Genband US LLC v. Metaswitch Networks Corp., 2017-1148

• Decision Date: 10 July 2017
• Docket Number: 2017-1148
• Citation: 861 F.3d 1378
• Parties: GENBAND US LLC, Plaintiff-Appellant v. METASWITCH NETWORKS CORP., Metaswitch Networks Ltd., Defendants-Appellees
• Court: U.S. Court of Appeals — Federal Circuit

861 F.3d 1378

GENBAND US LLC, Plaintiff-Appellant

v.METASWITCH NETWORKS CORP., Metaswitch Networks Ltd., Defendants-Appellees

2017-1148

United States Court of Appeals, Federal Circuit.

Decided: July 10, 2017

Douglas M. Kubehl , Baker Botts, LLP, Dallas, TX, argued for plaintiff-appellant. Also represented by Jeffery D. Baxter, Samara Kline ; Michael Hawes , Houston, TX.

Charles Kramer Verhoeven , Quinn Emanuel Urquhart & Sullivan, LLP, San Francisco, CA, argued for defendants-appellees. Also represented by Kevin Alexander Smith, David Eiseman, IV ; Joshua L. Sohn , Washington, DC.

Before Lourie, Taranto, and Chen, Circuit Judges.

Taranto, Circuit Judge.

Appellant Genband US LLC sued Metaswitch Networks Corp. and Metaswitch Networks Ltd. (together, Metaswitch) for patent infringement. After a jury found that Metaswitch infringed various claims of several of Genband's patents, and that the claims at issue had not been proven invalid, Genband sought a permanent injunction. The district court denied the request, concluding that Genband had not established irreparable harm from the infringing activities. That conclusion, however, may have relied on too stringent an interpretation of the requirement, for an injunction, that the allegedly irreparable harm is being caused by the infringement. Based on the district court's opinion and the briefing in this court, moreover, we cannot be confident of the answer to the causation question under the standard properly governing the inquiry or whether there is any independent ground for finding no irreparable harm or otherwise denying an injunction. Accordingly, we vacate the denial of the injunction and remand for reconsideration.

I

Genband sells products and services that help telecommunications companies offer voice-communications services over Internet Protocol networks, i.e. , "voice over IP" (VoIP) services. Genband owns a number of patents related to its offerings, some of them acquired in 2010 when it purchased the Carrier VoIP and Application Solutions line of business from Nortel Networks Inc. out of Nortel's bankruptcy. Metaswitch sells telecommunications products and services that compete with Genband's offerings, though Metaswitch was not a major competitor until recent years. See Genband US LLC v. Metaswitch Networks Ltd , 211 F.Supp.3d 858, 865–66, 871–72 (E.D. Tex. 2016).

On January 21, 2014, Genband filed a complaint against Metaswitch in the United States District Court for the Eastern District of Texas, alleging that certain Metaswitch products infringed and/or continue to infringe seven U.S. patents owned by Genband: U.S. Patents Nos. 6,772,210; 6,791,971; 6,885,658; 6,934,279; 7,995,589; 7,047,561; 7,184,427; and 7,990,984. See id. at 866–69. The lawsuit proceeded to a jury trial in January 2016, and the jury found that Metaswitch infringed all asserted claims and that those claims were not invalid. Id. at 868. The jury awarded $8,168,400 in damages. Id.

The district court thereafter held a bench trial to address various matters, including equitable defenses and Genband's request for a permanent injunction. Id. On September 29, 2016, the district court issued an opinion and order containing extensive findings of fact and accompanying conclusions of law. Among other things, the court rejected Metaswitch's equitable defenses, including laches, finding no unreasonable delay by Genband in asserting the patents. Id. at 895–901.

The court also denied Genband's request for a permanent injunction. Id. at 894–95. The district court rested its denial entirely on the determination that Genband failed to show that it would suffer irreparable harm from Metaswitch's continued infringement. The court gave two reasons, without indicating that the second reason independently supported its determination.

