Mentor Graphics Corporation v. EVE-USA, Inc. et al

Filing 852

PERMANENT INJUNCTION FACTUAL BASIS. See order for full text. Signed on 3/17/15 by Judge Michael W. Mosman.Associated Cases: 3:10-cv-00954-MO, 3:12-cv-01500-MO, 3:13-cv-00579-MO (dls)

UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
PORTLAND DIVISION
MENTOR GRAPHICS CORPORATION,
an Oregon corporation,
Plaintiff and Counter-Defendant,

Civil Action No. 3:10-CV-954-MO (LEAD)
Civil Action No. 3:12-CV-1500-MO
Civil Action No. 3:13-CV-579-MO

v.
EVE-USA, INC., a Delaware corporation, and
SYNOPSYS EMULATION AND
VERIFICATION S.A., formed under the laws
of France,
Defendants and Counter-Plaintiffs.
SYNOPSYS, INC., a Delaware corporation,
EVE-USA, INC., a Delaware corporation, and
SYNOPSYS EMULATION AND
VERIFICATION S.A., formed under the laws
of France,
Plaintiffs and Counter-Defendants,
v.
MENTOR GRAPHICS CORPORATION,
an Oregon corporation,
Defendant and Counter-Plaintiff.

1 – PERMANENT INJUNCTION

PERMANENT INJUNCTION
FACTUAL BASIS

On March 11, 2015, this court issued an order granting Plaintiff’s (“Mentor”) Motion for
a Permanent Injunction [758]. On March 13, 2015, Defendants (collectively “Synopsys”) filed a
Motion for Stay [845]. Synopsys argued that the order granting the injunction was fatally flawed
under FRCP 65 because the order failed to state the reasons why it issued. For the following
reasons, I issued the order granting a modified version of Mentor’s proposed injunction.
I.

Irreparable Harm
Mentor successfully argued that absent an injunction it was likely to suffer

irreparable harm by showing: (1) the emulation market is a “design wins” market; and (2)
it likely had and will continue to suffer harm from price erosion caused by Synopsys’s
infringement.
A.

Design Wins Market

The Federal Circuit has held that “exclusion from a fair opportunity to compete for
design wins constitutes irreparable harm.” Broadcom Corp. v. Emulex Corp., 732 F.3d 1325,
1337 (2013). The irreparable harm comes from the fact that the patentee is prevented from
making future sales during the lifecycle of the design, and from the fact that the patentee is not
able to compete on a level playing field for future sales due to the approval efficiencies and
goodwill gained from the first infringing sale.
Mentor successfully proved at trial that the emulation market is a design wins market.
Mr. Cantow and Ms. Stuckwisch testified about the product “stickiness” in the emulator market.
Mr. Gandhi, Synopsys’s 30(b)(6) witness from Intel, stated that, “it is not easy to displace
competition” and, “[the] investment which customers make over the years makes those products
much more, you know – harder to replace.” Gandhi Dep. Tr. at 49, 52. Even Synopsys, in its
Response to Mentor’s Motion for Accounting [808], stated, “once an emulation provider has a
foothold within a company, it is likely to grow its presence.” Defs.’ Response [808] at 4. These
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are all market characteristics that suggest the emulation market is a design wins market. By
infringing on Mentor’s patent, Synopsys excluded Mentor from a fair opportunity to compete for
design wins, resulting in irreparable harm.
B.

Price Erosion

Absent Synopsys in the two-supplier Intel market, Mentor would be a monopoly supplier
to Intel. With Cadence waiting in the wings, there is certainly a ceiling on the higher prices that
Mentor could charge Intel, but basic economics says that Mentor could and would charge higher
prices. Given the difficulty and uncertainty in calculating what that higher price would be, and
how many emulators Intel would buy at that price point, this is the type of hard to quantify harm
that constitutes irreparable harm and justifies a permanent injunction.
Synopsys argues that any reduction in Mentor’s prices during the infringing period was
due to volume discounts that Mentor voluntarily gave, or because of Intel’s focus on price. This
may or may not be true, but it ignores the impact the presence of Synopsys in the emulator
market had on these two price reducing factors. Perhaps, absent Synopsys, Mentor would not
have to offer volume discounts to close orders with Intel. Although focused on price, perhaps
Intel would lack sufficient bargaining power to get Mentor to lower its prices. I do not find these
arguments sufficiently persuasive to lead to a conclusion that any price erosion Mentor suffered
was a self-inflicted wound.
II.

