Willful Infringement and Injunctions at the E.D. Tex.

i4i Ltd. v. Microsoft, No. 6:07CV113 (E.D. Tex., August 11, 2009, order) (L. Davis)

In May, a jury found that Microsoft willfully infringed i4i's patent relating to the processing of XML documents with custon XML elements, and awarded i4i $200M in damages. A flurry of post-trial motions followed, among which was a motion by i4i for a permanent injunction, and a JMOL motion by Microsoft to negate the finding of willful infringement.

On the issue of willful infringement, Microsoft argued that the fact that pretrial summary judgment was granted on certain asserted claims, i4i's voluntary dismissal of other claims, and defenses asserted at trial precluded willfulness liability entirely under Seagate.

Judge Davis disagreed:

Microsoft’s arguments are premised on an overly broad reading of Seagate. It argues that the objective prong of the willfulness analysis is met if and only if a defendant failed to present valid defenses during the infringement proceedings . . . most disturbingly, Microsoft’s arguments invite the Court to adopt a view of willful infringement that would allow an accused infringer to stay willfully ignorant despite a high likelihood that its actions infringe a valid patent. Such a view would allow an infringer to escape a finding of willfulness regardless of its conduct at the time the infringement began as long as it presented many defenses after a formal action was filed. Such a view is inconsistent with both Seagate and generally accepted legal principals regarding “objective” legal analysis.

On the subjective prong, Judge Davis focused on whether Microsoft "knew or should have
known" of the likelihood that their actions would infringe:

As Microsoft does not argue (and did not argue to the jury) that any of these “defenses” would have been apparent and considered by a reasonable person in Microsoft’s position prior to its infringing activity, these arguments are irrelevant and inappropriate. Furthermore, the pretrial summary judgment and i4i’s voluntary dismissal of accused products are irrelevant to the remaining claims that the jury found were valid and the remaining products that the jury found were willfully infringing. Additionally, Microsoft’s remaining defenses of invalidity were rejected by the jury and i4i presented sufficient evidence to support its infringement and validity positions.

Second, Microsoft argues that i4i presented insufficient evidence under the subjective prong of Seagate. Microsoft effectively argues that anything short of a “cease-and-desist” letter would be ineffective to put it on notice of an objective risk of infringement. In fact, i4i presented sufficient evidence, both direct and circumstantial, that Microsoft was aware of the likelihood that its activities were infringing.

On the issue of i4i's motion for a permanent injunction, the court applied the 4-factor eBay test and found that an injunction was warranted:

First, i4i has overwhelmingly shown that it has been irreparably injured by Microsoft’s continuing infringement of the ‘449 patent and could not be compensated with monetary damages. The fact that there is direct competition in a markplace weighs heavily in favor of a finding of irreparable injury . . . Simply because i4i adapted to a market where Microsoft fills 80% of the market space does mean that i4i has not suffered an irreparable injury. The evidence shows that i4i lost a, perhaps irretrievable, opportunity in the early days of the custom XML market. See PX 172. This continuing loss of market share and brand recognition is the type of injury that is both incalculable and irreparable.

[T]he balance of hardships also favors i4i. As i4i notes, Microsoft is the world’s largest software company with yearly revenues exceeding $60 billion. . . . i4i’s business is comprised almost exclusively of XML authoring products based off of the ‘449 patent . . . Thus, the evidence clearly indicates that while custom XML is a small fraction of Microsoft’s business, it is central to i4i’s.

[Wi]th regard to the public interest, i4i does not request that Microsoft disable infringing WORD products that are sold prior to the effective date of any injunction. i4i also indicated at the hearing, that it would be amenable to Microsoft providing support to customers who purchased infringing WORD products before the effective date of its proposed injunction. Thus, i4i’s proposed injunction would have little effect, if any, on the daily operations of Microsoft’s current customers. In addition, where products do not relate to a significant compelling public interest, such as health or safety, this factor weighs in favor of an injunction.

To read more, download the (65-page) opinion here (link)

CAFC Finds Infringement Under Doctrine of Equivalents, but Limits Injunctive Relief

Voda v. Cordis Corp., 07-1297, August 18, 2008

After a jury trial, the district court found that Cordis infringed Voda's patent related to cardiac guide catheters. On appeal, Cordin argued, among other things, that the district court erred in finding infringement under the doctrine of equivalents (DOE). Voda appealed the district court's denial of a permanent injunction.

