Tivo Inc. v. Echostar Communications Corp., 2:04 CV 1 DF.

• Decision Date: 17 August 2006
• Docket Number: No. 2:04 CV 1 DF.,2:04 CV 1 DF.
• Citation: 446 F.Supp.2d 664
• Parties: TIVO INC., Plaintiff, v. ECHOSTAR COMMUNICATIONS CORP., et al. Defendants.
• Court: U.S. District Court — Eastern District of Texas

Page 664

446 F.Supp.2d 664

TIVO INC., Plaintiff, v. ECHOSTAR COMMUNICATIONS CORP., et al. Defendants.

No. 2:04 CV 1 DF.

United States District Court, E.D. Texas, Marshall Division.

August 17, 2006.

Alexander C.D. Giza, Andrei Iancu, Adam S. Hoffman, Christine W.S. Byrd, Morgan Chu, Perry M. Goldberg, Richard E. Lyon, Irell & Manella, Los Angeles, CA, Samuel Franklin Baxter, Attorney at Law, Marshall, TX, Ben Yorks, Brian Jones, Michelle Armond, Irell & Manella, Newport Beach, CA, R. Scott Feldmann, Randall I. Erickson, Steven P. Rice, Van V. Nguyen, Crowell & Moring, Irvine, CA, Garret Wesley Chambers, McKool Smith, Dallas, TX, for Plaintiff.

Alison M. Tucher, Jason A. Crotty, Rachel Krevans, Robert M. Harkins, Jr., Harold. J. McElhinny, Kristina Paszek, Morrison & Foerster LLP, San Francisco, CA, Karl J. Kramer, Emily A. Evans, Morrison & Foerster, Palo Alto, CA, Damon Michael Young, John Michael Pickett, Young Pickett & Lee, Texarkana, TX, for Defendants.

ORDER

FOLSOM, District Judge.

Before the Court is Plaintiff TiVo's Motion for Entry of Judgment and Permanent Injunction. Dkt. No. 733. Also before the Court is Defendants' (1) Opposition to TiVo's Motion for Entry of Judgment and Permanent Injunction and (2) Cross-Motion to Stay Any Injunction Pending Appeal, TiVo's (1) Reply Re: Motion for Entry of Judgment and Permanent Injunction and (2) Opposition to EchoStar's Cross-Motion to Stay Injunction, and Defendants' Reply in Support of Cross-Motion to Stay Any Injunction Pending Appeal. Dkt. Nos. 737, 747, 754, respectively. On June 28, 2006 the Court heard the parties on these motions. Having considered the motions, all other relevant briefing, and the applicable law, the Court finds that Plaintiff's Motion for Injunction should be GRANTED and Defendants' Motion to Stay Any Injunction Pending Appeal should be DENIED.

I. BACKGROUND

In this patent infringement action, Plaintiff claimed a number of Defendants' digital video recorders¹ ("DVRs") infringe several claims in Plaintiff's U.S. Patent No. 6,233,389 (the "'389 patent"). In March 2006-April 2006, the case was tried to a jury. The jury found that Defendants' accused DVRs infringed each of the asserted claims and further found that Defendants' infringement was willful. None of the asserted claims was found invalid. The jury awarded Plaintiff $73,991,964 million in compensatory damages.

Plaintiff now moves for entry of a permanent injunction. Defendants oppose any injunction and, alternatively, move to stay any injunction.

II. LEGAL PRINCIPLES

Recently the Supreme Court revisited the propriety of issuing permanent injunctions as a matter of course after a finding of infringement in patent cases. eBay Inc. v. MercExchange, L.L.C., ___ U.S. ___, ___ _ ___, 126 S.Ct. 1837, 1839-1841, 164 L.Ed.2d 641 (U.S.2006)(hereinafter "eBay"). Observing the existence of a "`general rule,' unique to patent disputes" that mandated the issuance of a permanent injunction once infringement and validity were decided, the Supreme Court explored the origins of this general rule and compared it to other instances in which courts are faced with deciding whether or not to issue equitable relief. Id. The Supreme Court determined that equitable relief is not mandatory in patent cases, but instead should be decided in accordance with traditional equitable considerations. Id.

To this end, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief:

A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that 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.

Id. Further, the Supreme Court held that:

[T]he decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.

Id. It is clear that the Supreme Court by its decision did not intend to part with long-standing decisions in equity. As noted by Chief Justice Roberts, "there is a difference between exercising equitable discretion pursuant to the established four-factor test and writing on an entirely clean slate." Id. at 1841 (Roberts, C.J.concurring). And, as Justice Kennedy notes in his concurrence, "the existence of a right to exclude does not dictate the remedy for a violation of that right," which aligns equitable decisions in patent cases with other cases. Id. at 1842 (Kennedy, J. concurring).

