TEK Global S.R.L. et.al. v. Sealant Systems International Inc. et.al.

Filing 336

ORDER DENYING 312 MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET PERIOD AND GRANTING MOTION TO MODIFY INJUNCTION by Judge Grewal. (Grewal, Paul) (Filed on 10/13/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
For the Northern District of California

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SEALANT SYSTEMS INTERNATIONAL,
INC. et al.,

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Plaintiffs,

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v.
TEK GLOBAL, S.R.L., et al.,

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Defendants.

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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO
STAY, DENYING MOTION TO
EXTEND SUNSET PERIOD, AND
GRANTING MOTION TO MODIFY
INJUNCTION
(Re: Docket No. 312)

After a jury rendered its verdict on all triable issues, this court enjoined Defendants TEK

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Global S.R.L. and TEK Corporation from various acts found to infringe United States Patent No.

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6,789,581.1 Despite the irreparable harm to Plaintiff Accessories Marketing Inc. supporting the

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permanent injunction, the court also ordered a ninth-month sunset period for TEK to get its affairs

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in order and minimize any unjustified impact on third parties.2 These nine months were on top of

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the 11 months since a jury found that TEK infringed multiple valid patent claims. 20 months are

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not sufficient enough for TEK; TEK now moves for a stay of the injunction altogether or at least an
extension of the sunset period for another five months so that it may pursue relief from the Federal

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See Docket No. 284.

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See id.

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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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Circuit.3 TEK’s request for relief from the injunction is not its first—as an alternative to denying

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the injunction outright TEK sought precisely the same stay in opposing the injunction at the

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outset.4 As before, the court finds that neither a stay of the injunction or nor an extension of the

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sunset period is warranted, but that a modest modification to the injunction’s terms is.

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I.

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Especially in the aftermath of the Supreme Court’s 2006 decision in eBay v. MercExchange,

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a permanent injunction in a patent case is no mere perfunctory or mechanical exercise. Indeed, as
the Supreme Court itself emphasized, such injunctions may issue only “in accordance with the

United States District Court
For the Northern District of California

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principles of equity.”5 One tool trial courts may use in applying such principles lies in Fed. R. Civ.

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P. 62(c), which authorizes the suspension or modification of an injunction pending appeal from a

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final judgment granting the injunction.6

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In deciding whether to suspend or modify an injunction, the court must consider four factors:
(1) whether the movant has made a strong showing that it is likely to succeed on the merits of its

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appeal; (2) whether the movant will be irreparably injured absent a stay; (3) whether the issuance

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of the stay will substantially injure other parties interested in the proceeding; and (4) the public

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interest.7 While the undersigned has expressed its doubts, other courts have equitably applied these

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See Docket No. 312 at 2.

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See Docket No. 258 at 25.

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eBay Inc. v. MercExchange, L.L.C., 547 U.S. 338, 392 (2006) (citing 35 U.S.C. § 283).

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See Fed. R. Civ. P. 62(c); Fed. R. App. P. 8(a)(1); see also Amado v. Microsoft Corp., 517 F.3d
1353, 1358 (Fed. Cir. 2008) (observing that district courts “possess broad equitable authority to
modify injunctions”); Broadcom Corp. v. Emulex Corp., 732 F.3d 1325, 1339 (Fed. Cir. 2013)
(finding that 18-month sunset period was not an abuse of discretion); Broadcom Corp. v.
Qualcomm Inc., 543 F.3d 683, 704 (Fed. Cir. 2008) (approving injunction including 20-month
sunset provision); B. Braun Melsungen AG v. Terumo Medical Corp., 778 F. Supp. 2d 506, 524 (D.
Del. 2011) (issuing injunction with 15-month sunset period).

