not prove its features are “the driver” of demand but instead may rely upon evidence of being “a driver”. The appellate court also re-oriented the focus of inquiry toward ensuring that the allegedly irreparable injury is being caused by use of the infringing features. This is obviously tricky in a multi-component situation.
Regarding the delay in filing of the infringement lawsuit, the court did not truly review that portion of the decision other than to hold that the timing of the lawsuit filing and decision not to request preliminary relief may be relevant to the determination of irreparable harm.
So, to be clear, to obtain an injunction, the patentee must first win its lawsuit – proving infringement and overcoming any validity challenges (both direct and collateral). At that point, the patentee must then prove the set of equitable “eBay” factors, that include proof that any ongoing infringement would cause irreparable harm. When proving irreparable harm the patentee must take pains to ensure that the claimed irreparable harm is being caused by the infringement rather than some other act by the infringer, and when doing this the appropriate analysis is to consider the extent that the infringing features are driving sales of the infringing device.
= = = = =
[1] U.S. Patents Nos. 6,772,210; 6,791,971; 6,885,658; 6,934,279; 7,995,589; 7,047,561; 7,184,427; and 7,990,984.
[2] See, 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), cert. denied, 136 S. Ct. 2522 (2016), petition for cert. filed, 85 U.S.L.W. 3460 (U.S. Mar. 10, 2017) (No. 16-1102).
>trump commands repeal on TWITTER
>it happens
GOD EMPEROR
whew o m g. Might end the party. And then on the other side, hillary’s backers are picking a lady that might end their party.
>trump commands repeal on TWITTER
>it happens
GOD EMPEROR
Remember, folks: these are the guys who are whining 24-7 about “fake news.”
Might end the party
Well, that’s going to happen anyway.
Keep the laughs coming, 6! It’s totally unpredictable how Mango Hairball’s spoken desire to destroy a popular and beneficial program will turn out for him and his party of authoritarian pr cks. It’s just impossible to know!
“for him and his party of authoritarian pr cks”
As opposed to the Malcolm-like self-appointed Watcher-Over-the-Fields-of-Rye when it comes to patents type of “authoritarian pr cks”…
Malcolm truly is the Trump of this blog.
MM is upset that Trump can get away with things Obama never could. Lol.
Do you like your new pre-selected for your party nominee for the dem nomination in 4 years? Mrs. Harris will sure put the diverse in diversity, that’s for sure. Though she is a bit of a nobody at present, barely anyone knows her or anything about her. Do you think she’ll stand a chance agin T rump? How will the dems take losing again? Will the dems falter and fall into gigantic in-fighting over whether they want to become the party of minorities/women/etc instead of the worker? Will they fall apart before the republicans?
Typo alert: “Here however Federal Circuit suggests that the District Court may have applied [to–> too] stringent of a nexus requirement when it demanded proof that “the patented features drive demand for the product” before finding irreparable harm.”
Darn that voice recognition software!
Hello,
Could anyone provide me an idea of how many
in-house patent lawyers per researcher are hired in industry? What is the rule of thumb?
There is no rule of thumb for the number of in-house patent attorneys per corporation – it varies widely. In general it is shrinking, as more patent preparation and application work is being outsourced, typically on a competitive price-fixed-fees basis, even to India. Plus, what patent litigation and licensing work that is being handled in-house may well be handed by attorneys who are not patent attorneys.
Whenever I see the notion that outsourcing of patent application writing is being outsourced overseas, I am compelled to remind people that doing that runs the very real risk of invalidating any later obtained patent.
Material that becomes a patent application can only receive a proper “export clearance” AFTER an application is submitted.
If you have already outsource the material in order to write the application prior to obtaining the necessary “export clearance” of the submitted application, you have already violated the condition of that same “export clearance.”
Several major companies have figure out how to do this legally. I do not know what they do, but they do it. [Patent applications prepared in India.]
P.S. It is is not required to actually file a U.S. application first in order to obtain an export clearance from the PTO for foreign filing.
Do not be so sure that this IS being done legally.
Doing it and getting away with doing it should NOT be confused with doing it legally.
As to your P.S., can you explicate? I would love to be able to learn (and modify) my stance, but until I see the details, I will have to rely on my actual investigations (albeit those investigations are becoming a bit aged).
Re the P.S. The way I did it was run the application disclosure draft for approval by the same security group in the PTO that reviews actual filed applications automatically. There may be other ways.
So you ran a draft through the same security group in the PTO?
How did you run your draft? As far as I know, the USPTO has no such procedure. Was it run “informally?”
Further (on a more mundane practical level), you completed a draft, then turned around and outsourced the application writing?
