IP News

The Federal Circuit, reviewing for an abuse of discretion, determined that the district court may have applied the causal-nexus requirement too stringently. “Drive demand” could be interpreted to mean that an infringing feature must be “the driver” of decisions by consumers, requiring proof that almost no buyers would purchase the product without the infringing feature. In multi-consumer, multi-feature products, however, “drive demand” is governed by an interpretation that an infringing feature must only be “a driver” of decisions by consumers. Under this “causation” approach, when showing irreparable injury through lost sales, the reasons consumers make purchases lost to the patentee must be considered. The connection between lost sales and infringement may be shown through evidence that the infringing feature increased the product's desirability, or that the absence of the feature would make the product less desirable. Here, the Federal Circuit explained that Genband's evidence showing that it was losing sales due to Metaswitch making sales in direct competition is a type of harm often found irreparable.

Furthermore, while foregoing a preliminary injunction may be legally relevant to an irreparable harm inquiry, the Federal Circuit agreed with Genband that there may reasons for a patent owner to forego a preliminary injunction that are independent of conceding that there is no irreparable harm. For example, the merits of a case may be better presented during litigation; and as was the case here, Metaswitch's competitive threat was initially small and it only became a major competitor in later years.

District Court Abused Discretion In Denying Attorneys' Fees, Where Plaintiff Continued to Litigate After Markman Order Made Its Position Untenable

On July 5, 2017, a Federal Circuit panel of Judges Reyna, Mayer, and Hughes issued a unanimous decision, authored by Judge Reyna, in AdjustaCam, LLC v. Newegg, Inc., Case No. 2016-1882. The panel reversed and remanded a decision denying defendants' motion for attorneys' fees by the United States District Court for the Eastern District of Texas in No. 6:19-cv-00329-JRG.

AdjustaCam, LLC (“AdjustaCam”) is the exclusive licensee of U.S. Patent No. 5,855,343, directed to a camera clip that supports a camera both on a flat surface and when attached to a computer monitor. AdjustaCam sued Newegg, Inc., Newegg.com, Inc, and Rosewill, Inc. (collectively, “Newegg”) and several other companies for infringement, dismissing most defendants before claim construction. AdjustaCam voluntarily dismissed its claims against Newegg with prejudice later than most other defendants, after a Markman order had been issued and extended expert discovery had been conducted. The district court denied Newegg's motion and determined that Newegg “failed to prove AdjustaCam acted inappropriately,” because, among other reasons, “one could reasonably argue [Newegg's] products meet the 'rotatably attached' limitation.”

The Federal Circuit previously remanded Newegg's appeal in light of the Supreme Court's decision in Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014). On remand, a new trial judge assigned to the case referred provided deference to evaluations from the retired trial judge that had previously heard the case. The district court reasoned that such deference should be made considering “the unavoidable human intangibles that 'a totality of the circumstances' contemplates.” Newegg appealed again to the Federal Circuit.

The Federal Circuit found that the district court abused its discretion in not awarding fees to Newegg because it failed to follow the Federal Circuit's mandate on remand, and its decision was based on “a clearly erroneous assessment of the evidence.” Instead of engaging in independent analysis under Octane as instructed, the district court adopted the previous judge's fact-findings. Furthermore, the Federal Circuit found that the five-year record pointed to the case as standing out from others with respect to the substantive strength of AdjustaCam's litigating position. The district court's Markman order, found “that the claims of the '343 patent describe 'rotably attached' objected as rotating over a single axis,” yet AdjustaCam did not introduce any evidence that Newegg's ball-and-socket products were limited to a single axis of rotation. Additionally, an award of attorneys' fees under the “totality of the circumstances” test was supported by AdjustaCam's repeated use of after-the-fact declarations to elongate the period of time it had to press its arguments, as well as AdjustaCam's nuisance-value damages against other defendants.

***** Howard J. Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Andrews Kurth Kenyon. He can be reached at [email protected]. Michael Block is an associate with the firm. He can be reached at [email protected].