No Adequate Remedy at Law
Mentor successfully argued there is no adequate remedy at law because its injuries are

largely unquantifiable. For example, Mentor argued the injuries arising from an inability to fairly
compete in a design wins market are hard to quantify. I agree that it would be hard, if not
impossible, to calculate how many sales would result from the incumbency effect or how prices
would be affected by the incumbency effect. With regard to price erosion, it would also be hard
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to prove exactly how much of a drop in price is caused by the infringement, and what portion is
caused by other independent factors. Mentor also argued that its brand recognition is hurt when
Synopsys products, because they both contain the same patented technologies, increasingly look
like Mentor’s products. Placing a dollar amount on that harm is hard, if not impossible. Finally,
Mentor argued that its reputation as an inventor is hurt when all of its supposedly innovative
improvements are found in competing products, again a harm that is hard to prove.
Synopsys’s only counter-argument is that if Mentor was able to prove its damages at trial,
it should also be able to do so now. Synopsys’s position assumes, however, that the jury verdict
fully compensated Mentor for all of the harms it suffered over the course of Synopsys’s
infringement. This may not be an accurate assumption. At best, it can be said that the jury verdict
fully compensated Mentor for all of the injuries that it could prove it suffered as a result of
Synopsys’s infringement. It is possible that Mentor suffered additional unquantifiable injuries
that it did not seek compensation for at trial because it knew that it could not prove them. The
fact that Mentor was able to prove and recover some damages at trial should not now preclude it
from protecting itself from hard to prove future harms.
III.

Balance of Hardships
The balance of hardships weighs in favor of a permanent injunction. On one side of the

scale is the irreparable and hard to quantify harm to Mentor discussed above. On the other is the
harm suffered by Synopsys’s customers who purchased infringing ZeBu emulators after the
verdict was entered and the harm to Synopsys from having to give extraterritorial notice of the
infringement.
I believe that I should give little to no weight to the harm arising out of post-verdict sales.
There is no justification for these sales. Synopsys knew its ZeBu emulator had been found to
infringe the ’376 patent, and should have ceased selling that emulator. Harm arising out of
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Synopsys’s willful illegal behavior post-verdict cannot justify denying an injunction, especially
given the uncertainty in this case regarding Mentor’s ability to recover supplemental damages.
With regards to the notice provision, Mentor showed at trial that Intel was able to set up
ZeBu emulators in Israel, but still operate those emulators from within the United States. Given
this ability for remote use, Synopsys could easily circumvent the injunction by selling emulators
to foreign third parties and having those third parties contract with Synopsys customers within
the United States to grant them access to the ZeBu emulators sold and installed abroad. Although
Synopsys argues that these types of notice provisions are normally disfavored in the law, I
believe it is appropriate here given the ability to easily access and utilize emulators remotely.
Whatever competitive harm Synopsys will suffer as a result of this notice provision is
outweighed by the harm Mentor would suffer is Synopsys were allowed to simply sell and install
emulators abroad for remote use by third parties within the United States.
Given the reasons stated above, the balance of hardships weighs in favor of granting
Mentors request for a permanent injunction.
IV.

Public Interest
With regard to the public interest, Mentor successfully argued that the public interest

weighs in favor of an injunction. Mentor made all of the classic arguments in favor of having and
enforcing patent rights. Mentor argued the public benefits from innovation, and patents
encourage innovation by allowing the innovator to capture all the economic gains from its
research and development efforts. Synopsys’s counter-arguments were: (1) the patented feature
is really not that important; (2) taking these emulators off the market for such a small flaw would
lead to higher prices in the market for emulators, and that hurts the public; (3) the public is hurt
when the number of products it has to choose from in the market place is decreased; and (4) the
cost of enforcing the injunction will be a waste of resources. All of these arguments are either
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rejected by the jury verdict, or are wholly irrelevant because they are not really arguments
against this injunction, but rather arguments against having any type of patent system at all.
CONCLUSION
For the foregoing reasons, I granted Mentor’s Motion for Permanent Injunction [758].
IT IS SO ORDERED.
DATED this 17th

day of March, 2015.

/s/Michael W. Mosman___
MICHAEL W. MOSMAN
United States District Judge

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