A Sign of Things to Come? Federal Circuit Revives Preliminary Injunction Remedy

Stan Gibson's Notes from the Inventor Underground

 

Over the past decade, the ability to obtain a preliminary injunction in a patent case has become more and more difficult, with rulings from the district courts frequently denying the remedy in all but the most egregious of cases. That trend may be changing as the Federal Circuit recently found that a district court had erred and abused its discretion in denying a motion for preliminary injunction.

In Trebro Manufacturing, Inc. (“Trebro”) v. FireFly Equipment, LLC (“FireFly”), Case No. 2013-1437 (Fed. Cir. Apr. 9, 2014), the United States District Court for the District of Montana denied Trebro’s motion for a preliminary injunction against FireFly.

Trebro had sued FireFly for infringement of U.S. Patent No. 8,336,638 (the ’638 patent). The technology at issue focused on “sod harvesters,” which are vehicles equipped with knives that cut sod pieces from the ground, conveyor belts that transport the pieces, and mechanisms to stack the sod pieces on a pallet. FireFly’s accused product is a sod harvester called the ProSlab 150. Trebro also sells sod harvesters, including one called the SC2010 Slab.

After reciting the general standards for obtaining a preliminary injunction, the Federal Circuit stated the familiar test for proving a likelihood of success on the merits, namely, that “a patentee must prove that success in establishing infringement is ‘more likely than not.’ Revision Military, Inc. v. Balboa Mfg. Co., 700 F.3d 524, 525–26 (Fed. Cir. 2012). To prove an accused product literally infringes the patent in suit, the product must contain each and every limitation of the asserted claim(s). See, e.g., Cheese Sys., Inc. v. Tetra Pak Cheese & Powder Sys., Inc., 725 F.3d 1341, 1348 (Fed. Cir. 2013).”

The Federal Circuit disagreed with the district court’s analysis of literal infringement because the district court erred in requiring an element that was not found in the claims of the patent. “On this record, therefore, Trebro has established that it is ‘more likely than not’ to succeed on infringement. The district court abused its discretion in determining otherwise. That certain components of the ProSlab 150 involved in raising the sod may not move vertically does not defeat the likelihood of infringement. The only basis on which the district court found no likelihood of success was the erroneous requirement that a bed frame be moved vertically. Absent an explicit claim construction favorable to FireFly (which, of course, does not include a ‘bed frame’), this court holds that the district court erred. This error of law in claim construction underlies, in part, the district court’s abuse of discretion.”

The Federal Circuit also addressed whether the district court had abused its discretion in finding that there was a substantial question of validity of the patent. “Even if a patentee shows the likelihood of proving infringement, the accused infringer can defeat the likelihood of success on the merits by raising a substantial question as to the validity of the patent in suit.” The Federal Circuit found that the district court had erred on this issue as well. “Here, the district court clearly erred in finding a substantial question as to the ’638 patent’s validity. First, this court assumes that the district court’s unconstrained statement that ‘Claim 1 is not novel or non-obvious’ must have been a misstatement. The district court’s brief discussion of invalidity considered only one feature of the patent—the lifting of the horizontal conveyor. See Order at *4. This court appreciates the short time frame for consideration of a preliminary injunction motion. However, the district court’s analysis in this case did not adequately support an ultimate conclusion that claim 1 was anticipated or obvious.”

The Federal Circuit also concluded that the district court’s conclusion that the vertically-moving horizontal conveyor “was not a novel or non-obvious feature” was clearly erroneous. “The district court based this conclusion solely on Mr. Tvetene’s testimony about other sod harvesters that had been on the market—but without regard to the ’638 patent’s priority date. Mr. Tvetene testified undisputedly that the only two sod harvesters having a vertical-moving horizontal conveyor were not on the market until 2006 or later. J.A. 747. Neither party challenges that the ’638 patent’s priority dates back, at least, to the February 2005 provisional application. Thus, these later-sold sod harvesters (the Kesmac Slabmatic 3000 and 1500) cannot be considered prior art. This court need not consider at this time whether Trebro has proven priority to November 2004 based on the Brouwer affidavit and the purportedly corroborating attorney memorandum.”

Most notably, the Federal Circuit also found that the record did not contain a single prior art reference that raises a substantial question as to the ’638 patent’s validity. “Without even a reference to call validity into question, the district court abused its discretion in concluding there was no likelihood of success on the merits on the basis of validity.”

