Monday, June 18, 2007

E.D. Tex. Grants Permanent Injunction for Non-Practicing Patent Holder

CSIRO v. Buffalo Technology, Inc., E.D. Tex. (6:06-CV-324), June 15, 2007

CSIRO is the principal scientific research organization of the Australian Federal Government. Established in 1926, CSIRO conducts scientific research and applies the efforts of that research to benefit the public at large. CSIRO is similar to the United States’ National Science Foundation and National Institute of Health.

On January 23, 1996 CSIRO was granted U.S. Patent No. 5,487,069 (“the ‘069 patent”) which is directed to addressing the "multipath" problem for indoor wireless networks (WLANs). CSIRO’s intent from the beginning was to derive revenue from its invention through licensing the ‘069 patent. The patent is considered by CSIRO to be a "core" patent for the IEEE 802.11a and 802.11g standards.

CSIRO successfully sued Buffalo in the E.D. Tex. for infringing the '069 patent, and sough a permanent injunction. Buffalo countered that CSIRO was not entitled to an injunction since eBay, since it did not produce any products or otherwise compete in the relevant wireless market.

Judge Davis disagreed, stating that formal research institutions may avail themselves of injunctive relief when their patents are infringed.

Irreparable Harm to CSIRO

Relying on the TiVo, Paice and Visto cases, Buffalo argued that, since eBay, district courts have typically granted injunctive relief in favor of competitors but denied injunctive relief to non-competing licensors. The court rejected this argument:

The majority opinion in eBay rejected the conclusion that “a ‘plaintiff’s willingness to license its patents’ and ‘its lack of commercial activity in practicing the patents’ would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue.”

CSIRO has shown that its harm is not merely financial. While CSIRO does not compete with Buffalo for market share, CSIRO does compete internationally with other research groups—such as universities—for resources, ideas, and the best scientific minds to transform those ideas into realities. CSIRO’s reputation is an important element in recruiting the top scientists in the world. Having its patents challenged via the courts not only impugns CSIRO’s reputation as a leading scientific research entity but forces it to divert millions of dollars away from research and into litigation costs. Delays in funding result in lost research capabilities, lost pportunities to develop additional research capabilities, lost opportunities to accelerate existing projects or begin new projects. Once those opportunities have passed, they are often lost for good, as another entity takes advantage of the opportunity. Delays in research are likely to result in important knowledge not being developed at all or CSIRO being pushed out of valuable fields as other research groups achieve critical intellectual property positions. Thus, the harm of lost opportunities is irreparable. They cannot be regained with future money because the opportunity that was lost already belongs to someone else.

Adequacy of Remedies Available at Law:
In his concurrence, Justice Kennedy instructed courts to be cognizant of the nature of the patent being enforced and the economic function of the patent holder when applying the equitable factors. eBay, 126 S. Ct. at 1842 (Kennedy, J., concurring) (“When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”) . . . The right to exclude becomes more urgent when the product is the invention.

This case is not the situation that concerned Justice Kennedy; Buffalo’s infringing use of CSIRO’s technology is not limited to a minor component of the technology. The ‘069 patent is the core technology embodied in the IEEE’s 802.11a and 802.11g standards. Buffalo’s products are designed to provide the wireless functionality of the IEEE’s 802.11a and 802.11g standards. Since Buffalo’s infringement relates to the essence of the technology and is not a “small component” of Buffalo’s infringing products, monetary damages are less adequate in compensating CSIRO for Buffalo’s future infringement.

Balance of Hardships

Finding the CSIRO suffered irreparable harm, the court found Buffalo's hardship was not sufficient to find in its favor: "The hardship to Buffalo of permanently enjoining its infringing conduct is limited to the injury ordinarily expected when an injunction is imposed. Mere hardship incurred in the process of ceasing operations is not sufficient."

The Public Interest
Research institutions, such as CSIRO, make substantial scientific advances. The work of research institutions is often at the forefront of scientific awareness. Although their work may not always have immediate applications, the work of research institutions has produced enormous benefits to society in the form of new products and processes. Because the work of research institutions such as CSIRO is often fundamental to scientific advancement, it merits strong patent protection. Furthermore, the public interest is advanced by encouraging investment by research
organizations into future technologies and serves to promote the progress of science and the useful arts. Thus, the public interest factor favors CSIRO’s motion for permanent injunction.

View/download the order here (link)

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