Brent P. Lorimer
Shareholder at Workman Nydegger
posted on 31 October 2011 | 0 Comments
In Robert Bosch LLC v. Pylon Mfg. Corp. (Fed. Cir. October 13, 2011) the Federal Circuit revisited the standards for issuing permanent injunctions after judgment has been entered finding infringement and validity. Specifically, the court made it crystal clear that findings of validity and infringement do not give rise to a presumption of irreparable harm. In doing so, however, the court also made it clear that the eBay pendulum has not swung nearly as far in favor of infringers as some have predicted.
Prior to the Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, if a patent owner prevailed on infringement and validity, litigants generally assumed that a permanent injunction would follow as a matter of course. In eBay, the Supreme Court overruled that general rule and made clear that permanent injunctions are not automatically available to a successful patentee. Specifically, the eBay Court held that a patentee seeking a permanent injunction must demonstrate entitlement to a permanent injunction by establishing the following propositions:
(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.
In the aftermath of eBay, district courts have attempted to apply the eBay paradigm with varying success. The Bosch opinion represents an attempt by the Federal Circuit to lend some clarity to that process. Bosch’s patents covered windshield wiper blades. Bosch prevailed on validity and infringement for a number of claims and sought a permanent injunction. In support of its request, Bosch produced evidence that it competed with the defendant, Pylon, in all relevant markets, that Pylon had caused it to suffer price erosion and loss of market share, and that Pylon was unlikely to be able to compensate Bosch in money damages because of its financial instability. Pylon did not put on its own evidence, but instead argued that no injunction should issue because there was no showing of irreparable harm. Among other things, Pylon argued that Bosch failed to meet its burden because (1) it did not establish the existence of a two-supplier market, (2) it failed to define the relevant market, and (3) it could not establish irreparable harm since the wiper blade business was only a small part of Bosch’s overall revenue. The district court denied Bosch’s motion, and Bosch appealed.
The Federal Circuit first addressed an issue left open by eBay, i.e., whether a patent owner who has established infringement and validity is entitled to a presumption of irreparable harm. Whatever viability that proposition may have had prior to Bosch, it was destroyed when the Federal Circuit found that eBay “jettisoned” the presumption of irreparable harm.
Immediately after nailing the coffin shut on the presumption of irreparable harm, however, the court held that while eBay may have changed the landscape of permanent injunctions, “it does not swing the pendulum the other way,” and that “it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.” As exhibit A to that proposition, the court took the extraordinary step of reversing the district court and ordering the issuance of a permanent injunction in favor of Bosch, without remand.
Along the way, the court provided litigants and district courts guidance on what will and will not suffice to show irreparable harm. First, Judge O’ Malley wrote that the patentee need not prove the existence of a two-supplier market to establish irreparable harm. This is particularly true where the patent owner has been diligent in pursuing the defendant and other infringers. Second, “the fact that an infringer’s harm affects only a portion of a patentee’s business says nothing about whether that harm can be rectified.” This statement, made in the face of Pylon’s argument that the wiper business was not a “core” business for Bosch, confirms the proposition that David can indeed cause irreparable harm to Goliath. As noted by Judge O’ Malley, “[a] party cannot escape an injunction simply because it is smaller than the patentee, or because its primary product is an infringing one.” On this issue, the fact that the defendant competes in markets where the patent owner also competes is highly relevant to irreparable harm. Third, the fact that a defendant is financially suspect is probative that money damages will not suffice, tending to establish irreparable harm. Particularly important to the court was Pylon’s decision not to respond to Bosch’s assertions that it would not be able to respond in damages to satisfy a judgment.
The last chapter has not yet been written on permanent injunctions, but it appears from Bosch that the sea change predicted by many readers of eBay is more of a gentle swell than a tsunami. Stay tuned.
 The author wishes to recognize and thank Feng Zhou for his considerable assistance in preparing this article.
 See, e.g., Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1247 (Fed. Cir. 1989).
 The exact rate of the prevalence of permanent injunctions in pre and post-eBay patent litigation has been the subject of some debate. For example, a study done by Foley & Lardner, Injunctive Relief after eBay v. MercExchange, Presentation to the AIPLA 2007 Annual Patent Law Committee, puts the pre-eBay issuance rate at 95% and the post-eBay issuance rate at 74%. www.foley.com/files/tbl_s31Publications/FileUpload137/4541/InjunctiveReliefAftereBay.pdf. A different study of pre-eBay permanent injunctions in patent cases estimates the rate to be 84%. Robert M. Isackson, After 'eBay,' Injunctions Decrease, 30 Nat'l L.J., Dec. 3, 2007 at S1. The Foley publication reports that the rate of issuance of permanent injunctions in patent cases fell from 95% in the year before eBay to 74% in the following year. According to the Foley report, issuance rates remained at similar levels, 68% and 75% respectively, for the two years following. Another study estimates post-eBay permanent injunction rates at 77%. Stacy Streur, The EBay Effect: Tougher Standards but Courts Return to Prior Practice of Granting Injunctions for Patent Infringement, 8 NW. J. Tech. & Intell. Prop. 67 at *17. Regardless of the exact numbers, it is clear that eBay has decreased the number of post-judgment permanent injunctions issued in patent cases.
 The evidence relied on by Bosch consisted of a “Risk Management Report” indicating that Pylon posed a “[m]oderate risk of severe financial stress, such as bankruptcy, over the next 12 months,” that Pylon fell in the 49th percentile nationally in the category of “Financial Stress,” and a public filing that the parent of Pylon took a five million dollar loan at a rate of 8.46%.