Green Light, Red Light • 2011 11 04 GreenLightRedLightYes, you can! No, you can’t! Anything Bosch can do, Pylon can’t do at all, at least when it involves Bosch’s windshield wiper blade patents. That’s the message Pylon got from this Federal Circuit decision. Pylon’s probably not singing happy showtunes about it.

Robert Bosch LLC v. Pylon Manufacturing Corp., No. 2011-1096 (Fed. Cir. Oct. 13, 2011) (Judges Bryson, O’Malley, and Reyna)

Bosch sued Pylon for infringing its patents on “beam-type” windshield wiper blades. At trial, a jury found that Bosch’s patents were valid and that Pylon infringed them. Bosch asked the court to issue a permanent injunction—basically, to order Pylon to stop selling the infringing blades.

Judge Robinson, the district court judge, said that Bosch had not shown “irreparable injury”—harm that can’t be fixed—so she denied Bosch’s injunction request.

The State of the Law

A little history on permanent injunctions: In patent cases, courts used to issue permanent injunctions automatically if they determined that a patent is valid and infringed. In 2006, the Supreme Court in eBay Inc. v. MercExchange, L.L.C. got rid of that rule. It decided that, even if the patent is valid and infringed, the patent holder still has to meet these four conditions to get an injunction:

(1) that it has suffered an irreparable injury; (2) that remedies available at law such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and the defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

(See page 8 of the Bosch opinion.) Courts also used to presume that there was “irreparable injury” if a patent holder could show that it was even likely to win a patent infringement action. Courts continued to hold onto that presumption once they determined that a patent is valid and infringed. But the Supreme Court didn’t specifically talk about that presumption in the eBay case, so the status of that rule was in flux after the Supreme Court chimed in.

The Federal Circuit cleared up that uncertainty in this case. The court proclaimed that the “presumption of irreparable harm” for valid, infringed patents no longer exists. So, after eBay, patent holders aren’t guaranteed either an injunction or a presumption of irreparable harm, which is a major step towards getting an injunction.

But—and this is a major “but”—the court strongly noted that eBay “does not swing the pendulum in the opposite direction.” (See page 10.) The court commented that “the fundamental nature of patents as property rights granting the owner the right to exclude,” is an important consideration in the injunction analysis. The court announced that eBay didn’t wipe the windshield completely clean: “In deciding these cases, we have developed certain legal standards that inform the four-factor inquiry and, in particular, irreparable harm.” (See page 12.) In other words, there is a relationship between patent case law and the eBay test, and judges must consider that relationship when deciding whether to issue an injunction.

Where the Trial Judge Took a Wrong Turn

Back to the main show—the facts of this case. As I mentioned above, Judge Robinson concluded that Bosch didn’t meet the “irreparable harm” factor. She gave three primary reasons: (1) Bosch didn’t clearly define who sells and buys these blades; (2) there are other companies that compete with Bosch and Pylon in the windshield wiper business; and (3) the windshield wiper business is a small, less significant part of Bosch’s overall business. Since Bosch didn’t meet the first requirement of the test, Judge Robinson didn’t consider the other three factors before denying Bosch’s request.

The Federal Circuit disagreed with Judge Robinson and held that she abused her discretion and committed “clear legal error” in her analysis. This is a high bar to overcome—it’s essentially the “we’ll only overturn you if you really messed up” standard. (As an aside, Judge Robinson is very experienced and handles a lot of patent cases, which makes this opinion particularly unusual.) Her two big mistakes (according to the court): (1) relying too heavily on the type of evidence that she considered, and (2) failing to consider other evidence that favored Bosch in the harm analysis.

The court first looked at the judge’s reasons for denying the injunction. The court said that the judge should not have treated the “multiple competitors” aspect and the “non-core business” aspect as negatives. The court noted that a two-competitor market generally weighs in favor of an injunction. But having other competitors in the market doesn’t necessarily weigh against it. Also, the court said that size does not equal reparability—a harm that is small isn’t necessarily fixable with a monetary award.

Next, the court said that the judge should have considered other evidence that demonstrates irreparable harm. The court mentions a particular, very large account that Bosch lost to Pylon, to demonstrate that the two companies compete directly. And, Bosch lost part of the market, not just money. Plus, Bosch offered evidence that Pylon has money problems and might not be able to pay money damages.

Considering all these points, the Federal Circuit concluded, “the record contains no basis on which the district court rationally could have concluded that Bosch failed to demonstrate irreparable harm….” (See page 22.)

Is This Our Exit?

The court didn’t stop there. Even though the district court didn’t weigh the other eBay factors, the Federal Circuit did. The court determined that money damages couldn’t sufficiently pay Bosch back for the infringement and that forcing Bosch to compete against its own patented invention (which would happen if Pylon were allowed to keep selling the infringing blades) tipped the scales in favor of an injunction. Although it would ordinarily send the case back and let the district court weigh these factors, the court said this situation is different and concluded, “[A]ny alternative result on remand would necessarily be an abuse of discretion.” (See page 25.) The court reversed the lower court and sent the case back with an order to enter an injunction.

Judge Bryson dissented on this final point. He agreed that the district court analyzed the irreparable harm prong incorrectly, but he believed that a number of factual questions exist, and that the district court should decide those questions first.

Read the Bosch opinion to see if you think the Federal Circuit wiped away the bugs in this case.