Download Order: Motion for Preliminary Injunction; 2010-08-31; Denied; FLSD; District Judge Cecilia M. Altonaga; Fusilamp, LLC v. Littelfuse, Inc., et. al. (1-10-cv-20528) FLSD

Plaintiff Fusilamp, LLC’s filed a motion for preliminary injunction June 24, 2010 requesting the court to enjoin defendants, Littelfuse, Inc. and Catalina Performance Accessories, Inc. from infringing United States Patent No. 5,598,138 covering a fault-indicating blade fuse, typically used in automobiles. Fusilamp  initially filed its complaint alleging patent infringement, declaratory judgment, and breach of contract on February 19, 2010. Shortly thereafter, Littelfuse filed a request for an ex parte reexamination of the ‘138 Patent. On May 20, 2010, the PTO granted and ordered reexamination of all requested claims.

By the court’s standard, to prevail on a motion for preliminary injunction, the plaintiff must show: (1) a substantial likelihood of success on the merits of the underlying case, (2) the movant will suffer irreparable harm in the absence of an injunction, (3) the harm suffered by the movant in the absence of an injunction would exceed the harm suffered by the opposing party if the injunction issued, and (4) an injunction would not disserve the public interest. The failure of the movant to establish even one of the four factors “would, standing alone, make preliminary injunctive relief improper.” Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir. 2000). A plaintiff alleging patent infringement demonstrates a substantial likelihood of success by showing: (1) the patent is likely to withstand a challenge to its validity; and (2) the plaintiff will likely prove the defendant is infringing the patent. See Amazon.com v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001).

Fusilamp USA maintained the ‘138 Patent was likely to withstand a challenge to its validity because it is presumed valid, and this presumption exists at every stage of the litigation. In response, Littelfuse pointed to the reexamination order granted by the PTO and examples of prior art that it contended undermined the patentability of an integrated light-emitting fault indicator fuse.

The court acknowledged that, at a trial to determine the validity of a patent, a patent is presumed valid under 35 U.S.C. § 282 and the burden is placed on the alleged patent infringer to overcome the presumption by clear and convincing evidence. However, the court found that this is not the same burden an alleged infringer must meet when it defends against a motion for preliminary injunctive relief. That is, the alleged infringer must only establish the existence of a substantial question as to the invalidity of the patent.

On this issue, the court found that, while the PTO’s decision to reexamine the ‘138 Patent is not dispositive on the issue of validity, it is relevant to whether a substantial question of invalidity has been raised:

“In arriving at its reexamination decision, the PTO considered the prosecution history of the ‘138 Patent and recognized a lack of clarity regarding an amendment to the original application as well as certain statements made by the patent applicant as to the novelty of the incorporated light-emitting electrical device … That the PTO has ordered a reexamination of the ‘138 Patent on grounds of patentability supports Fusilamp’s assertion of a substantial question regarding the patent’s validity.” Order p. 7 (citations omitted).

Ultimately the court found that the presumption of validity does not relieve a patentee who moves for a preliminary injunction from carrying the normal burden of demonstrating it will likely succeed on all disputed liability issues at trial, even where the issue concerns the patent’s validity. The court concluded that, because Littelfuse met its burden in establishing substantial questions exist as to the validity of the ‘138 Patent and Fusilamp USA failed to establish a substantial likelihood of success on the merits of the underlying claim, plaintiffs’ motion for preliminary injunction was denied.

The parties have a history of patent litigation against each other, having filed four earlier separate patent lawsuits against each other in the Northern District of West Virginia going back to 2003.  All of the earlier cases are currently stayed pending reexamination of the asserted patents.  In the present case, which is apparently the fifth patent suit between the parties, Chief Judge Bailey simultaneously entered a preliminary injunction against sales of the allegedly infringing products and stayed all other claims pending outcome of ongoing reexamination proceedings.  Both parties filed interlocutory appeals.  Both parties agreed that the district court erred by simultaneously entering a preliminary injunction and staying the case.  They disagreed, naturally, on which order should be maintained.

After resolving a jursidictional challenge by Crane, the Federal Circuit first turned to the preliminary injunction arguments.  The Federal Circuit found that the district court abused its discretion in determining that Automated Merchandising Systems (AMS) would suffer irreparable harm.  The irreparable harm was based solely on lost revenue and market share.  The lost revenue argument cannot by itself support a finding of irreparable harm because it is presumed to be compensable through damages.   The Federal Circuit found the lost market share and price erosion analyses to be speculative and not supported by the Supreme Court’s decision in eBay Inc v. MercExchange LLC.

