Monday, May 16, 2022

Federal Circuit Vacates "Obey-the-Law" Injunction

The nonprecedential decision, handed down today, is Carl Zeiss Meditec, Inc. v. Topcon Medical Systems, Inc., unanimous opinion by Judge Linn, joined by Judges Hughes and Stoll.  The case involves alleged trade secret misappropriation, among other things, but the legal principle at issue--that an injunction cannot merely order a defendant to "obey the law" or to "not infringe"--applies to patents as well. (For discussion, see John M. Golden, Litigation in the Middle: The Context of Patent-Infringement Injunctions, 92 Tex. L. Rev. 2075-2115 (2014); John M. Golden, Injunctions as More (or Less) Than "Off Switches": Patent-Infringement Injunctions’ Scope, 90 Tex. L. Rev. 1399 (2012); Marketa Trimble, Cross-Border Injunctions in U.S. Patent Cases and Their Enforcement Abroad, 13 Marquette Intell. Prop. L. Rev. 331 (2009).) 

Plaintiff CZMI alleges that defendants Topcon and others misappropriated seventy of CZMI’s trade secrets, and obtained a preliminary injunction stating:

            IT IS HEREBY ORDERED THAT Plaintiff CZMI's Renewed Motion for Preliminary Injunction is GRANTED.


            1. THS and TMS are enjoined from releasing and selling Glaucoma Module to the public, pending further order of the Court.


            2. THS, TMS and Kurzke are enjoined from, directly or indirectly, obtaining, retaining, using, transmitting, disseminating, or disclosing, or attempting to obtain, retain, use, transmit, disseminate, or disclose, any CZMI confidential, proprietary, or trade secret information, including any files obtained from the Hard Drive or during the course of Former Defendants' employment with CZMI.

(See 2021 WL 1186335.)  Topcon argues that the injunction violates Federal Rule of Civil Procedure 65(d), which states “Every order granting an injunction and every restraining order must: (A) state the reasons why it issued; (B) state its terms specifically; and (C) describe in reasonable detail—and not by referring to the complaint or other document—the act or acts restrained or required.”  The Federal Circuit agrees:

            We agree with Topcon that the district court’s injunction fails to provide the kind of notice required by Fed. R. Civ. P. 65(d) as to whether and to what extent Topcon’s continued use of its Harmony platform and DICOM decoder is outlawed. At the outset, we note that the district court’s opinion expressly says that “CZMI now limits the proposed injunction to Glaucoma Module specifically.” Preliminary Injunction Order at 7 n.6. CZMI inexplicably does not address this footnote in its briefing. Moreover, the injunction order heavily focuses on the improper acquisition, disclosure, and use of the confidential HFA reports, rather than any confidential information associated with OTC data. The acquisition theory wholly revolves around Kurzke’s hard drive, and the use/disclosure theory also heavily focuses on the “145 HFA reports” Kurzke kept on the hard drive and delivered to Calcey for the purpose of testing the Glaucoma Module.


            There is no evidence cited by either the district court or CZMI that the hard drive contained any confidential OCT information. While there is some mention that the hard drive contained OCT data of Kurzke’s own eyes, there is no discussion by the district court that that information was confidential.


            CZMI’s contention that paragraph 2 properly captures all 70 trade secrets it asserted against Topcon because it made the argument to the district court and because the district court did not qualify its injunction is not sufficient to remove the ambiguity in the scope of the injunction. First, the district court did not address whether all that information was confidential, or whether it was acquired, used, or disclosed improperly. Second, as Topcon convincingly argues, the scope of the asserted trade secrets captured under CZMI’s argument is staggering, including unspecified software architecture, unnamed user interfaces, generically noted research, and other information simply identified as trade secrets. The district court did not engage an analysis of the likelihood of success on these many and varied alleged trade secrets. Finally, Rule 65(d) expressly requires that the injunction order itself must “describe in reasonable detail—and not by referring to the complaint or other document—the act or acts restrained or required.” (emphasis added).1


                    1/  We recognize that the Ninth Circuit “has not taken a rigid approach” to Rule 65(d)’s no-incorporation requirement and has allowed, for example, attachment of a confidential appendix as part of the injunction. . . .

After addressing a few additional arguments, the court vacates paragraph 2 and remands for the district court “to clarify the scope of the injunction as to whether and to what extent it enjoins the continued use of Topcon’s Harmony platform and DICOM decoder.”

One thing I find a mildly surprising is that the preliminary injunction order was entered in March 2021, that is, fourteen months ago.  I haven't looked into when the appeal was argued, or whatever other extraneous circumstances may have intervened, but normally I would have expected that an interlocutory appeal like this would have been handled more quickly.

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