A patent holder seeking a permanent injunction against an infringer must prove that it has suffered an irreparable harm by showing some causal nexus between the infringing features of the accused products and the sales lost to the patentee. The Federal Circuit recently reversed a lower court’s interpretation of this causal nexus requirement, finding that the patentee did not need to prove that “the patented features drive demand for the product.” Instead, the patentee must show only that the infringing features are “a driver” of consumer demand.
Patentees seeking a permanent injunction after a judgment of infringement must meet the eBay four-factor test: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for the injury; (3) that, considering the balance of hardships between the patentee and infringer, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. In proving irreparable injury, the patentee must demonstrate a causal nexus between the infringing features of the accused products and the sales lost to the patentee. In Genband US LLC v. Metaswitch Networks Corp., the Federal Circuit ruled that a district court erred in its interpretation of the causal-nexus requirement by requiring the patent owner to prove that the patented features of the accused products drive demand for the products.
Genband owns patents directed to products and services for voice-communication services over Internet Protocol networks, known as “voice over IP” services. Metaswitch sells competing products and services. Genband filed a complaint against Metaswitch alleging that Metaswitch’s products infringe Genband’s patents. A jury found Genband’s patents to be valid and infringed by Metaswitch, and awarded over $8 million in damages to Genband.
Following the jury verdict in its favor, Genband sought a permanent injunction. The district court denied Genband’s request, finding that Genband failed to show that it would suffer irreparable harm from Metaswitch’s continued infringing activity, in part because Genband did not demonstrate a causal nexus by proving that the patented features drive demand for the product. Genband appealed to the Federal Circuit.
The Genband Decision
On Appeal, the Federal Circuit found that the lower court erred in its interpretation of the causal nexus requirement by requiring Genband to prove that the patented features “drive demand” for the infringing product. The court explained how the “drive demand” formulation is susceptible to importantly different interpretations along a spectrum of stringency. Applied most strictly, it may require the patent owner to prove that the patented features are the sole or single driver of consumers’ decisions to purchase the product. That is, that almost no consumers would purchase the product but for the infringing features. The Federal Circuit explained that this is an unduly stringent standard in multi-purchaser, multi-feature situations, where different consumers assign different weights or values to their purchasing decisions.
At the other end of the spectrum, the Federal Circuit noted that the causal-nexus requirement should not be too flexible. It is not enough that the patentee might lose some insubstantial market share as a result of the infringing product—the patentee must show more than an insubstantial connection between the patented features and the product demand. Further, it is not sufficient to show that that the infringing features are not one of the top five drivers for consumers’ purchasing decision.
Instead, the patentee is required to present enough evidence to establish some connection between the patented features and the demand for the infringing product. For example, it is sufficient to show that: (1) the patented features are one among several features attributable to the consumers’ purchase; (2) the patented features make the product significantly more appealing to consumers; (3) a lack of the patented features make the product significantly less appealing to consumers; or (4) the patented features impact consumers’ purchasing decisions, perceptions, and desires for the product.
Lastly, the Federal Circuit clarified that its guidance applied to a multi-purchaser, multi-component situation and noted that the causal-nexus inquiry may require little work in an injunction analysis where the infringing product contains no feature relevant to consumers’ purchasing decisions other than what the patent claims. In such a case, the court noted, causal nexus may be apparent from the simple fact of infringing sales.
Strategy and Conclusion
A patent owner may not need to show that infringing features of accused products are the sole driver of consumer demand in order to prove a causal nexus between irreparable harm and the infringing features of the accused products necessary to support an award of a permanent injunction. It may be enough to show that the infringing features are “a driver” of demand, which increase a product’s desirability.
The Genband opinion can be found here.