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See Standard Havens Prods., Inc. v. Gencor Indus., Inc. 897 F.2d 511, 512 (Fed. Cir. 1990)
(citing Hilton v. Braunskill, 481 U.S. 770, 776 (1987)).
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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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factors on a “sliding scale,” so that even where the movant only demonstrates a “substantial”

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chance of success on the merits, a stay may be appropriate if the balance of the hardships weigh in

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the movant’s favor. 8 Similarly, if the movant is more likely to win on appeal, the balance of harms

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may weigh less heavily in its favor.9 Among other factors, “evidence of employee layoffs,

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immediate insolvency, and possible extinction of a company provide a basis of irreparable harm

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that militates in favor of granting a stay.”10

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While a permanent injunction may have been warranted, this “does not preclude a granting of

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a stay of that injunction pending appeal as both issues require different analyses.”11 Though the

United States District Court
For the Northern District of California

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harm to the alleged infringer receives limited weight in the context of a motion for a permanent

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injunction, the “analysis changes in the context of a request for a stay on appeal because of the

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See Brocade Commc’ns Sys., Inc. v.A10 Networks, Inc., Case No. 10-CV-3428-PSG, 2013 WL
557102, at *2 (N.D. Cal. Feb. 12, 2013); cf. Alliance for the Wild Rockies v. Cottrell, 632 F.3d
1127, 1134 (9th Cir. 2011) (continuing to apply sliding-scale approach after careful consideration
of Winter). See also Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 51 (2008) (Ginsberg, J.,
dissenting) (“[C]ourts have evaluated claims for equitable relief on a ‘sliding scale,’ sometimes
awarding relief based on a lower likelihood of harm when the likelihood of success is very high.
This Court has never rejected that formulation, and I do not believe it does so today”) (citation
omitted); see also Apple, Inc. v. Samsung Elecs. Co., Case No. 5:12-cv-00630-LHK, 2012 WL
2576136, *2 (N.D. Cal. July 3, 2012) (applying the “sliding scale” approach and noting the court
“need not . . . give equal weight to each of the four factors”).
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See Standard Havens Prods., Inc., 897 F.2d at 512.

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Apple, Inc. v. Samsung Electronics Co., Ltd., Case No. 5:11-cv-01846-LHK, 2012 WL 2527044,
at * 7 (N.D. Cal. July 2, 2012) (citing Standard Havens Prods., 897 F.2d at 515); In re Hayes
Microcomputer Prods., Inc. Patent Litig., 766 F. Supp. 818, 823 (1991) (granting stay of injunction
pending appeal where it appeared “highly likely that, when and if the injunction is finally enforced,
[defendants would] be forced out of business”).
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Smith & Nephew, Inc. v. Arthrex, Inc., Case No. 2:07-cv-335-TJW, 2010 WL 2522428, at *5
(E.D. Tex. June 18, 2010) (holding that “while in the context of awarding a permanent injunction
the Court finds that the balance of hardships favors [plaintiff], the Court finds that in the context of
a stay of the permanent injunction pending appeal the balance of hardships favors [defendant]”).
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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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chance for reversal.”12 Still, the movant must show that the “balance of hardships” against the
substantial harm to the nonmoving party “tips sharply in [the movant’s] favor.”13
TEK brought the parties to federal court by charging AMI’s sister company Sealant Systems

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International, Inc. with infringement of TEK’s U.S. Patent No. 7,789,110 in the Southern District

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of New York.14 SSI then sued TEK for a declaratory judgment of noninfringement of the ’110

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patent in this district.15 After AMI purchased U.S. Patent No. 6,789,581 from an unrelated third
party, AMI’s claim for infringement was added in the first amended complaint.16 SSI then filed a
second amended complaint adding TEK as a defendant with respect to the claim of infringement.
After the New York case was transferred here, the cases were consolidated.17 The court

United States District Court
For the Northern District of California

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granted AMI’s motion for summary judgment that it did not infringe the ’110 patent and set the

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remainder of the case for trial.18 A jury found for AMI on the ’581 infringement claims.19 After

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careful consideration of the eBay factors, including TEK’s strenuous claims at trial that the ’581

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patent was not necessary for a successful tire repair kit and could be quickly designed-around, as
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Extreme Networks, Inc. v. Enterasys Networks, Inc., Case No. 07-cv-229-BBC, 2009 WL
679602, at *4 (W.D. Wis. Mar. 16, 2009) (granting a stay even though the court “disagree[d] with
defendant’s challenges to the jury’s verdict,” because “the court of appeals may see things
differently”).
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Apple, Inc., 2012 WL 2576136 at *8 (citation and brackets omitted; italics in original).

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See Docket No. 101-2 at 1.