The Federal Circuit then turned to the likelihood of success on the merits and found that the district court had improperly shifted the burden to Crane to show AMS was unlikely to succeed on the merits, rather than forcing AMS to demonstrate that it was reasonably likely to succeed on the merits.  It also found the district court too quick to dismiss Crane’s invalidity arguments.  It cited to the Supreme Court’s decision in KSR International Co. v. Teleflex Inc., noting that it “changed the state of obviousness law [and] was issued after the patents were examined in the PTO,  but before the district court issued the decision under review here.  Interestingly, the Federal Circuit made no reference at all to the pending reexaminations as a factor in this analysis.

Because the Federal Circuit found no irreparable harm had been proven, and that AMS has failed to prove reasonable likelihood of success on the merits, the Court vacated the preliminary injuction.

The Federal Circuit then turned to the propriety of the stay pending reexamination.  It agreed with the parties that the District Court erred in both granting a preliminary injunction and a stay pending the outcome of reexamination.  The Court stated that “[b]ecause it logically seems that there cannot simultaneously be a substantial issue of patentability and no substantial issue of patentability, stays pending reexamination are typically inappropriate in cases in which preliminary injunctions are appropriate.”  Because the Court vacated the injunction, it stated that “there is no longer any problem with staying AMS’s claims agains Crane pending the outcome of the reexamination process.”  It further acknowledged that “it may simplify the issues for trial [and it] might even render a trial unnecessary.”  The Court then noted that “given the wide discretion the district court generally has to manage its docket, this seems to be a case in which the stay could have been correctly granted or denied.”  The Court found no abuse of discretion and affirmed the district court’s stay of AMS’s claims against Crane, as well as against Crane’s co-defendant Seaga.

See also, the recent Reexamination Center posting related to a stay pending reexamination and a preliminary junction in the District Court of New Jersey here.

Read the Court Order: Motion for Stay Pending Reexamination; 2009-11-24; Granted; District Judge Jose L. Linares; Everett Laboratories, Inc. v.River’s Edge Pharmaceuticals, LLC. (2-09-cv-03458) NJD

River’s Edge filed a request for ex parte reexamination of the ‘123 Patent on September 18, 2009 based largely on Everett’s alleged failure to disclose several prior art references including one of its own products (Vitafol®PN). On October 23, 2009 the USPTO granted the request. River’s Edge filed the motion to stay three days later.

Read USPTO Order: 90009575 – Order Granting Request for Ex Parte Reexamination – Mailed 10-23-2009

The Court weighed three factors in its decision to grant the stay (see Stays). In assessing whether a stay would unduly prejudice River’s Edge or present a clear tactical disadvantage to Everett, the Court admitted, but declined to give weight to the irreparable harm alleged in Everett’s request for preliminary injunction. The Court observed that such claims “are meaningless” unless Everett can demonstrate a reasonable likelihood of success on the merits, which is countered by the invalidity defense raised by River’s Edge and the USPTO’s grant of ex parte reexamination.

The Court was careful to note that while the USPTO’s decision to reexamine the ‘123 Patent in light of Vitafol®PN is not dispositive on the issue of validity, it nevertheless viewed the SNQ as significant given that River’s Edge is basing its invalidity defense on Everett’s failure to disclose Vitafol®PN as a prior art reference during the prosecution of the ‘123 Patent. The Court was not persuaded that delay based on the pendency of the reexamination before the USPTO demonstrated undue prejudice because the proceeding “serves the interests of correctness and finality by assuring that any decision by the PTO as to the relevance of the Vitafol®PN prior art (as it relates to Defendants’ obviousness defense) can be taken into account by this Court prior to its decision on Everett’s application for a preliminary injunction.”

Second, without much discussion, the Court concluded that the case would be simplified if the litigation was stayed pending reexamination of certain claims with respect to the ‘123 Patent in light of Vitafol®PN. Lastly, the Court concluded that the case is in its early stages (i.e., the complaint was filed July 14, 2009, motions to dismiss had been briefed recently, no pretrial scheduling order had been entered, and parties had engaged in limited disclosures). As such “pausing” for a stay at this time would curtail discovery activities and all three factors weighed in favor of granting a stay.

The case is Everett Laboratories, Inc. v.River’s Edge Pharmaceuticals, LLC., case number 2-09-cv-03458, in the United States District Court of New Jersey.