Injunctions Pending Appeal – Not Without Solid Evidence of Harm

IMX filed a motion for reconsideration of the Court’s previous denial of a permanent injunction pending appeal. As grounds for reconsideration, IMX cited an attempted post-verdict workaround by Lendingtree and design work that preceded the workaround as “ongoing, infringing conduct.” Op. at 2. The Court saw the use of this new evidence as grounds for reconsideration as “nonsensical” because a workaround implies that Lendingtree has found a noninfringing alternative rather than a new infringing method. More likely, IMX used this “new evidence” as a way to make its assertion of new case law (a series of district court opinions according to the opinion) to the Court more palatable. Nonetheless, the Court examined the cases cited by IMX and distinguished them on their facts. Of particular concern to the Court was IMX’s lack of evidence that either it or the public would be harmed without an injunction pending appeal. Id. at 3-4. Due to Lendingtree’s admission that they continued infringing conduct until September of 2006, some nine months after the jury’s verdict against Lendingtree, the Court ordered that Lendingtree produce an accounting of their continued infringement to the Court so that the Court may modify the damages award.

Interestingly, this issue of stays pending appeal was dealt with in summary fashion by the Federal Circuit yesterday in the Verizon v. Vonage patent dispute over VoIP internet telephony. The Eastern District of Virginia had granted Verizon’s request for an injunction barring Vonage from signing up new customers during the pendency of Vonage’s appeal to the Federal Circuit. Vonage argued to the Federal Circuit that the status quo could only be preserved by allowing Vonage to sign up new customers during the appeal. In addition, Vonage noted that district courts are overturned on their claim constructions about 40% of the time (I’ve seen higher numbers, but 40% is reasonable). Since Vonage was arguing on appeal that the claim construction was incorrect, and, statistically, it had a 40% chance of winning, Vonage asserted the unfairness of permanently damaging its business where it had decent odds of winning on appeal. The Federal Circuit issued a permanent stay of the injunction pending appeal of the claim construction.

Chad�s Editorial Take:

Both of these decisions raise interesting questions about the fairness of entering judgment against adjudged infringers before the Federal Circuit has had the final say on claim construction. Here�s my take: as long as the Federal Circuit (and the Supreme Court by not overturning them) insists on a de novo standard of review for patent claim construction, it makes little sense to grant injunctions pending appeal against accused infringers at the district court level. I know that this stance could hurt patentees that have rightfully prevailed, but the posting of bond could help alleviate this concern. As in the criminal context, I think it is more important to protect the adjudged infringer that ultimately may be found innocent than it is to reward the patentee with immediate gratification for prevailing at the district court level. Ultimately, I think the de novo standard of review must be changed because the district courts are clearly in a better position to construe the patent�s claims than an appeals court working with only a paper record. Until that happens, however, the reality will remain that your success at the Federal Circuit on claim construction is determined as much by the composition of the panel as by the arguments made by the parties on appeal.

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