In a permanent injunction analysis, a finding that the public interest factor supports an injunction is not itself sufficient to mandate injunctive relief. A post-verdict royalty calculation determined at the district level may change if additional economic factors alter the parties’ bargaining positions after an appeal.
A jury found the asserted patents valid and infringed. The district court entered a permanent injunction against the alleged infringer and established a sunset royalty for the alleged infringer’s continued infringement until the injunction took effect. The Federal Circuit reversed the permanent injunction and affirmed the post-verdict royalty calculation.
The Federal Circuit held that the district court erred in its analysis of three of the four permanent injunction factors. The district court erred with respect to the irreparable harm factor for three reasons. First, litigation cost cannot support irreparable harm because, although “[l]itigation costs are undoubtedly undesirable and may take funds away from other endeavors . . . they are not irreparable harm in the injunction calculation.” Second, loss of market share by the patentee’s non-exclusive licensee does not make the patentee’s harm irreparable especially because, here, the alleged infringer and patentee do not compete. Third, the focus of the irreparable harm analysis should be on the patentee and not its non-exclusive licensee. In addition, the evidence illustrated that the patentee expended efforts attempting to license the patents-in-suit to the alleged infringer, asked for a sunset royalty period six months longer than what the court eventually ordered, and the harm to the patentee was readily quantifiable. With this evidence and analysis, the court concluded that it was clearly erroneous for the district court to conclude that money damages would not adequately compensate the patentee.
Next, the district court erred when it held that the adequacy of remedies is lacking. Particularly because no evidence in the record supported the assertion that a large share of the patentee’s business opportunity or damage to brand recognition is now lost. In fact, the patentee’s own expert testified that the patentee had not lost any sales by licensing to the alleged infringer.
Moreover, the Federal Circuit concluded that the balance of hardships favoring the patentee was not supported by the evidence. The district court erroneously relied on the fact that the patentee was a smaller company that relied on patents more than the alleged infringer did. But, this fact does not matter, especially here, when the patentee and the alleged infringer do not compete in the same market.
Finally, the district court correctly held that the public interest factor favored a permanent injunction. “[The alleged infringer’s] customers will suffer some harm with removal of their video-on-demand services, but it was satisfied that [the patentee] showed that the customers’ interests in entertainment did not outweigh the public interest in allowing patentees [generally] to enforce their right to exclude.” Given the district court’s reasoning, the Federal Circuit held that the finding on the public interest factor was not clearly erroneous. Moreover, the Supreme Court previously held that finding that the public interest favored a permanent injunction, when the other three factors do not, is not enough to grant a permanent injunction.
Also the Federal Circuit held that there was no error in its post-verdict royalty calculation. Nonetheless, the Federal Circuit suggested that the district court determine an appropriate ongoing royalty and may consider, on remand, additional evidence of changes in the parties’ bargaining positions and other economic circumstances that may be of value in determining an appropriate ongoing royalty.
A copy of the opinion can be found here.