Ruling on Motion for Permanent Injunction, Sealant Sys. Int'l Inc. v. TEK Global S.R.L., Case No. 5:11-cv-00774-PSG (Magistrate Judge Grewal)
You may think that once a patentee has won an infringement suit with a competitor who sells products employing the patented technology, the fight is over and the infringer, upon a showing of causal nexus, will be enjoined from further use of the patented article. You would be wrong. According to a recent order by Magistrate Judge Grewal, in order to obtain a permanent injunction, a patentee that can demonstrate a causal nexus between a patented feature and the popularity of the infringing product containing said feature still has to prove equitable relief is proper. Fortunately for the plaintiff involved, Magistrate Judge Grewal found that the conditions for a permanent injunction were, in fact, satisfied.
The plaintiffs in the case, Accessories Marketing, Inc. ("AMI") and its sister company Sealant Systems International, Inc. ("SSI") manufacture and sell onboard tire repair kits. The Defendants TEK Global S.R.L. and TEK Corp. (collectively, "TEK") manufacture and sell the same. At trial, a jury found that a TEK product infringed certain claims of a patent owned by AMI for a tire repair kit containing a two-piece removable port and receptacle system for tire sealant ("the '581 patent"). AMI then moved for a permanent injunction. In ruling on the motion, Magistrate Judge Grewal first noted there is no presumption in favor of an injunction in patent infringement cases. Rather, the patentee retains the burden of showing the traditional equitable four-factor test favors an injunction: (1) irreparable injury; (2) inadequate remedies at law; (3) balance of hardships; and (4) public interest. Magistrate Judge Grewal considered each factor in turn, affording the most attention to the first factor – irreparable injury.
Magistrate Judge Grewal first noted the Federal Circuit recognizes a "preexisting" requirement that the party seeking injunctive relief must identify a causal nexus between infringement and the alleged harm. Meaning, a patent owner must show some connection between the infringed feature and consumer demand, for if lost sales to an infringing product has nothing to do with the infringing feature, then there is no irreparable injury caused by the infringement. At trial, the jury found the '581 patent's two-piece port and receptacle system was an advancement over prior art in that it allowed the sealant container to be removed from the kit, disposed of, and replaced, thereby obviating the need to replace the entire kit. Because TEK's kit relied on this feature, Judge Grewal found TEK's infringement was "traceably tied to its products' success," and thus satisfied the causal nexus requirement.
Finding the causal nexus requirement met, Judge Grewal then considered several other factors to determine whether there was irreparable injury, including: (1) AMI competed with TEK within the same market even though only SSI actually sold the product, because AMI was "bound at the hip" to sales from its sister company, SSI; (2) the plaintiffs lost market share due to the infringement; (3) TEK had obtained unfair incumbency benefits from design wins based on sales of the infringing product; (4) AMI showed unwillingness to license the patent (although the probative value of this factor was deemed di minimus because AMI had only controlled the rights to the patent for a short time); and (5) TEK had the financial ability to satisfy the judgment. Magistrate Judge Grewal thus found that since TEK's infringement "clearly and causally bred unwarranted gains in market share and incumbency benefits in a competitive market," the only "reasonable conclusion" was that TEK irreparably harmed AMI.
He then found the other equitable relief factors also favored an injunction. Money damages were inadequate because sales of the infringing kits comprised the bulk of TEK's sales, and said sales significantly changed the market. The balance of hardships favored equitable relief because absent a permanent injunction, AMI would have to compete with its own patented invention. And the public's interest in upholding patent rights also favored equitable relief. Accordingly, Magistrate Judge Grewal decided the fight was, in fact, over for the defendant, and he ordered the permanent injunction.
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