For the DOE, the CAFC reiterated that two tests for equivalence are used:

This court applies two articulations of the test for equivalence. See Warner-Jenkinson, 520 U.S. at 40 (explaining that different phrasings of the test for equivalence may be "more suitable to different cases, depending on their particular facts"). Under the insubstantial differences test, "[a]n element in the accused device is equivalent to a claim limitation if the only differences between the two are insubstantial." Honeywell Int’l Inc. v. Hamilton Sundstrand Corp., 370 F.3d 1131, 1139 (Fed. Cir 2004). Alternatively, under the function-way-result test, an element in the accused device is equivalent to a claim limitation if it "performs substantially the same function in substantially the same way to obtain substantially the same result." Schoell v. Regal Marine Indus., Inc., 247 F.3d 1202, 1209-10 (Fed. Cir. 2001).

Cordis took issue with a claim term that recited "a first substantially straight leg" and "a second substantially straight leg." According to Cordis, their curved catheter did not meet this limitation in certain claims. The CAFC disagreed:

[W]e conclude that Voda introduced substantial evidence establishing that the redesigned curve portion of the XB catheter meets the straight and substantially straight limitations under the doctrine of equivalents. One of Voda’s experts testified that the difference in shape between the redesigned curve portion and a straight portion was so insubstantial that cardiologists would have difficulty distinguishing the two during use. There was also testimony that the redesigned curve portion performed the same function as a straight portion, in the same way, to achieve the same result.

On the denial of a permanent injunction, Vordis, who is an individual inventor, argued that irreparable harm would come to his exclusive licensee. However, Vordis did not argue that he himself would suffer the same injury. The CAFC found this fatal to his argument:

We disagree with Voda that the denial of a permanent injunction in this case conflicts with eBay. The Supreme Court held only that patent owners that license their patents rather than practice them "may be able to satisfy the traditional four-factor test" for a permanent injunction. Id. (emphasis added). Nothing in eBay eliminates the requirement that the party seeking a permanent injunction must show that "it has suffered an irreparable injury." Id. (emphasis added). Moreover, we conclude that the district court did not clearly err in finding that Voda failed to show that Cordis’s infringement caused him irreparable injury. In addition, we find that the district court did not clearly err or abuse its discretion in finding that monetary damages were adequate to compensate Voda. Accordingly, we affirm the district court’s denial of Voda’s request for a permanent injunction.

Post-Ebay Decision in D. Del.: Plaintiff Must Show Why Monetary Damages Aren't Enough

Praxair Inc. v. ATMI Inc. (03-1158) District of Delaware, March 27, 2007

After Praxair successfully sued ATMI for patent infringement, Praxair moved for a permanent injunction on ATMI's infringing gas cylinder device. The two companies were in "direct and head-to-head competition" and are the two main mechanical-based systems for the controlled delivery of industrial gases on the market. Praxair argued that this relationship, and ATMI's sale of the infringing product, entitled Praxair to an injunction.

ATMI countered that an injunction would force customers to incur significant costs by shutting down operations to qualify an alternative gas source or to switch to alternate cylinders. While ATMI retained title to most of its cylinders, the customers own the gas stored in the cylinders.

After reviewing the eBay four-factor test, the district court ruled that Praxair has not provided sufficient evidence showing irreparable injury and the inadequacy of legal remedies:

Under eBay, a plaintiff must prove that it is entitled to its statutory right to exclude by demonstrating, inter alia, irreparable injury and the inadequacy of legal remedies. Though the quantum of evidence required is relatively unclear, the court finds that Praxair has not met its burden under eBav to put forward sufficient proof vis-a-vis the broad scope of the relief requested. Praxair generally argues that VAC's presence in the market will cause Praxair to "likely lose additional market share, profits, and goodwill," without further detail. Praxair has not provided or described any specific sales or market data to assist the court, nor has it identified precisely what market share, revenues, and customers Praxair has lost to ATMI . . . While money damages are generally considered inadequate to compensate for the violation of a patentee's right to exclude, Praxair nonetheless had a burden to iterate specific reasons why ATMl's infringement can not be compensated for with a money award.

The court stated that Praxair may renew its motion for injunctive relief following appellate review of the jury verdict.

Download opinion here

Hat Tip: Delaware IP Law Blog