Not adding up yet, Paul…
(but thanks for answering).
Section 5.13 of the regs cover this (getting a FFL when no corresponding US app has or will be filed).
Still, there’s a bit of a chicken/egg problem. If you want your specification messed up in India, you have to have enough of a description of the subject matter to provide to the PTO first to enable it to conduct a proper security review before it will grant the FFL.
Still, as PC mentions, there are large corps doing this.
Thanks for the section, Mellow (and thanks for recognizing the bit of chicken and egg – reflecting my mundane practical level comment).
Is a violation of export restrictions a valid grounds for patent invalidation in court, or does it apply only if the PTO catches you before issuance? It’s a very, very small risk if it can’t be used to invalidate in court.
It renders the obtained patent unenforceable.
This does mean after grant, and either in court (if patent holder is seeking court action to enforce), or out of court (for the patent holder seeking to use its patent in any action (for example, in negotiating license deals).
A patent holder knowingly engaging in what amounts to misrepresentation (for example, a patent holder knowing that they have violated export control laws by engaging foreign services prior to having properly received an export approval) may be liable for more than merely “losing their patent.”
The infirmities of the Supreme Court’s eBay decision are detailed well in this recent article by Judge Michel and Matthew Dowd: link to criterioninnovation.com
The eBay decision and two concurrences did nothing but add confusion to the law. It’s time for a reassessment.
Congress should go back to the basics. An invention secured by a patent may not be practiced without authorization by the owner. All the fuss the last eleven years is 100% an attempt by private parties to intrude on property duly granted to someone else. There is no dispute that Merck Exchange invented the Buy Now Button and that Ebay used it. There is no dispute that Merck followed the law. Ebay could have served the public / their customers with an extra click. They could have paid Merck market price (i.e. voluntarily agreed) for the invention. Instead, they persuaded the Supreme Court to make up new rules, and make them retro-active.
But hey, this new scheme sure is nice for big corporations, lawyers, and expert witnesses!
Now patent owners like Genband get forced into compulsory licensing at a rate determined by an academic economist applying the 15 Georgia-Pacific factors to a hypothetical negotiation. As if they have a clue how much a one-of-a-kind property is worth. What an absurd concept. It is worth what Merck / Genband / Patent Owner will accept for it! If Ebay / Metaswitch / Infringer can’t meet the price/terms they can’t use the invention.
All the fuss the last eleven years is 100% an attempt by private parties to intrude on property duly granted to someone else.
LOL
Looks like a new batch of patent crack just got passed around.
How is “patent crack” even remotely an intelligent attempt to engage in any meaningful dialogue?
Malcolm, your cognitive dissonance is once again on display.
Is this meaningful dialogue:
All the fuss the last eleven years is 100% an attempt by private parties to intrude on property duly granted to someone else.
No, it’s not. It’s the scripted ranting of an entitled babyman.
But somehow it slips right by you, “anon”, and your s00per d00per serious concerns about “meaningful dialogue.”
Go figure.
You got anything else? You want to drop in some rant about commies and “ivory towerism”?
Your feelings are noted.
As is the usual “scripted ranting of an entitled – and self-appointed – watcher over the fields of patent eye” baby man Accusing Others Of That Which He Does.
Try something other than vapid and unadu lterated mindless ad hominem.
Given your 11 year track record, I doubt that you are capable of anything else.
As for an example of meaningful dialogue, see post 1.
So Apple has a slide to unlock creature and once the proof that this feature helps drive sale of the infringing Samsung phones. How does one prove this?
Could one advertise on eBay Samsung phones under categories A and B, with category A listing all the nifty features the Samsung cell phone has, and category B has all of the features of category A with the additional feature of slide to unlock?
The prices are the same.
If the sales of category B are higher, what does that prove?
What if category A are higher?
Interesting experiment, but how is it valid unless the phone w/o the patented feature is offered for sale cheaper, and at different price differentials levels at different times, so as to establish its consumer significance?
Paul, people might always choose the cheaper phone. As I said, how does one prove this?
You can’t and, therefore, that is WHY Equity takes jurisprudence and issues an injunction in the first place. In cases, such as this, the injunction IS what forces the market (here the infringer) to determine a price for infringement – or new innovation that improves and avoids the infringement.
The ‘you should have asked for a TRO argument’ by the Court is just an unwarranted judicial ‘look-back’ – we all know the TRO standard is much higher, and in this day and age of IPR and never ending Ex Parte attacks – probably a dead letter of the law.
