Genband v. Metaswitch Outlines Permanent Injunction Standards for Infringing Sales of Multicomponent Products

This week the Federal Circuit issued its decision in Genband US LLC v. Metaswitch Networks Corp., No. 2017-1148 (Fed. Cir. July 10, 2017) (precedential), which vacated a district court’s order denying a request for a permanent injunction in a case involving two competitors in the telecommunications industry. The opinion synthesizes and clarifies a prior series of rulings regarding the proper standards for evaluating irreparable harm in requests for injunctive relief regarding sales of multicomponent products.

In 2006, the Supreme Court reemphasized the four-factor equitable test that a patentee must satisfy to obtain a permanent injunction in a patent infringement action: (1) whether the patentee has suffered irreparable injury, (2) whether other remedies, such as monetary damages, are inadequate to compensate for that injury; (3) whether an injunction is warranted in view of the balance of hardships between the patentee and infringer; and (4) whether an injunction would adversely affect the public interest. eBay Inc. v. MercExchange LLC, 547 U.S. 388, 391 (2006). The Court emphasized that the ultimate decision whether to grant an injunction falls within the equitable discretion of the district courts. Id. at 394. Since eBay, the Federal Circuit has worked to craft guidelines for district courts applying the four-factor test, particularly where the infringing activity relates to multicomponent products. In a series of decisions in the long-running Apple v. Samsung dispute, the Federal Circuit held that demonstrating irreparable harm in such cases requires “some causal nexus” between infringing features of the defendant’s products and sales lost by the patentee. Apple, Inc. v. Samsung Elecs. Co., 735 F.3d 1352, 1364 (Fed. Cir. 2013) (Apple III); see also Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1324 (Fed. Cir. 2012) (Apple I); Apple, Inc. v. Samsung Elecs. Co., 695 F.3d 1370, 1374-75 (Fed. Cir. 2012) (Apple II); Apple, Inc. v. Samsung Elecs. Co., 809 F.3d 633, 640 (Fed. Cir. 2015) (Apple IV).

In Genband, the Federal Circuit revisited those decisions and the causal-nexus requirement. Genband accused Metaswitch of infringing several patents by selling complex telecommunications products. A jury found the asserted claims valid and infringed and awarded Genband over $8 million in damages. After a subsequent bench trial, the district court declined to issue a permanent injunction, concluding that Genband failed to establish as part of the irreparable harm inquiry that patented features drove demand for the infringing products. The district court cited the Apple v. Samsung line of cases in reaching its conclusion.

On review, the Federal Circuit concluded that it could not determine whether the district court had applied the correct legal standard. The court acknowledged that statements in the Apple cases could harbor ambiguity by framing the causal nexus inquiry in terms of whether patented features “drive demand” for the infringing products—i.e., whether the patented features must be the driver, or merely a driver, for consumer demand. Accordingly, the Federal Circuit explained that “it has been clear since at least Apple III” that the less rigorous standard applies. Thus, a patented feature need not be the sole reason that consumers purchase an infringing product to establish the required causal nexus. The patentee need only show that the patented features significantly influenced consumer demand, which can be established in a variety of ways, such as through evidence that the patented features significantly increased the appeal of the infringing products, evidence that omitting the patented features would make those products less desirable, or evidence that the patented feature is one of several features that consumers use to make purchasing decisions.

Because the district court offered scant analysis of the causal nexus requirement in its opinion, the Federal Circuit panel could not discern whether the district court applied the correct standard or whether doing so would make a difference in the outcome. Accordingly, the Federal Circuit concluded that remand was warranted for the district court to evaluate irreparable harm under the correct standard. The court also briefly addressed the district court’s ancillary conclusion that Genband’s delay in bringing suit and failure to request a preliminary injunction weighed against granting a permanent injunction. The Federal Circuit noted that various considerations could reasonably explain Genband’s choices without prejudging the harm resulting from Metaswitch’s infringement. But the court also rejected Genband’s position that a patentee’s choices about when to sue and whether to seek preliminary relief should be categorically irrelevant to the propriety of a permanent injunction, holding that the district court remained free to weigh those issues on remand.

The Federal Circuit’s decision provides helpful clarity for parties seeking or defending against permanent injunctive relief, particularly in high-tech sectors characterized by multi-component products and multi-purchaser markets. The court’s synthesis of the Apple v. Samsung cases provides substantial flexibility in what kinds of evidence can suffice to establish a causal nexus in the irreparable harm inquiry, and creative plaintiffs seeking injunctive relief can be expected to advance a variety of theories going forward.

Other Notable Decisions – Week of July 7, 2017

Google Inc. v. Intellectual Ventures II LLC, Nos. 2016-1543, 2016-1545 (Fed. Cir. July 10, 2017) (non-precedential). In Google, the Federal Circuit vacated and remanded part of a Patent Trial and Appeal Board decision that had upheld several claims over anticipation and obviousness challenges during inter partes review. The court held that the Board did not adequately explain its findings that the asserted prior art did not disclose certain limitations recited in the claims. In particular, the Board’s stated explanations that it did not agree with, or was not persuaded by, the petitioner’s positions fell short of providing an affirmative explanation of how and why the Board reached its conclusions. The Board also failed to identify or adopt affirmative contrary evidence to substantiate its findings and failed to address or even acknowledge various evidence submitted by the petitioner. This decision is another in a growing line of opinions in which the Federal Circuit has reversed or vacated AIA trial decisions based on the Board’s failure to adequately explain its factual findings and ultimate conclusions on patentability. Accordingly, Google v. I.V. highlights a key issue for parties considering appeal from an unfavorable Board decision, particularly in light of the court’s otherwise largely deferential review the Board has received.

Securus Techs., Inc. v. Global Tel*Link Corp., No. 2016-2573 (Fed. Cir. July 14, 2017) (non-precedential). The Federal Circuit reviewed another IPR decision in Securus, affirming the Board’s final written decision upholding the patentability of the challenged claims. Of note, the petitioner based its challenge in part on an issue of claim construction, arguing that a claim limitation that concluded with a colon followed by a series of additional steps separated by semicolons included only the first step immediately following the colon. As a general proposition, the court agreed that the colon following the first limitation “is indicative of a list of particulars to follow,” and the court further held that the most natural reading of the limitation was one that included not only the first step following the colon, but also all subsequent steps associated with the limitation. The court also noted that the specification supported that reading of the claims. The Securus decision provides an example of the importance that punctuation can have in the claim construction process—an important reminder to patent prosecutors and litigators alike.

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