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See Docket No. 1.

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See Docket No. 37.

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See Docket No. 8.

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See Docket No. 134 at 18.

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See Docket No. 217.

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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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well as strong evidence of fierce competition between TEK and AMI in the on-board-tire-repair-kit
market, the court granted AMI’s motion for permanent injunction.20
The permanent injunction requires TEK and affiliates to cease: (1) making, using, selling,

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offering to sell, or importing in the U.S. any tire repair kit that includes features infringing

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specified claims of the ’581 patent; (2) providing customer service or technical support related to

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those products; and (3) modifying or updating any documentation regarding the operation or use of
such products.21 To ease the impact of the injunction on both TEK and third parties, a temporary
sunset provision with various restrictions delays the effect of this permanent injunction for nine

United States District Court
For the Northern District of California

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months, until December 10, 2014.22 During this period, TEK may continue to sell infringing kits

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for certain pre-qualified Original Equipment Manufacturers’ platforms.23

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TEK has since appealed to the Federal Circuit, claiming that the ’110 claims were improperly
dismissed, that the ‘581 patent is invalid and that TEK is not infringing.24 TEK also appeals the
permanent injunction, arguing that there was no willful infringement before AMI brought suit, that

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neither AMI nor SSI had practiced the ’581 patent at issue, and that there was no need to restore
market share to a competitor of TEK.25

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In its opposition to AMI’s permanent injunction motion, TEK initially sought a stay as an

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alternative.26 Relying on what it claims are “changed circumstances” hindering the implementation

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of a non-infringing design that threaten TEK’s very existence, TEK now seeks a stay for the

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See Docket No. 283 at 48.

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See Docket No. 284 at 1.

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See id. at 1-2.

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See id. at 2.

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See Docket No. 290.

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See id.

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See Docket No. 259 at 25.

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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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second time, pending a hearing and decision on TEK’s appeal to the Federal Circuit. In the

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alternative, TEK requests that the court extend the injunction’s sunset period until April 10, 2015.27

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TEK further requests that the court narrow the sunset provision’s customer certification

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requirement, which requires TEK to obtain agreements to restrict the use of the products from

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customers who have purchased TEK products after April 25, 2013.28

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II.

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This court has jurisdiction under 28 U.S.C. § 1338. The parties further consented to the

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United States District Court
For the Northern District of California

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jurisdiction of the undersigned magistrate judge under 28 U.S.C. § 636(c) and Fed. R. Civ. P.
72(a).

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Although this is not is the first time TEK has sought a stay of the injunction pending appeal,
changed circumstances can justify what is effectively a motion for reconsideration.29 One might
reasonably question whether at least some of the circumstances TEK points to are truly changed.
For example, then as now, TEK cites the impact of the injunction on its customers’ willingness to

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consider its infringing products. The court need not resolve that question, however, because even

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if none of the circumstances at issue were known before, a stay of the injunction still is not

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warranted.

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III.

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Standard Havens requires the court to weigh: (1) whether TEK has made a strong showing
that it is likely to succeed on the merits on appeal; (2) whether the TEK will be irreparably injured

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absent a stay; (3) whether a stay will substantially injury parties other than TEK or AMI with an
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See Docket No. 312 at 1-2.

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See id. at 13-14.

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See Civil L.R. 7-9.

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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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interest in this proceeding; and (4) the public interest.30 On the record before the court, even as
supplemented by TEK with its changed circumstances, all four factors weigh against a stay.
First, TEK offers nothing new relevant to its potential for success on the merits of its appeal,

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and in line with its previous findings, the court concludes that TEK is unlikely to prevail. Of

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course this is ultimately an issue for the Federal Circuit to resolve for us all. But after many days

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of evidence, argument and deliberation, nine citizens of this district found claims 27-31, 24, 40,
and 42 were infringed by a preponderance of the evidence.31 That same jury unanimously found
TEK did not prove invalidity by clear and convincing evidence.32 The court’s 64-page order

United States District Court
For the Northern District of California

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addressing the parties’ various post-trial motions explained that the jury verdict was supported by

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substantial evidence, and nothing TEK presents now suggests otherwise.33 TEK also fails to

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present new evidence to suggest that the court abused its discretion or committed clear error in

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finding the four eBay factors supported issuing the injunction.

