Acumed v. Stryker: eBay v. MercExchange Revisited

Of course, there are many other details to consider with respect to permanent injunctions in patent cases. Nonetheless, Acumed provides valuable guidance on a few key points.

Robert E. Alderson, Jr. is an associate and Paul Dennis Connuck is a partner in the Intellectual Property Department of Kramer Levin Naftalis & Frankel LLP in New York City.

In Acumed LLC v. Stryker Corp. , 551 F.3d 1323 (Fed. Cir. 2008), the Federal Circuit affirmed the grant of a permanent injunction enjoining Stryker from making and selling a putatively infringing orthopedic nail product. In so deciding, the Federal Circuit declined to articulate a bright-line rule governing the grant of permanent injunctions in patent infringement actions. Nevertheless, the Acumed decision is instructive with respect to how the courts may apply the rule of eBay Inc. v. MercExchange , L.L.C., 547 U.S. 388 (2006) in patent infringement cases and the facts that may be adduced to secure ' or defeat ' the grant of injunctive relief.

Those who review the facts of Acumed may be surprised by the court's affirmance of the injunction in that action in view of the: 1) prior licenses granted by Acumed under the asserted patent, and 2) evidence that Acumed's product exhibited safety problems not associated with Stryker's accused, but “medically superior,” device. Indeed, in light of these facts, the Federal Circuit itself characterized the Acumed decision as a close one, “especially with regard to the [factors of] irreparable harm and lack of adequate remedy at law.” Acumed, 551 F.3d at 1332. Thus, if we are to draw any lesson from this decision, special attention must be paid to its facts.

Background

Acumed is the assignee of U.S. Patent No. 5,472,444 (“the '444 patent”), which is directed to an orthopedic nail used to treat fractures of the proximal humerus (the upper portion of the upper arm bone). Acumed sued Stryker in federal district court, alleging that one type of orthopedic nail made by Stryker infringed the '444 patent. After trial, a jury found that Stryker had willfully infringed certain valid claims of the patent and awarded damages based both on Acumed's lost profits and a reasonable royalty. In a subsequent hearing, the district court granted Acumed's motion for a permanent injunction, applying “the general rule [in patent cases] that an injunction will issue, once infringement and validity have been adjudged ' [absent] ' exceptional circumstances.” Id. at 1326 (quoting Transcript of Record at 53).

During the pendency of Stryker's first appeal to the Federal Circuit, the Supreme Court decided eBay, in which it proclaimed that the traditional four-factor test for permanent injunctions must be applied in patent cases. As a result, the Federal Circuit remanded the case for reconsideration of the four-factor test as clarified in eBay. On remand, the district court again granted a permanent injunction. Stryker appealed that decision to the Federal Circuit.

Application of eBay's Four-Factor Test

In eBay, the Supreme Court held that a patentee must satisfy the following four-factor test for injunctive relief to secure a permanent injunction enjoining patent infringement:

1. that the patentee has suffered an irreparable injury;

2. that the 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 defendant, a remedy in equity is warranted; and

4. that the public interest would not be disserved by a permanent injunction.

eBay, 547 U.S. at 391.

Irreparable Injury and No Adequate Remedy at Law

The Federal Circuit's Acumed decision, authored by Judge Alan David Lourie, evaluated the first two factors of the eBay test together, focusing primarily on the prior licenses Acumed granted to two of its competitors. Stryker had argued that these prior licenses showed that money damages in the form of a reasonable royalty would constitute an adequate remedy inasmuch as these arms' length royalty rates provided an appropriate measure of such royalty. Acumed countered that it was within the trial court's discretion to determine how much weight to give to a patentee's prior licensing activity and that Stryker was a significant and direct competitor of Acumed while the other licensees were not. Accumed, 551 F.3 at 1327-28.

In agreeing with Acumed, the Federal Circuit began its analysis with a reminder that “the essential attribute of a patent grant is that it provides a right to exclude competitors from infringing the patent.” Id. at 1328. So noting, Judge Lourie proceeded to observe that the previous grant of a license is only one of many factors for the district court to consider, and that “[a] plaintiff's past willingness to license its patent is not sufficient per se to establish lack of irreparable harm if a new infringer were licensed.” Id. (citation omitted). Other important factors include the identity of past licensees, the experience in the market since the licenses were granted, and the identity of the new infringer. Id.