Ned, if “people might always choose the cheaper phone” why would that not be strong evidence of a LACK of “some causal nexus between [defendant’s] infringing conduct and [patentee’s] alleged harm” ? But of course varying product prices as a test is not practical, for various business reasons.
Nor is this Fed. Cir. test of “some causal nexus between [defendant’s] infringing conduct and [patentee’s] alleged harm” ever going to be easy to prove or decide in multiple-feature products like smart phones. [But complaining here about eBay and Apple decisions is not going to make this go away.[
But, a party could do what is done in trademark cases. Conduct product-purchaser surveys. Ask if they were aware of the patented feature when they purchased the product, ask if it was a factor in making their purchase decision, ask if they would have bought the infringing product anyway even if it did not have the infringing feature, etc.
[However, both party’s attorneys might be afraid to do so, fearing not getting the answer they want.]
Paul,
I think that your suggestion may merely lead to more (and more expensive) “battle of experts,” and recriminations that the other side did not properly “build” their surveys.
(Note that I am not panning your idea per se)
Curiously, I did not see anything in this E.D. TX opinion about what should be an enhanced damages rate for infringement continuing after the final judgment of infringement. [That could be nearly as effective as an injunction if it renders such continued infringement profitless.] Nor did I see any mention of IPRs or reexaminations?
Also, the opinion notes that: “Metaswitch sells telecommunications products and services that compete with Genband’s offerings, though Metaswitch was not a major competitor until recent years.” Shouldn’t not being a major competitor be at least a partial excuse for not suing them immediately? [If one’s recoverable lost profits are less than the legal costs of an infringement suit, it make neither business or judicial-economy sense to require such suits to get an injunction when they greatly increase their infringement.]
Good points Paul.
Your comment of “ould be nearly as effective as an injunction if it renders such continued infringement profitless” reminds me that for some instances, treble damages are likely NOT enough of a penalty.
In practice, what is the difference between issuing an injunction (that must under the statute be specific) and a subsequent fine for contempt (a $$ amount) and trying to determine $$ for a compulsory license (the going forward infringement – really a form of conduct order) for the same conduct, which in turn must be judicially enforced to collect a $$ amount? In the injunction scenario, you have a statute requiring specifics, and in the later – conduct decree – I would just assume, another mini- litigation concerning whether the conduct decree is specific enough to warrant, here again, a contempt motion to collect the funds. To be sure, in RIMM, the Court imposed an accounting during the appeal at a specified rate of money accounting, but as I recall that was more of a book entry demand on the infringers books.
For the specific product that was held infringed, and damages were awarded on, a contempt motion to collect those damages is rarely ever needed. Nor is an injunction violation likely for that product. Contempt disputes occur when the defendant changes that product and alleges that it no longer infringes.
Paul would not the same be true for the ‘continuing payments’ or whatever people are calling the post trial, sans injunction payments?
It should (once again) be noted that equity and the primary driver for applying equity is NOT at its proper legal footing in today’s broken-scoreboard environment,
The primary driver of equity is making the transgressed as whole as possible.
FAR too often, the non-patent traditional “notion” of “injunction as the harshest measure” is misapplied.
The primary driver of equity should be applied in context to what a patent IS – a negative right of exclusivity as opposed to a positive right of actually DOING something.
The lack of legal awareness (either deliberate or misplaced by other other ideologies) prevents a more pure objective analysis of how injunctions should be applied (in the patent context) to make the transgressed whole.
This legal reasoning applies fully regardless of whether or not an item is covered by a single patent or is – as noted here – “where the patents cover a few components of a multi-component product.”
Found guilty of infringing? STOP or pay the consequences. It matters not at all if a few components or the entire item is affected, the infringer by continuing even with merely minor items in a multi-component product is STILL infringing and the nature or what a patent itself is DIRECTLY suffers, and it is THAT (negative right) nature that is irreparably harmed, rather than any “positive” side effects of the negative right of a patent (sales of actual goods).
This is one of those points that weak patent rights INVITE efficient infringement and plays to the strengths of the well-monied and already established firms and penalizes the innovators.
The adage of “necessity is the mother of invention” is never more true than making patent rights strong and using BOTH a carrot and stick approach to patents (carrots to the innovators, sticks for the infringers).
You have put your finger on the issue. Equitable discretion being conflated with what the Chancellor thinks is fair and reasonable – with a rule of law – equity – in the Justice Story meaning of the term ‘Equity.’ It’s like 200 years of our common law and equity jurisprudence has been flushed down the memory hole. It’s sort of pathetic – reading the Court ordered mental gymnastics – to just avoid your ‘common sense’ view of equity Anon.
Comments are closed.