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TEK does not seriously dispute that any of its changed circumstances evidence suggests in
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any meaningful way that it is likely to succeed on appeal. It instead presents the same port,
receptacle, reservoir and causal nexus arguments as it did before. Significantly, as to all but one

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Standard Havens Prods., Inc., 897 F.2d at 512.

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See Docket No. 283 at 8-10.

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See id at 16.

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See Enovsys LLC v. Nextel Comms., Inc., 614 F.3d 1333, 1341 (Fed. Cir. 2010) (“a jury verdict
‘must be upheld if it is supported by substantial evidence . . . even if it is also possible to draw a
contrary conclusion’”) (citation omitted); Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 563
F.3d 1358, 1370-71 (Fed. Cir. 2009) (finding substantial evidence is “relevant evidence reasonable
minds might accept as adequate to support the jury’s conclusion . . . A court will not weigh the
evidence or assess the credibility of witnesses in determining whether substantial evidence exists”);
Boehringer Ingelheim Vetmedica, Inc. v. Schering- Plough Corp., 320 F.3d 1339, 1350 (Fed. Cir.
2003) (holding the court “must draw all reasonable inferences in favor of the nonmoving party . . .
[and] disregard all evidence favorable to the moving party that the jury was not required to
believe”); Door-Master Corp. v. Yorktowne, Inc., 256 F.3d 1308, 1312 (Fed. Cir. 2001) (“Where,
as here, a jury finds a patent valid,” the Federal Circuit “will not disturb that finding unless
reasonable jurors could not have reached that verdict”).
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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

1

claim—claim 42—TEK challenges only the jury finding of no anticipation, but not non-

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obviousness or infringement. As the court explained at length in its order, substantial evidence

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including expert testimony from not only AMI, but also TEK itself, supports the jury’s findings.34
Second, as to TEK’s irreparable injury, TEK has not offered sufficient evidence that goes

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beyond its mere allegations. TEK leans heavily on the suggestion that testing and validation for
OEM customers has proven slower than previously anticipated and that no OEM customer will buy

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a product that is not globally compliant, precluding any non-infringing alternative for the U.S.
market alone.35 TEK also points to layoffs it has already suffered contemporaneously with the

United States District Court
For the Northern District of California

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switch of one OEM to a non-infringing substitute.36 But even if this was not anticipated when TEK

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first raised the possibility of a stay, and there was sufficient evidence in the record to substantiate

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the causation beyond the correlation that it claims, harm from avoiding infringement has long been

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recognized as an insufficient basis for staying an injunction.37 It does not matter that TEK’s

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infringement was not found to be willful.38 Over the 20 months between the verdict and the

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expiration of the sunset period, all OEMs have had plenty of opportunity to stock up on TEK
products during that period to manage until the redesigned product is completely ready to go.

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See Docket No. 283.

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See Docket No. 312-1 at ¶ 12-14.

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See id. at ¶ 16.

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See, e.g., Stryker Corp. v. Zimmer Inc., Case No. 1:10-cv-1223, 2013 WL 6231533, at *26 (W.D.
Mich. Aug. 7, 2013) (“an immediate injunction will only injure Zimmer to the extent Zimmer will
no longer be allowed to infringe Stryker’s patents, something it had no right to do in the first
place”).
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In support of its argument to the contrary, TEK cites to Grain Processing Corp. v. Am. MaizeProducts Co., 185 F.3d 1341, 1353 (Fed. Cir. 1999). But Grain Processing was an opinion about
lost profits, not its permanent injunctions. In any event, while noting that TEK’s claimed hardships
come from its infringement, the court has hardly “disregarded them altogether,” Smith & Nephew,
Inc. v. Interlace Med., Inc., 955 F. Supp. 2d 69, 79 (D. Mass. 2013), as TEK suggests. Even as
recently as late last week, the court accepted additional evidence of hardship tendered by TEK.
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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

TEK claims that once the sunset period ends, it will be unable to sell products in the TEK400

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and TEK500 families that have made up a substantial percentage of TEK Corporation’s revenues

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over the past five years.39 The projected loss of TEK Corporation’s revenue does not, of course,