The Federal Circuit concluded that the district court did not abuse its discretion in weighing these factors or granting the injunction in light of the specific facts of the case:

We decline to consider whether it would be appropriate under other circumstances to deny injunctive relief because the patentee had licensed the patented technology to other competitors. We simply note that the district court did not abuse its discretion here when it considered the licenses granted by Acumed along with all the other relevant factors and ultimately concluded that Acumed would suffer irreparable harm from Stryker's continued infringement with no adequate remedy at law. Id. at 1329 n.1.

Thus, neither the district court nor the Federal Circuit accepted the contention that Acumed's past grants of royalty-bearing licenses to arguable competitors per se foreclosed it from proving irreparable harm or the inadequacy of its remedies at law. Rather, the Federal Circuit confirmed that district courts should consider all relevant evidence concerning these eBay factors.

Balance of Hardships

The Federal Circuit also found that the balance of hardships favored Acumed. Significantly, in noting that this part of the test relates only to the balance “between a plaintiff and a defendant,” Judge Lourie deemed consideration of the effect of the injunction on customers and patients “irrelevant under this prong of the injunction test.” Id. at 1330. The court similarly dismissed arguments relating to the expenses Stryker incurred in developing the accused product, reasoning that
“[o]ne who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected.” Id. (citation omitted).

In finding that the balance of hardships tipped in favor of Acumed, the Federal Circuit further noted that: 1) Acumed's orthopedic nail was one of Acumed's major products while Stryker's product represented only a small portion of its overall product market, and 2) Stryker “could eliminate any potential hardship on itself by adopting [a non-infringing] design.” Id. The court thus concluded that the district court had not abused its discretion in finding that the balance of hardships tipped in favor of Acumed.

Public Interest

Addressing the fourth and final prong of the eBay test, Stryker argued that Acumed's orthopedic nail suffered from a “screw back-out problem” which did not occur with its own orthopedic nail, and that Stryker's product was, therefore, demonstrably safer. Thus, according to Stryker, the public interest would be disserved by the issuance of a permanent injunction and consequent removal of Stryker's safer orthopedic nail from the market.

To this, the Federal Circuit responded that there was credible evidence that Acumed had largely remedied the screw back-out problem by using an improved design, and that “there was 'considerable dispute at trial'” whether the evidence concerning screw back-out problems “was the product of biased experts.” Id. at 1331 (citation omitted). Moreover, the court pointed out, Acumed had identified viable alternatives to its product. The Federal Circuit thus ruled that, under these circumstances, the district court was justified in finding that the public interest was not disserved by granting an injunction.

Conclusion

What lessons may be taken from the Federal Circuit's decision in Acumed? How might a patent attorney influence the outcome of a similar case? Keeping in mind that the court considered this case to be a close one, only slightly dissimilar facts (or very similar facts presented somewhat differently) could lead to a different result.

Thus, for example, one might first consider the nature and number of prior licenses. Did the patentee grant licenses to parties who are arguably closer competitors of the patentee than the party against whom it seeks a permanent injunction? How many prior licenses have been granted by the patentee? What products or processes are covered by these licenses? How do these licenses, compared with the contemplated compulsory license, affect the market for the patentee's technology? Second, with regard to the balance of hardships, consider whether the allegedly infringing product could be characterized as a major or minor product of the accused infringer. Does it comprise or relate to the accused infringer's primary business? Third, consider the nature and strength of your expert testimony. Are your experts arguably overreaching in presenting public interest or other evidence?

Of course, there are many other details to consider with respect to permanent injunctions in patent cases. Nonetheless, Acumed provides valuable guidance on a few key points.

Robert E. Alderson, Jr. is an associate and Paul Dennis Connuck is a partner in the Intellectual Property Department of Kramer Levin Naftalis & Frankel LLP in New York City.