I. Preliminary injunction background
An issued patent provides its owner the right to exclude or stop others from competing against the patented invention. However, that right has been weakened in that it is much harder to convince a court to grant an injunction than before. Before 2006, a court would regularly grant an injunction upon showing an issued patent coupled with a showing that the patent owner was likely to show or did show infringement by an accused infringer.
In 2006, the U.S. Supreme Court decided eBay v. MercExchange which significantly reduced the ability of patent owners to stop infringement or to secure an injunction. The reason that few patent based injunctions were issued was due to the new requirement that for an injunction to issue, the courts must look to four different factors and show that an injunction was warranted.
II. Irreparable injury
One of the factors was that there must be irreparable injury to the patent owner. Oftentimes, when there is competition between two companies, a monetary award can make the patent owner whole or bring the patent owner back to the financial position prior to the start of infringement by the patent owner’s competitor. In other words, the harm is not irreparable because the patent owner can be made whole through monetary compensation. Accordingly, not many injunctions were issued post-eBay.
Because of eBay, the lower courts began to take a strict stance on issuing injunctions against competitors and have not granted many injunctions based on patents. However, since then, the courts have begun loosening the standard required to grant an injunction and started to issue injunctions in specific circumstances.
III. Fact pattern of Tinnus v. Telebrands
In Tinnus v. Telebrands Corp. (Fed. Cir. 2017), the court found another basis for finding irreparable harm and granting an injunction. Tinnus produced and sold a toy for filling water balloons which was covered by U.S. Pat. No. 9,051,066. Tinnus sold its toy under the brand Bunch-O-Balloon. Telebrands Corporation sold its competing product under the trademark Balloon Bonanza. Both products allow the user to attach the toy to a hose for filling multiple water balloons at once instead of filling each balloon one by one. Parents loved the concept because it freed up their time so that they were not standing in front of a faucet to fill and tie each water balloon one by one.
Tinnus sought a preliminary injunction against Telebrands Corporation for the sale of Balloon Bonanza. To obtain the preliminary injunction, Tinnus had to establish that it was likely to succeed on the merits, that it was likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tipped in its favor, and that an injunction was in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2009).
Telebrands Corporation attempted to defeat the preliminary injunction by showing that Tinnus did not provide sufficient evidence to establish that Tinnus suffered irreparable harm. The Federal Circuit affirmed the magistrate judge’s finding of irreparable harm due to price erosion, consumer confusion, reputational harm and loss of goodwill.
A. PRICE EROSION:
Bunch O Balloons was initially sold for $17 in August 2014. The price of the Bunch O Balloons was reduced to $12.99 and eventually to $9.99 by mid-2015 based upon direct competition from sales of Balloon Bonanza. The magistrate judge explained that the market entry and continually reduced price of Telebrands’ allegedly infringing product drove down the prices at which the Bunch O Balloons product was sold, leading to the harm that was ultimately irreparable, specifically, a lower price for a patented product.
B. CONSUMER CONFUSION, REPUTATIONAL HARM AND LOSS OF GOODWILL:
Tinnus provided customer reviews and emails showing that customers thought that Balloon Bonanza was formally called Bunch O Balloons. Customers wondered whether Balloon Bonanza was a licensed product. The magistrate judge explained the consumers were confused about which product was sold by which company and that the patented Bunch O Balloons product had been diluted in the minds of the consuming public. Additionally, the magistrate judge recognized that Bunch O Balloons had received better ratings than Balloon Bonanza on Amazon.com and Toysrus.com and that false association between the two caused irreparable harm to Tinnus.
C. Evidence of irreparable harm before the patent grant date
Telebrands Corporation attempted to show that the evidence used by Tinnus was insufficient by arguing that the evidence provided by Tinnus was dated before the issuance or grant date of the Tinnus patent. The Federal Circuit found that:
“the irreparable harm analysis does not depend solely on evidence pre-dating the patent. The record contains additional evidence of harm after the ‘066 patent’s issuance that is sufficient to support a finding of irreparable harm. For example, a review for Tinnus’ Bunch O Balloons product on Amazon – dated a few weeks after the patent issued – states that the customer liked the “off brand” Bunch O Balloons product better than the “name brand” Balloon Bonanza. This establishes persisting harm to Tinnus’ reputation and tarnishes his status as an inventor in this market.”
Thus, pre-issuance evidence could show irreparable harm post-issuance of the patent because of a persisting harm.
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.