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reflect what percentage of TEK Global’s revenue is at risk. The record is clear that TEK Global’s

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revenue is more diversified.40 Even as to TEK Corporation, TEK offers only its own speculation

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that it faces a break-up of its OEM business as a result of the denial of the stay, as opposed to the

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entry of the injunction in the first place. The only customer from whom TEK tenders any evidence
makes clear that it views the date of the injunction as dispositive no matter the entry of the stay.41

United States District Court
For the Northern District of California

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And if anything, TEK’s claims about the centrality of the claimed invention to its revenue stream

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undermine rather than support the argument in favor of a stay. The reason is that such inventions

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do not implicate the concerns raised in Justice Kennedy’s eBay concurrence: “[w]hen the patented

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invention is but a small component of the product the companies seek to produce and the threat of
an injunction is employed simply for undue leverage in negotiations, legal damages may well be

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sufficient to compensate for the infringement and an injunction may not serve the public
interest.”42
TEK itself acknowledges that it has already constructed a prototype of its design-around

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product,43 and the re-designed product should be on the market in the United States by April

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2015,44 another factor pointing toward TEK’s limited harm.

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See Docket No. 312 at 4.

Cf. Hynix Semiconductor Inc. v. Rambus Inc., 609 F. Supp. 2d 951, 968 (N.D. Cal. 2009)
(denying injunction that would "decimate" the infringer's business).
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See Docket No. 333-4 at 6 ¶ 2.
547 U.S. at 396-97.

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TEK had its prototype ready in August 2013, four months after the jury verdict. See Docket No.
318 at 14.
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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

Third, as to injury to other parties interested in the proceeding, TEK offers no new evidence

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that further delaying the injunction does not injure AMI. At best TEK urges that AMI might suffer

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no greater harm than it is now, especially if OEMs took up AMI’s suggestion that they are free to

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stock up during the period of TEK’s remaining sunset period.45 TEK also questions the

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significance of AMI’s harm when it does not practice the ’581 patent and in fact purchased the

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patent only after this litigation was launched.46 But TEK’s bootstrapping would require a follow-

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on stay anytime even if a one-day sunset period were permitted. Nothing in the case law even hints
at such an outcome.
More fundamentally, these arguments take no account of the fundamental nature of the right

United States District Court
For the Northern District of California

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at issue: the right to exclude.47 No matter AMI’s lack of practice of the patent or when AMI

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acquired it, TEK’s ongoing infringement denies AMI of AMI’s right to exclude competitors from

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practicing the ’581 patent’s claims.48 While perhaps less well-remembered than its criticism of the

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Federal Circuit, eBay’s criticism of the district court’s seeming reliance on such distinctions was

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44

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45

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See Docket No. 312 at 1-2.

See Docket No. 315 at 19. TEK replies that AMI’s “is a curious line of argument indeed,
because it suggests that AMI believes it would not be irreparably harmed (as long as it receives
royalties on sales of the accused products) if TEK supplies OEMs with the accused products
beyond December 10, 2014. From AMI’s perspective, it shouldn’t make any difference whether
OEMs stock up on the accused products prior to December 10, 2014 or continue to order them as
needed during the appeal period.” See Docket No. 319 at 4.

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46

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47

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See Docket No. 312 at 1, 10.

See Edwards Lifesciences AG v. CoreValve, Inc., 699 F.3d 1305, 1314 (Fed. Cir. 2012) (“A
patentee’s right to exclude is a fundamental tenet of patent law”).
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See Brocade Comms. Systems, Inc., 2013 WL 557102 at *4 (“Because Brocade’s right to
exclude a direct competitor from practicing its patents cannot be remedied through damages, an
injunction is appropriate”); see also Trebro Mfg., Inc. v. Firefly Equip., LLC, 748 F.3d 1159, 1171
(Fed. Cir. 2014) (“the fact that Trebro does not presently practice the patent does not detract from
its likely irreparable harm”).
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ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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just as pronounced. “[T]raditional equitable principles do not permit such broad classifications.”49

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Put another way, whether for Thomas Edison and his light bulb patents or AMI and its off-the-shelf

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purchase, the exclusive rights under 35 U.S.C. § 271 are the same; that period of exclusivity never

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comes back.