Finally, the Federal Circuit addressed the issue of likelihood of irreparable harm. On this issue, it also concluded that the district court abused its discretion in determining that Trebro did not show a likelihood of irreparable harm. “The district court clearly erred in finding as speculative the harm Trebro is likely to suffer if its direct competitor is able to sell an infringing product in the small, niche sod harvester market. The district court stated that ‘Gregg Tvetene was not able to testify that Trebro has suffered actual harm, but he did state that loss of a sale of a sod harvester will result in the loss of a $50,000 gross profit, which could result in employees being laid off.’ Order at *3. Further, the district court committed legal error by giving no weight to Trebro’s evidence of likely loss of market share and customers. Id. at *4. The district court claimed instead that ‘purely monetary relief’ would suffice because Trebro can be ‘compensated through an award of lost profits or a reasonable royalty.’ Id.”

This conclusion was based on “the uncontroverted testimony of Mr. Tvetene [which] showed that harm to Trebro is not speculative. The sod harvester market at issue in this case is a tiny market with only three players—Trebro, FireFly, and Mr. Brouwer’s company (a licensee of the ’638 patent). J.A. 728–29. Trebro sells only roughly eight sod harvesters per year. J.A. 731. The opportunities to attract customers and make sales are thus scarce in this tight market. FireFly is a new entrant on the market of sod harvester sales. And every sale to FireFly is essentially a lost sale to Trebro. See J.A. 731. This lost sale also translates into a lost customer: ‘[O]nce a farmer buys a sod harvester, they’re not going to replace it for many years in the future.’ J.A. 733. Moreover a single lost sale is a sizeable percentage of the yearly market in this area.”

In addition, this conclusion was further supported because “Trebro is very likely to lose significant market share as well as customers. See J.A. 733. The district court’s blanket dismissal of evidence showing likely loss of market share and loss of access to customers was an error of law. This court has often explained that such factors are pertinent to the irreparable harm inquiry. See Aria Diagnostics, 726 F.3d at 1304 (Fed. Cir. 2013) (preliminary injunction); Celsis in Vitro, Inc. v. CellzDirect, Inc., 664 F.3d 922, 930 (Fed. Cir. 2012) (preliminary injunction); see also Broadcom Corp. v. Emulex Corp., 732 F.3d 1325, 1336–37 (Fed. Cir. 2013) (permanent injunction); Douglas Dynamics, LLC v. Buyers Prods. Co., 717 F.3d 1336, 1344–45 (Fed. Cir. 2013) (permanent injunction); Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1152–54 (Fed. Cir. 2011) (permanent injunction).

Significantly, the Federal Circuit found immaterial that Trebro did not practice the patent and that the failure to practice the patent did not detract from the likely irreparable harm. “To the contrary, Trebro and FireFly are direct competitors selling competing products in this market. Thus, the record strongly shows a probability for irreparable harm. See Order at *1 (‘FireFly is a direct competitor of Trebro.’); J.A. 728–29, 754, 763 (testifying that SC2010 Slab is ‘the device that competes with FireFly’). In multiple instances, this court has held that a party that does not practice the asserted patent may still receive an injunction when it sells a competing product. Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 702 F.3d 1351, 1363 (Fed. Cir. 2012) (overturning denial of permanent injunction despite non-practicing product, noting ‘[d]irect competition in the same market is certainly one factor suggesting strongly the potential for irreparable harm’); Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 702–03 (Fed. Cir. 2008) (affirming permanent injunction where Broadcom sold indirectly competing, non-practicing product, supporting showing of irreparable harm); cf. High Tech Med. Instrumentation, Inc. v. New Image Indus., Inc., 49 F.3d 1551, 1556–57 (Fed. Cir. 1995) (reversing grant of preliminary injunction due to ‘lack of commercial activity by the patentee,’ but noting ‘a patentee’s failure to practice an invention does not necessarily defeat the patentee’s claim of irreparable harm’).”

There also was nothing in the record to support a showing that an injunction would somehow harm the public. “The patent deals with sod harvesting and covers a small market that may not have a broad-reaching effect.”

As a result, the Federal Circuit held that the district court had abused its discretion in denying the preliminary injunction motion and remanded for further proceedings consistent with the opinion.

* * *

The Federal Circuit’s reversal is significant in several respects. First, the Federal Circuit again stated that, in the irreparable-harm analysis, it is not critical that the patent owner practice the patent. Indeed, what is significant is the direct competition and whether patent owner can show lost sales as a result of that direct competition. Second, a simplistic showing of patent invalidity, without a disclosure of each and every element in the prior art, is not sufficient to defeat a preliminary injunction. Third, a showing of a likelihood of direct infringement by the patent owner will also be sufficient to support a preliminary injunction.

As a result of the Federal Circuit’s decision, it should be easier for patent owners who can show direct infringement and lost sales from direct competition to obtain a preliminary injunction.