Monday, October 31, 2022

Federal Circuit Overturns Preliminary Injunctions in Design Patent Cases

On Friday of last week, the Federal Circuit issued two related precedential opinions, both brought by design patent owners ABC Corporation I and ABC Corporation II against numerous companies that allegedly sell infringing hoverboards in e-commerce.  Both cases are procedurally complex.  For present purposes, I will note only that in the first of the two cases (No. 2021-2150) Judge Taranto, writing for the panel, vacates the preliminary injunction on the ground that the defendants in these cases were never afforded the requisite notice in accordance with Federal Rule of Civil Procedure 65(a).  In the second of the two opinions, Judge Dyk (writing for the same panel) concludes that a second preliminary injunction granted by the same judge against some of the same parties (and apparently not tainted by procedural irregularities) nevertheless rested on four separate errors, the first of three of which related to the "likelihood of success on the merits" factor:

            First, the district court applied, at least in part, the wrong legal standard. When the district court concluded that plaintiffs had established a likelihood of success on the merits . . . the court reasoned: “Resolving this expert dispute will likely require a trial. I find that the need for a trial is sufficient in this case for plaintiff to have met their burden to demonstrate a likelihood of success on the merits.” J.A. 8482 (emphasis added) . . . .  Elsewhere the district court stated: “[P]laintiff will likely succeed on the merits of their design patent . . . infringement. The claim designs in the infringing products are not sufficiently dissimilar, or plainly dissimilar . . . . ”  This reasoning is directly counter to our precedent. To show a likelihood of success on the merits, a patentee must show that it will likely prove infringement of the asserted claims. “If [the defendant] raises a substantial question concerning . . . infringement . . . , i.e., asserts an infringement . . . defense that the patentee cannot prove ‘lacks substantial merit,’ the preliminary injunction should not issue.”, Inc. v., Inc., 239 F.3d 1343, 1350–51 (Fed. Cir. 2001) (quoting Genentech, Inc. v. Novo Nordisk, A/S, 108 F.3d 1361, 1364 (Fed.Cir.1997)). An injunction cannot be granted because a trial is required or because the accused products are not “sufficiently dissimilar” or “plainly dissimilar” from the patented design. Thus, the court failed, at least in part, to apply “the appropriate legal standard,” necessitating setting aside the 2021 preliminary injunction order. . . .


            Second, the district court was required to conduct the ordinary observer analysis through the lens of the prior art, and the court's conclusory discussion contains no indication that it conducted the required analysis. . . .


            Third, the district court failed to apply the ordinary observer test on a product-by-product basis, which is particularly important here in light of significant differences among the accused products themselves. . . .


            The fourth and final problem with the preliminary injunction order is that, even if the district court were to find a likelihood of success as to infringement, the language of the injunction is overbroad . . . . The order does not mention or specifically enjoin “Accused Products A through D.” . . . . Injunctions that by their terms apply to “any device” within the scope of the patent claims do not meet the specificity requirement of Rule 65(d). . .  (pp. 12-19).

That’s a lot of errors, though in fairness to the district court integrating the factors relevant to granting a preliminary injunction with the statutory presumption of validity is not easy—though there is case law addressing how courts are supposed to do so, as discussed in the opinion (and in some of my work, e.g., Comparative Patent Remedies pp. 98-99).  Design patent law is also an area in which few people, including judges, are likely to be proficient.  Cases like this one do lend some support to the idea of establishing specialized patent trial courts or specialized chambers within generalist courts, as is the practice many places, though there is always the countervailing risk that specialized courts will be subject to “capture” (a matter that some may argue has been true of those U.S. district courts that have managed to attract a disproportionate share of patent litigation over the years).  Finally, the problem of injunctions lacking the requisite specificity apparently is a recurring one, despite the clear mandate of Rule 65.  For previous (actually, still fairly recent) discussion on this blog, citing relevant work by Professors Golden and Trimble, see here.

For discussion of this case elsewhere in the blogosphere, see Professor Sarah Burstein's insightful post on Patently-O; see also posts by Eileen McDermott on IP Watchdog (the link is down at the moment, however) and this article by Dani Kass on Law360.

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