First, the court held that Genband did not demonstrate a causal nexus between the alleged irreparable harm (based on lost sales) and the presence of the infringing features in Metaswitch's infringing products. Id. at 894–95. In so ruling, the district court stated that "it is Genband's burden to demonstrate that the patented features drive demand for the product." Id. at 894. The court borrowed certain language from this court's decision in Apple, Inc. v. Samsung Electronics Co. (Apple II ), 695 F.3d 1370, 1375 (Fed. Cir. 2012) ("The patentee must ... show that the infringing feature drives consumer demand for the accused product."), which in turn relied on similar language in Apple, Inc. v. Samsung Electronics Co. (Apple I ), 678 F.3d 1314, 1324 (Fed. Cir. 2012) ("If the patented feature does not drive the demand for the product, sales would be lost even if the offending feature were absent from the accused product."). Before reiterating the "drive demand" principle, the district court quoted this court's statement in Apple, Inc. v. Samsung Electronics Co. (Apple III ), 735 F.3d 1352, 1364 (Fed. Cir. 2013), that "this inquiry should focus on the importance of the claimed invention in the context of the accused product, and not just the importance, in general, of features of the same type as the claimed invention." Genband , 211 F.Supp.3d at 894. The district court then noted Genband's arguments that certain stringency-reducing explanations of "drive demand" are found in both Apple III , 735 F.3d at 1365 and Apple, Inc. v. Samsung Electronics Co. (Apple IV ), 809 F.3d 633, 641–42 (Fed. Cir. 2015), cert. denied , ––– U.S. ––––, 136 S.Ct. 2522, 195 L.Ed.2d 844 (2016), petition for cert. filed , 85 U.S.L.W. 3460 (U.S. Mar. 10, 2017) (No. 16-1102). But the court did not indicate agreement with Genband that those explanations state the governing law. Genband , 211 F.Supp.3d at 894.

The court then applied its articulated legal standard as follows:

During the bench trial, Genband presented the following regarding the causal nexus, which falls into three general categories: (1) a self-generated "win-loss" report; (2) demonstratives purporting to correlate dates of Metaswitch press releases with an alleged decline in Genband's market share; and (3) statements from Metaswitch marketing materials and opinion testimony from Mr. McCready [a Genband executive].

Genband's presentation of evidence does not satisfy its burden to show causal nexus. Accordingly, Genband fails to show that it has suffered irreparable harm as required for a permanent injunction.

Id. at 894–95.

The district court's second reason for finding no irreparable harm involved Genband's litigation choices. The court found that, although Genband did not unreasonably delay in suing Metaswitch for infringement, it did delay in suing for several years after analyzing Metaswitch's products, and the court also observed that Genband did not seek a preliminary injunction. Those facts, the court concluded, weighed against a finding of irreparable harm from Metaswitch's sales. Id. at 895. The district court denied the requested permanent injunction without addressing other considerations. Id.

Genband appeals. We have jurisdiction under 28 U.S.C. § 1292(a), (c)(1).

II

We review a district court's grant or denial of injunctive relief for abuse of discretion. Ecolab, Inc. v. FMC Corp. , 569 F.3d 1335, 1352 (Fed. Cir. 2009). "A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Cooter & Gell v. Hartmarx Corp. , 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990) ; see Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. , ––– U.S. ––––, 134 S.Ct. 1744, 1748 n.2, 188 L.Ed.2d 829 (2014). A "clear error of judgment in weighing relevant factors" is also a ground for finding an abuse of discretion. Ecolab , 569 F.3d at 1352 (quoting Innogenetics, N.V. v. Abbott Labs. , 512 F.3d 1363, 1379 (Fed. Cir. 2008) ). Where it is not evident that a district court has applied the correct legal standard in exercising its discretion, we may vacate and remand for the district court to do so in the first instance, especially where further factual findings may be warranted under the correct legal standard. Id. ; see Apple III , 735 F.3d at 1368.

In this case, the sole basis for denial of the requested injunction was the district court's finding that Genband did not show irreparable injury from the conduct it sought to enjoin, one precondition to issuing the requested injunction. See eBay Inc. v. MercExchange, L.C.C. , 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006). Genband relied on evidence that Metaswitch was making sales in direct competition with it, causing Genband to lose sales and thereby to suffer harms of the type often found irreparable. See Apple IV , 809 F.3d at 640–41 ; Broadcom Corp. v. Emulex Corp. , 732 F.3d 1325, 1336–37 (Fed. Cir. 2013) ; Douglas Dynamics, LLC v. Buyers Prods. Co. , 717 F.3d 1336, 1345 (Fed. Cir. 2013). But the district court held that Genband had not met a requirement that is part of the irreparable-injury component of eBay in cases like this—namely, the requirement of "some causal nexus" between the infringing features of the infringer's products and the sales lost to the patentee. Apple I , 678 F.3d at 1324 ; see Apple II , 695 F.3d at 1374–75 ("a sufficiently strong causal nexus [that] relates the alleged harm to the alleged infringement" is "part of the irreparable harm calculus"); Apple III , 735 F.3d at 1364 ("some causal nexus between [defendant's] infringing conduct and [patentee's] alleged harm" is required); Apple IV , 809 F.3d at 640 (requiring "a causal nexus linking the harm and the infringing acts" to ensure that "an injunction is not entered on account of ‘irreparable harm caused by otherwise lawful competition’ " (quoting Apple III , 735 F.3d at 1361 )).

The district court's opinion, however, leaves us uncertain whether the court relied on too stringent an interpretation of the causal-nexus requirement. The court declared that Genband had to prove that "the patented features drive demand...