In a non-precedential opinion, the U.S Court of Appeals for the Federal Circuit recently held that there is no longer a presumption of irreparable harm “based just on proof of infringement” of a valid, enforceable patent. Although the holding is not binding, it provides insight into the Federal Circuit’s view on whether the Supreme Court’s 2006 decision in eBay v. MercExchange eliminated the traditional presumption of irreparable harm. Automated Merchandising Systems, Inc. v. Crane Co., Case No. 09-1158 (Fed. Cir., Dec. 16, 2009) (Michel, J.).
Plaintiff Automated Merchandising Systems (AMS) sued defendant Crane for infringement of various patents related to vending machine optical detection technology. In the U.S. District Court for the Northern District of West Virginia, AMS moved for a preliminary injunction, arguing that Crane’s sales of infringing products were depriving AMS of market share and that AMS would likely go out of business before litigation could conclude if the court did not enjoin Crane’s activities. The district court granted the motion, holding that AMS’s minimal evidentiary showings of lost revenue, lost market share and price erosion were sufficient to support a finding of irreparable harm, which is one requirement of issuing a preliminary injunction. In finding AMS’s evidentiary showings sufficient, the district court held that, due to the presumption of irreparable harm from patent infringement, the burden was on defendant Crane to show that any harm was finite, calculable and compensable. After the district court held that Crane failed to meet this burden, Crane appealed the district court’s ruling.
The Federal Circuit reversed, holding that in eBay, the Supreme Court discarded the presumption of irreparable harm based just on proof of infringement and, thus, that the basis for the district court’s preliminary injunction was unsound. The Court stated that, pursuant to eBay, the burden is now on the patentee to prove irreparable harm by demonstrating that its potential losses cannot be compensated by monetary damages. Here, AMS had introduced some evidence regarding lost sales, but the Court stated that lost sales are always compensable through damages and cannot alone support a finding of irreparable harm. AMS also presented evidence showing that, soon after Crane introduced its allegedly infringing products, one of AMS’s dealers asked AMS to no longer list it as a distributor. Finally, AMS suggested that Crane’s activities would lead to price erosion, but presented no evidence on this issue. The Court held that plaintiff AMS did not meet its evidentiary burden with these sparse showings and therefore vacated the district court’s grant of a preliminary injunction because AMS did not prove irreparable harm.