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TEK does offer that the court might impose conditions on the stay to temper any alleged
injury that AMI might suffer. For example, TEK might be permitted to sell the accused products

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during the extended stay period only to existing OEMs and only for the vehicle platforms that were
qualified and validated by April 25, 2013, with royalties covered by TEK’s $3,500,000 cash

United States District Court
For the Northern District of California

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bond.50 But TEK’s proposed bargain amounts to a compulsory license to that competitor.51 And

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AMI has never licensed the ’581 patent to anyone, let alone a competitor.52

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Other trial courts have held the same in similar circumstances. For example, in Broadcom
Corp. v. Qualcomm, Inc., the court held that while the patentee’s failure to offer a replacement
product for the infringing product may affect the degree of competition, an injunction and not

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merely a compulsory license was nevertheless warranted because both firms compete in the same

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market, a market the patent holder should have the opportunity to exploit.53 Similarly, in Callaway

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Golf Co. v. Acushnet Co., the court granted a permanent injunction rather than a compulsory

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license because the patentee faced lost market share from the defendant’s ongoing infringement.54

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49

eBay Inc., 547 U.S. at 393.

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See Docket No. 319 at 13.

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51

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See Paice LLC v. Toyota, 504 F.3d 1293, 1314 (Fed. Cir. 2007) (“Under some circumstances,
awarding an ongoing royalty for patent infringement in lieu of an injunction may be appropriate”).

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52

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53

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See Docket No. 315 at 18.

Broadcom Corp. v. Qualcomm Inc., Case No. SACV 05–467 JVS-RNBx, 2007 U.S. Dist.
LEXIS 97647, at *7 (C.D. Cal. Dec. 31, 2007) (Docket No. 995).
54

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Callaway Golf Co. v. Acushnet Co., 585 F. Supp. 2d 600, 622 (D. Del. 2008) (vacated on other
grounds).
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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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In Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., the court held that “the

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incumbency benefits of Fairchild defeating Power for ‘design wins’ cannot be fully compensated

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by payment of damages.”55 Courts have declined to impose a compulsory license even on patent

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holders who are not presently manufacturing the claimed invention or otherwise actively using the

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patented technology.56

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Fourth, TEK offer no new evidence that a stay of the injunction would favor the public

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interest. However under attack the right to exclude under a patent may appear in 2014, the public
interest remains well-served by the enforcement of that right under patents that are valid and

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For the Northern District of California

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infringed. 57 The injunction is narrowly tailored and already includes the nine-month sunset

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period.58 Together with the 11 months that preceded the entry of the injunction, the public will

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have been spared whatever ill effects of the injunction for no less than 20 months. While TEK is

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absolutely right that the public has a strong interest in maintaining a competitive market for tire
repair kits, that market is supported by the capital investments in research and development that

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patents and patent alienability nurture. That an infringing competitor may expand market output

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55

Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., Case No. 08-309-LPS, 2014 WL
2960035, at *1-2 (D. Del. June 30, 2014).
56

See, e.g., Emory Univ. v. Nova BioGenetics, Inc., Case No. 1:06-cv-0141-TWT, 2008 U.S. Dist.
LEXIS 57642, at *1-2, 11-14 (N.D. Ga. July 24, 2008); Joyal Prods., Inc. v. Johnson Elec. N. Am.,
Inc., Case No. 04-5172-JAP, 2009 U.S. Dist. LEXIS 15531, at *32, 40 (D.N.J. Feb. 26, 2009).
57

See i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 863 (Fed. Cir. 2010) (holding that the
“touchstone of the public interest factor is whether an injunction, both in scope and effect, strikes a
workable balance between protecting the patentee’s rights and protecting the public from the
injunction’s adverse effects”).
58

Cf. Qualcomm Inc., 543 F.3d at 704; Emulex Corp., 732 F.3d at 1339 (approving a sunset period
that “allowed for time to remove the infringing product from the market without causing significant
downstream disturbance for OEMs and consumers”); i4i Ltd. P’ship, 598 F.3d at 863 (holding that
the “touchstone of the public interest factor is whether an injunction, both in scope and effect,
strikes a workable balance between protecting the patentee’s rights and protecting the public from
the injunction’s adverse effects”).
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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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and lower prices in the short run does not change this fundamental market principle in the long
run.59

