An important decision by the Federal Circuit supporting a robust application of irreparable injury in the patent context should prove useful to trade secret plaintiffs. While that decision, Robert Bosch LLC. v. Pylon Mf’g Corp., 2011-1096 (Fed. Cir., Oct. 13, 2011), acknowledges that the U.S. Supreme Court’s decision in eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), “jettisoned the presumption of irreparable harm as it applies to determining the appropriateness of injunctive relief,” it cautions district courts not “to ignore the fundamental nature of patents as property rights granting the owner the right to exclude.” (Thanks to fellow partner Deborah Coleman for bringing this to my attention and to my colleague Robert Latta for his help with this post; a copy of the opinion is attached below).
Writing for the majority, Judge Kathleen O’Malley noted that while categorical rules for the application of injunctive relief have been abolished and district courts enjoy inherent discretion to fashion equitable relief, that does not mean that district courts “act on a clean slate.” Bosch, at *11. Rather, district courts should apply traditional legal standards in fashioning equitable relief. Id.
To that end, the Federal Circuit reversed the District Court of Delaware’s denial of a permanent injunction, reasoning that the plaintiff, Robert Bosh LLC, had more than adequately proven irreparable injury. For example, the Federal Circuit held that the presence of multiple competitors in a single market place, without more, does not negate a finding of irreparable harm. Id. at *14. According to the court, a patentee is not obliged to sue all infringers at once and to hold otherwise would abolish injunctive relief in all market places operating with more than two competitors. Id. Additionally, the Federal Circuit rejected the district court’s reasoning that a patentee could be denied injunctive relief simply because the patent represents technology which makes up a non-core part of the patentee’s business. Id. at *15. “Injuries that affect a “non-core” aspect of a patentee’s business are equally capable of being irreparable as ones that affect more significant operations.” Id. To hold otherwise, reasoned the court, would encourage large industrial corporations to subdivide their operations into child companies, each focusing on a different product line. Id.
Finally, the Federal Circuit emphasized that a district court should assess the financial condition of the infringer before the alternative of money damages is found to be adequate. Id. at 23. It held that a district court’s failure to ascertain whether monetary damages are truly a meaningful or viable alternative to an injunction may qualify as reversible error. Id. Additionally, in assessing the third eBay factor, the balance of hardships, the court recognized that an injunction cannot be avoided simply because the infringer is a smaller company or because the primary product sold by the infringer is an infringing one. Id.
The takeaway? Any decision affirming the element of irreparable injury in an IP context is generally a good thing for the trade secrets bar, but the Federal Circuit’s vigorous defense of the application of irreparable injury in Bosch is an especially welcome development. eBay should have had minimal impact on trade secret injunction requests since irreparable injury is rarely, if ever, presumed in the trade secret context. However, because eBay was perceived as a “bell weather” decision in the IP context, it may have caused courts to hesitate in issuing otherwise appropriate injunctions. In other words, eBay may have had a “spill over” effect on trade secret claims. Likewise, the Federal Circuit’s recognition of the necessity of a defendant’s solvency when considering the adequacy of a remedy at law (i.e., money damages) should benefit all potential plaintiffs seeking an injunction.