IP Law Daily, PATENT—Fed. Cir.: Improper standard used to deny injunctive relief in voice communications patent dispute, (Jul 10, 2017)

By Linda O’Brien, J.D., LL.M.

In a patent infringement action by a provider of voice communications over an Internet Protocol network services against a competitor, the district court may have applied an unduly strict approach in determining that the provider failed to establish a causal connection between the irreparable harm and the alleged infringement, the U.S. Court of Appeals for the Federal Circuit has ruled. Therefore, the district court’s denial of the provider’s request for a permanent injunction was vacated and remanded (Genband US LLC v. Metaswitch Networks Corp., July 10, 2017, Taranto, R.).

Genband sells products and services to telecommunications companies that offer voice communications over an Internet Protocol network, known as "Voice over Internet Protocol" (VoIP). Genband owns several patents relating to its offerings: U.S. Patent Nos. 6,791,971 ("the ‘971 patent"), 6,885,658 ("the ‘658 patent"), 6,934,279 ("the ‘279 patent"), 7,995,589 ("the ‘589 patent"), 7,047,561 ("the ‘561 patent"), and 7,184,427 ("the ‘427 patent").

In January 2014, Genband filed suit against competitor Metaswitch for patent infringement of the six patents. After a trial in January 2016, the jury rendered a unanimous verdict on infringement as to each of the asserted claims regarding each of the patents-in-suit, and found that the four patents Metaswitch sought to declare invalid—the ‘561, ‘971, ‘279, and ‘589 patents—were not invalid. The jury also awarded Genband $8,168,400 in damages. In September 2016, the district court rejected Metaswitch’s equitable defenses and denied its post-trial motion for a Judgment as a Matter of Law. The court also denied Genband’s request for a permanent injunction on the ground that Genband failed to show irreparable harm from the infringing activities. Genband appealed.

The district court opinion may have applied a too stringent interpretation of the requirement for an injunction that the alleged irreparable harm was being caused by the infringement, according to the appellate court. Genband relied on evidence that Metaswitch was making sales in direct competition with Genband, causing Genband to lose sales and thereby suffer irreparable harm. The district court found that Genband did not meet the requirement in Apple, Inc. v. Samsung Electronics Co., 695 F.3d 1370 (Fed. Cir. 2012), of "some causal nexus" between the infringing features of the infringer’s products and the sales lost to the patentee, and that Genband had to prove that "the patented features drive demand for the product."

The "drive demand" formulation is susceptible to different interpretations in situations where the product at issue has multiple purchasers and multiple features that different purchasers might assign different weights in their purchasing decisions, the court explained. However, it is clear in subsequent cases — Apple, Inc. v. Samsung Electronics Co., 735 F.3d 1352 (Fed. Cir. 2013) and Apple, Inc. v. Samsung Electronics Co., 809 F.3d 633 (Fed. Cir. 2015)—that the less stringent standard of "drive demand" applied in the multi-consumer, multi-feature context and that a showing of causal nexus did not require proof that "consumers will buy the accused product instead of the patentee’s competing product because it contains the infringing feature."

When the patentee relies on lost sales to show irreparable injury, the reasons that various purchasers have for making their purchases lost to the patentee matters, the court noted. Under the causation approach in the multi-purchaser, multi-feature context, the patentee may be able to make the causal connection between the infringement and lost sales through evidence that supports an inference of causation of a significant number of purchasers’ decisions, such as infringing features that significantly increase the product’s desirability.

Since the only dispositive basis of the district court’s denial of the injunction was the causal nexus requirement, it was uncertain that the district court applied to current governing approach to causation rather than an unduly demanding approach. Thus, a remand was needed to answer the question of causal nexus under the proper standard, the court concluded.

The case is No. 2017-1148.

Attorneys: Douglas M. Kubehl (Baker Botts, LLP) for Genband US LLC. Charles Kramer Verhoeven (Quinn Emanuel Urquhart & Sullivan, LLP) for Metaswitch Networks Corp. and Metaswitch Networks Ltd.

Companies: Genband US LLC; Metaswitch Networks Corp.; Metaswitch Networks Ltd.

Cases: Patent FedCirNews