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It may be true that come December TEK may no longer help customers and downstream

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users or update documentation or user manuals with respect to its products that infringe. But TEK

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offers little evidence that the customers and suppliers themselves face significant disruption from

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these limitations and offers no authority that the speculative effects of an injunction should be
weighed in the court’s calculation. No imminent monopoly in the market for tire repair kits has
been suggested, let alone substantiated, and no evidence suggests that with the substantial sunset

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For the Northern District of California

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period already in place customers have struggled to transition. If anything, the court must defer to

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testimony of TEK’s Chief Executive Officer Guido Petrelli, who previously declared it “does not

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cause great expense or delay” for OEMs to switch suppliers.60

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TEK alternatively requests that the court extend the sunset provision by five months to allow
TEK to bring to market a non-infringing alternative amid unanticipated lengthy testing and

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validation required by TEK’s customers.61 TEK predicts this additional testing and validation will

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not be completed until April 10, 2015, potentially leaving TEK with five months in which they are

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unable to sell either the accused products or its design-around, impacting the bulk of their

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revenue.62 The problem for TEK is that TEK itself previously confirmed that nine months would

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59

See Douglas Dynamics, L.L.C. v. Buyers Prods. Co., 717 F.3d 1336, 1346 (Fed. Cir. 2013); see
also Winsurfing Int’l, Inc. v. AMF, Inc., 782 F.2d 995, 1003 n.12 (Fed. Cir. 1986) (“One who elects
to build a business on a product found to infringe cannot be heard to complain if an injunction
against continuing infringement destroys the business so elected”).

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Docket No. 259-1 at ¶¶ 5, 7-9.

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See Docket No. 312 at 1, 10.

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See id.

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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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be sufficient.63 There also is no evidence that customers would be harmed in the absence of an

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extension. This is because, as TEK’s own expert declared, an “OEM can cancel and change its

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order from [a] supplier with little difficulty” and “doing so does not cause great expense or delay

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for the OEM.”64 And TEK’s other evidence shows that customer preparations for the injunction

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are well under way.65

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Where TEK does manage to persuade a change is in order is with respect the injunction’s

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customer certification requirement. TEK asks that the requirement be tweaked so that it applies
only after the date of the permanent injunction’s entry.66 As currently drafted, TEK must obtain

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For the Northern District of California

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from purchasers post-April 25, 2013 written certification “that the purchased Enjoined Product

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shall be used only as specifically and exclusively identified in an Appendix to this Injunction.”67

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April 25, 2013, the day the jury reached its verdict, is months before the court first entered the

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injunction on March 10, 2014. Even if none of the customer certifications reference purchases
made before January 2, 2014,68 TEK is right in pointing out that it does not make sense to impose

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restrictions on any customers retroactively. While counting post-verdict sales is important for

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calculating post-verdict, pre-injunction royalties, the separate requirement of a royalty report

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already serves the purpose of verifying the accuracy of TEK’s sunset period royalty payments.

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63

See Docket No. 303 at 32:22-25 (“the time of the sunset period is fine”); Docket No. 259-1 (“by
the time the sunset period ends, TEK will be on the market with a newly designed product”);
Docket No. 259-1 at ¶ 20 (“TEK’s new product is at the prototype stage and should be read within
the sunset period offered by AMI”).
64

See Docket No. 312 at 4 (citing Docket No. 259-1 at ¶¶ 5, 7-9.

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65

See, e.g., Docket No. 333.

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66

See Docket No. 312 at 13.

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67

See Docket No. 284 at 2; Docket No. 312 at 13.

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68

See Docket No. 315 at 22.

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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION

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The court therefore amends the date of the written certification requirement to March 10,

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2014. If AMI finds TEK’s royalty report does not properly verify the accuracy of TEK’s sunset

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period royalty payments, it may of course seek separate relief.

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SO ORDERED.

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Dated: October 13, 2014

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_________________________________
PAUL S. GREWAL
United States Magistrate Judge

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United States District Court
For the Northern District of California

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Case No. 5:11-cv-00774-PSG
ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET
PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION