Causal nexus requirement of the irreparable injury factor

Four factors for a permanent injunction

To secure a permanent injunction, the patent owner must demonstrate that four factors favor issuance of the permanent injunction. These four factors include (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

Irreparable injury factor

In Genband v. Metaswitch (Fed. Cir. 2017), the Federal Circuit explained the proper interpretation of the causal nexus requirement that must be shown to prove irreparable injury factor.

Causal nexus requirement varies

The difficulty in determining whether the causal nexus requirement has been satisfied is that the degree to which the infringement of the patent caused the harm varies based on the business situation.

For example, in simple transactions, the patent owner may have to show that the infringement of the patent was the sole reason of the harm to the patent owner. In contrast, for multi-purchaser, multi-feature products, the patent owner may show much less.  They may have to show that the infringement of the patent was more than just an insubstantial cause of the harm experienced by the patent owner.  As such, a proper analysis of the causal nexus requirement varies and involves an investigation as to the business situation surrounding the infringement and the patented product.

Facts of Genband

In Genband, the patent owner (Genband) sells products that help telecommunication companies offer Voice over IP services to others. Metaswitch competes with Genband. Genband sued Metaswitch for patent infringement and sought a permanent injunction.

Legal Analysis of Genband

The district court denied the permanent injunction.  On appeal, the Federal Circuit reversed and remanded the case back to the district court for further consideration based on the proper standard for the causal nexus requirement as the Federal Circuit explained.

In denying the permanent injunction, the district court used an erroneous standard.  The district court used too high of a standard.  The district court stated that “it is Genband’s burden to demonstrate that the patented features drive demand for the product.” (emphasis added).

Wrong standard

The wrong standard was used because of an erroneous understanding of a series of opinions related to litigation between Apple v. Samsung.  This series of cases explained the causal nexus requirement in more detail. In the earlier Apple cases, the Federal Circuit used the term “drive demand” to describe the causal nexus requirement.  However, in the later Apple cases, the Federal Circuit used words such as “some connection.” Thus, the Federal Circuit used varying language to show the type of causation that needs to be shown.  Apparently, the variation in language appears to have caused some confusion as to the proper standard.

In reviewing the Genband case, the Federal Circuit expressed concern that the drive demand standard was too stringent for the current business situation between the parties.  A strict formulation of the drive demand standard would require proof that no or almost no buyer would buy the product but for the infringing feature. A looser formulation of the drive demand formulation would only require that the infringing feature be a driver (versus the driver) of decisions by substantial (versus insubstantial) number of individual consumer decision-makers considering multiple features.

Apple v. Samsung cases

In discussing the Apple v. Samsung series of opinions, the Federal Circuit explained that the level of causation between the infringement and the harm can be expressed as the scale between the sole reason to something more than an insubstantial connection.  The degree of causal nexus depends on the market situation in which the patent owner and defendant find themselves.

For example, in smart phone sales, there are many different factors that consumers use to decide which smart phone to purchase. Phones are very complicated and have multiple features.  No one feature may be the deciding factor that a consumer uses to purchase the smart phone. Rather, the consumer may use a combination of features to make a purchasing decision between competing smartphones. If a strict standard is used to define the causal nexus requirement, then the patent owner would most likely never be able to show that a particular patented feature was the sole reason for a consumer to purchase a particular smart phone. However, a high standard may be appropriate for simple purchasing decisions where the product may have a single feature which is patented.

I invite you to contact me with your patent questions at (949) 433-0900. 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.