One of the difficulties of securing a patent based injunction was that it was difficult to prove that the harm to the patent owner was irreparable or that monetary compensation was not enough to make the patent owner whole due to the infringement of the patent. In Metalcraft v. Toro Co. (Fed. Cir. 2017), the Federal Circuit provided a basis for establishing irreparable harm that could be applicable to a wide range of situations so that proving irreparable harm would be much easier for many patent owners.
I. Standard for grant of preliminary injunction
For a court to award an injunction, the court must analyze the situation to determine whether an injunction should be granted. To do this, the court reviews four different factors. The Metalcraft decision dealt with a preliminary injunction so we will briefly review the standard for granting a preliminary injunction which requires a party to establish:
- That it is likely to succeed on the merits;
- That it is likely to suffer irreparable harm in the absence of preliminary relief;
- That the balance of equities tips in its favor; and
- That an injunction is in the public interest.
II. Irreparable harm factor
The irreparable harm factor is the second of the four factors a court must take into consideration in determining whether to grant or deny a preliminary injunction. For the patent owner, it poses its own challenges in showing that the infringement cause irreparable harm to the patent owner.
In Metalcraft, the Federal Circuit found that “where the injury cannot be quantified, no amount of money damages is calculable, and therefore the harm cannot be adequately compensated and is irreparable.” Accordingly, by showing that the monetary compensation cannot be calculated, irreparable harm can be established. In my opinion, this greatly enhances the patent owner’s ability to showing irreparable injury, and thus the ability of the patent owner to be granted an injunction. Some history may be useful in understanding the context of this case.
III. Brief history of patent based injunction
In 2006, the Supreme Court decided eBay v. MercExchange (2006) and held that the standard for determining whether to grant or deny an injunction for patent case shall be like any other case and would not be granted automatically. Patent based injunctions used to be regularly granted pre-eBay as long as infringement was shown. Post-eBay, the court had to take into consideration four different factors to analyze the situation to grant the injunction.
One of those factors was irreparable harm. Since patent infringement involved the sale of products wherein an infringing product was sold and profits went to the accused infringer instead of the patent owner, the courts generally found that it was easy to calculate monetary damages based on the infringement. The profits of the accused infringer or the lost profits of the patent owner were easy enough to calculate and awarded to the patent owner.
Patent owners complained that by denying the patent owner the right to enjoin others from making, using, selling, offering for sale the patented invention or importing the patented invention into the United States, the court was really denying patent owners the rights that they really sought when they filed the patent application – the right to exclude others.
Since 2006, the courts have begun to find ways that the patent owner can show irreparable harm. For example, in Apple v. Samsung, 809 F.3d 633, 641, 645 (Fed. Cir. 2015) the court recognized that it was difficult to quantify the harm to Apple’s “ecosystem” where one company’s customers would continue to buy that company’s products and recommend them to others. The loss to the patent owner was characterized as difficult to calculate because of the variable and uncertain nature of the ecosystem.
IV. Harm to brand loyalty constitutes irreparable harm
Here, the Federal Circuit indicated that the harm to brand loyalty of the patented product could be irreparable. The harm to brand loyalty would result in the loss of a potentially lifelong customer and its damage was impossible to quantify, thus the harm was irreparable. This logic may be applicable to many patent owners that sell its patented products.
In my opinion, the Federal Circuit lowered the requirements to establish irreparable harm, and thus gave more power to patent owners. The right to exclude others from competing against the patent owner is very powerful because it could be used to shut down a business or product line. The patent owner is not merely demanding an award of monetary compensation from the accused infringer. The injunction prohibits the competitor from competing and prevents the accused infringer from acquiring or establishing its own brand loyalty during infringement.
For the startup or inventor that relies upon a single patented product or small subset of patented products to sustain its business, the ability of the startup or inventor to prevent competition may be crucial to the inventor’s business survival.
I invite you to contact me with your patent questions at (949) 716-8178. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.