"Once a plaintiff has met its burden in showing that an injunction is necessary, no delay in the issuance of that injunction is appropriate absent extraordinary circumstances." Boehringer Ingelheim Vetmedica, Inc. v. Schering-Plough Corp., 106 F.Supp.2d 696, 708 (D.N.J.2000)(internal quotation and citation omitted). In determining whether a stay is appropriate, courts consider four factors: "(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies." Standard Havens Prods. v. Gencor Indus., Inc., 897 F.2d 511, 512 (Fed.Cir. 1990). Each factor is not necessarily entitled to equal weight; a stay is discretionary with the Court.

III. THE PARTIES' POSITIONS

Plaintiff argues that each of the four equitable factors "overwhelmingly weigh[s] in favor of enjoining EchoStar's continuing infringement." Dkt. No. 733 at 7.

Regarding the first and second factors, Plaintiff argues that because it is in direct competition with Defendants, their infringement has "direct, severe consequences" on its ability to compete. Id. According to TiVo, Defendants specifically target potential TiVo customers and Defendants' competition leads to Plaintiff's loss of critical market share. Id. TiVo argues that loss of customers and loss of market share are irreparable injuries that cannot be recouped though monetary awards. Id. at 8. Without an immediate injunction, Plaintiff argues, "new DVR customers on the EchoStar platform will likely adopt EchoStar's competing devices instead of TiVo's." According to TiVo "[t]hese customers are lost, probably for good." Id. at 8. TiVo cites evidence that customers tend to stay with their current DVR service providers, i.e. that they are "sticky customers." Id.

Plaintiff also argues that, because the DVR market is in its "formative years and is currently growing at exponential rates," Plaintiff risks being marginalized due to Defendants' infringement by the time the market matures. Id. at 9. Such marginalization, Plaintiff argues, has been expressly recognized as a type of irreparable harm. Id.

Plaintiff further argues that it suffers irreparable harm from price erosion resulting from Defendants' offering the infringing products and service at "less than full value." Id. at 9-10. Plaintiff also argued Defendants' infringement has resulted in "value erosion" as potential business partners are reluctant to enter into agreements for the technology Defendants utilize for free. Id. at 10. Lastly, Plaintiff argues that Defendants' infringement causes irreparable harm insofar as it encumbers Plaintiff's ability to invest in its business and in additional research and development. Id. at 10.

Only an injunction, Plaintiff argues, can remedy the irreparable harm caused by Defendants' infringement. Without an injunction, Plaintiff argues it will lose market share, which is particularly important during the formative years of a market. Id. at 11. Such harms, Plaintiff argues, cannot be remedied with monetary damages. Plaintiff also argues that, absent an injunction, ongoing harm to its brand, reputation and good will cannot be remedied. Id. And, in the absence of an injunction, Plaintiff argues it will be unfairly forced into a compulsory license. Dkt. No. 747 at 6.

Addressing the third factor, Plaintiff argues that the balance of hardships weighs heavily in favor of enjoining Defendants' infringement. Id. at 12. Plaintiff argues that, because of its size and its dependence on its DVR technology, it will become extinct if it cannot exploit its technology in the market. Id. By contrast, Plaintiff argues that the EchoStar corporation is a multi-billion-dollar corporation whose primary business is_providing satellite television signals. Id. Enjoining EchoStar's infringing DVRs will not affect its satellite transmissions, Plaintiff argues. Id. Thus, according to Plaintiffs, "an injunction causes EchoStar no hardship that is properly considered in this balancing." Id. Plaintiff further argues that, because Defendants' infringement is willful, it cannot complain of hardship. Id.

Regarding the public interest, Plaintiff argues that no interest would be served by allowing Defendants' infringement to continue. Id. at 13. To the contrary, Plaintiff argues that the public's interest in patent rights and the patent system would be served by enjoining Defendants' infringement. Id.

Plaintiff argues, anticipating Defendants will request a stay of any injunction, that the four factors for determining whether a stay is appropriate each weigh against a stay in this case. Id. at 16.

Lastly, Plaintiff addresses the specifics of the injunction they seek. Plaintiff requests that Defendants be immediately enjoined from "making, using, selling, offering for sale, and/or importing into the United States all of its infringing DVR products..." including not only the accused products but also products that are not more than colorably different. 6/28/06 Hr....