Smith & Nephew, Inc. v. Interlace Medical, Inc., 1-10-cv-10951 2013 WL 3289085 (D. Mass. June 27, 2013)

http://www.gpo.gov/fdsys/pkg/USCOURTS-mad-1_10-cv-10951/pdf/USCOURTS-mad-1_10-cv-10951-5.pdf

In what it described as a close case, the District of Massachusetts held that a party otherwise entitled to a permanent injunction after winning a patent suit would have to wait to enforce the injunction until the USPTO completed its reexamination proceedings.

Medical device maker Smith & Nephew, Inc. ("S&N") sued Interface Medical, Inc. and its owner Hologic, Inc. (together, "Hologic") for infringement of two patents in the manufacture and sale of a surgical endoscopic cutting device. At trial, the jury found that all the asserted patent claims were valid and infringed. While the suit commenced, however, Hologic initiated an inter partes reexamination by the USPTO of both patents. After trial, but before post-trial briefing was complete, the USPTO issued a preliminary rejection of all the claims relevant to the suit.

Following trial, S&N moved for a permanent injunction. Hologic’s response stressed the USPTO’s rejection of the asserted claims. The court analyzed each of the eBay v. MercExchange factors—(1) irreparable injury, (2) adequacy of monetary damages, (3) balance of hardships, and (4) public interest—and found that the reexamination proceedings impacted the first and third factors.

In analyzing whether S&N suffered irreparable injury by Hologic’s continued infringement, the court found that the Plaintiff had suffered irreparably based on the injury to its right to exclude and the harm from direct competition, lost customers, and lost opportunities. However, the reexamination proceedings raised a possibility that the asserted claims would be invalidated, making "the weight of this factor . . . somewhat diminished."

As to the balance of hardships, the court weighed S&N’s monetary losses and the irreparable harms previously discussed against the possible harms suffered by Hologic. Hologic argued that it would be forced to lay off 159 employees and would lose its $266 million investment; even if the USPTO were to invalidate the patents and make the injunction moot, Hologic would then incur over $38 million to restart its production. (The maximum value of the suit, by contrast, was under $20 million.) The court noted that normally, an infringer has no right to complain of the harms it would face by being forced to cease infringement. Yet because the reexamination proceedings raised the possibility that the patents were invalid, the court weighed both parties’ harms and found that Hologic’s hardship was much greater.

The court also found that monetary damages would not be completely adequate to compensate S&N’s injuries, but felt this factor did not weigh heavily since monetary damages would nonetheless "substantially mitigate" S&N’s harm. As to the public interest, the court found this factor to favor Hologic because of evidence that "at least some doctors consider [the Hologic] product more effective."

The court found that the eBay factors led to an "extremely close" decision. Here, the balance of the factors tipped in Hologic’s favor against an immediate injunction. However, without the ongoing reexamination proceedings, S&N would be entitled to an injunction. Rather than deny the injunction outright, the court granted the injunction but stayed it pending the final reexamination decision and all subsequent appeals.