Wednesday, December 16, 2009

Automated Merchandising Systems v. Crane

This non-precedential decision discusses the standards for preliminary injunctions, in particular the requirements for showing irreparable harm, avoiding a finding of likelihood of success by making a case for invalidity, and the implications of a reexamination proceeding for seeking a preliminary injunction.

1. Irreparable Harm

The court discussed what is required to demonstrate irreparable harm, which is harm that cannot be compensated via monetary damages. Evidence of lost sales, by itself, is presumed to be compensable by monetary damages and thus does not provide evidence of irreparable harm. The court stated that, in light of eBay, the “burden is now on the patentee to demonstrate that its potential losses cannot be compensated by monetary damages.” (p. 6.) Loss of market share must be shown to be non-compensable by monetary damages. Similarly, price erosion “might support a finding of irreparable harm sufficient to warrant a preliminary injunction” if it could be shown that prices could fall enough to drive the plaintiff out of the market. (p. 7.)

2. Likelihood of Success

The district court improperly shifted the burden from the plaintiff (to show a likelihood of success) to the defendant (to show that the plaintiff is unlikely to success on the merits.) The defendant’s argument against a preliminary injunction was based on an invalidity claim. The court acknowledged that “it may be difficult to determine precisely how much of an invalidity case Crane needs to present at this preliminary stage” because it does in fact have the “burden at trial of proving invalidity by clear and convincing evidence.” (p. 8.) Nonetheless, the district court did not sufficiently analyze the defendant’s invalidity argument, and so the Federal Circuit could not agree with its conclusion.

3. Preliminary Injunctions and Stays Due to Reexamination

The court explained that, in almost all circumstances, it would be improper to both grant a preliminary injunction and a stay pending reexamination. “[T]he district court ordinarily should not grant both a preliminary injunction and a stay. This is because a stay pending reexamination is appropriate only if there is a substantial issue of patentability raised in the reexamination proceeding, while the injunction against the accused infringer is appropriate only if there is no substantial issue of patentability. Because it logically seems that there cannot simultaneously be a substantial issue of patentability and no substantial issue of patentability, stays pending reexamination are typically inappropriate in cases in which preliminary injunctions are appropriate.” (p. 10.)