Texas Advanced Optoelectronic Solutions, Inc. v. Intersil Corporation
Filing
569
MEMORANDUM OPINION AND ORDER - DENYING 518 MOTION for Permanent Injunction filed by Texas Advanced Optoelectronic Solutions, Inc. and GRANTING IN PART 554 MOTION Supplemental Damages filed by Texas Advanced Optoelectronic Solutions, Inc. Signed by Judge Richard A. Schell on 4/22/2016. (baf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
TEXAS ADVANCED OPTOELECTRONIC
SOLUTIONS, INC.,
Plaintiff,
v.
INTERSIL CORPORATION,
Defendant.
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Case No. 4:08-CV-451
MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF’S
MOTION FOR PERMANENT INJUNCTION AND GRANTING
IN PART PLAINTIFF’S MOTION FOR SUPPLEMENTAL DAMAGES
The following are pending before the court:
1.
Plaintiff’s motion for permanent injunction (docket entry #518);
2.
Response to TAOS’s motion for permanent injunction (docket entry #525);
3.
Plaintiff’s reply in support of its motion for permanent injunction (docket entry
#530);
4.
Intersil Corporation’s sur-reply to Texas Advanced Optoelectronic Solutions, Inc.’s
motion for permanent injunction (docket entry #539); and
5.
TAOS’s notice of updated proposed final judgment and injunction and permanent
injunction order (docket entry #559).
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1.
TAOS’ motion for supplemental damages (docket entry #554);
2.
Notice of partial non-opposition to Plaintiff’s motion for supplemental damages
(docket entry #556);
3.
Intersil Corporation’s response to TAOS’s motion for supplemental damages and
related post-hearing filings (docket entry #563);
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4.
TAOS’ reply in support of its motion for supplemental damages (docket entry #565);
5.
Intersil Corporation’s sur-reply in opposition to TAOS’s motion for supplemental
damages and related post-hearing filings (docket entry #566); and
6.
Intersil Corporation’s amended sur-reply in opposition to TAOS’s motion for
supplemental damages and related post-hearing filings (docket entry #567).
On June 3, 2004, the parties entered into a letter “Confidentiality Agreement” to explore a
possible business relationship. Pursuant to the terms of the letter agreement, the parties exchanged
confidential information; however, the parties were ultimately unable to agree on the terms of a
business relationship and discussions regarding acquisition of TAOS by Intersil ended. The Plaintiff
subsequently reached the conclusion that the Defendant unfairly used the Plaintiff’s confidential
information to create a line of digital ambient light sensors that compete with the Plaintiff’s ambient
light sensors. As such, on November 25, 2008, the Plaintiff filed suit against the Defendant alleging
claims for patent infringement, breach of contract, trade secret misappropriation, and tortious
interference with prospective business relations.
On October 13, 2009, the Defendant filed its original answer and counterclaims, asserting
14 affirmative defenses and five counterclaims. After extensive summary judgment briefing, the
case proceeded to a jury trial on February 9, 2015. At the conclusion of the trial on March 6, 2015,
the jury found that (1) the Defendant breached its contract (“Confidentiality Agreement”) with the
Plaintiff, (2) the Defendant misappropriated the Plaintiff’s trade secrets, (3) the Defendant’s
misappropriation of the Plaintiff’s trade secrets resulted from the Defendant’s fraud, malice, or gross
negligence, (4) the Defendant intentionally interfered with the Plaintiff’s prospective business
relations with Apple, and (5) the Defendant willfully infringed the ’981 patent.
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PERMANENT INJUNCTION
The Plaintiff now claims that the Defendant has continued to sell ambient light sensors that
incorporate the Plaintiff’s trade secrets and patented technology. In order to prevent the Defendant
from continuing to sell the Infringing and At-Issue Products, the Plaintiff moves the court for the
entry of a permanent injunction.
“A permanent injunction is an extraordinary remedy.” Bianco v. Globus Med., Inc., No.
2:12-CV-00147-WCB, 2014 WL 1049067, at *1 (E.D. Tex. Mar. 17, 2014), citing Nken v. Holder,
556 U.S. 418, 428 (2009); R.R. Comm'n of Tex. v. Pullman Co., 312 U.S. 496, 500 (1941). “A
successful plaintiff is not entitled to injunctive relief as a matter of course, but must make a showing
that the circumstances require the Court to enter an injunction.” Id., citing Salazar v. Buono, 559
U.S. 700, 714 (2010); Harrisonville v. W.S. Dickey Clay Mfg. Co., 289 U.S. 334, 337-38 (1933).
“‘An injunction should issue only where the intervention of a court of equity is essential in order
effectually to protect property rights against injuries otherwise irremediable.’” Id. (internal quotation
marks excluded), quoting Weinberger v. Romero–Barcelo, 456 U.S. 305, 312 (1982), quoting
Cavanaugh v. Looney, 248 U.S. 453, 456 (1919). “Courts have developed a four-factor test to
determine whether the remedy of an injunction is warranted in a particular case.” Id. “The plaintiff
bears the burden of showing: (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.,
citing eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 390 (2006); i4i Ltd. P'ship v. Microsoft
Corp., 598 F.3d 831, 861 (Fed. Cir. 2010), aff'd, 131 S.Ct. 2238 (2011).
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1.
Irreparable Injury & No Adequate Remedy at Law
As noted above, the jury found that the Defendant misappropriated the Plaintiff’s trade
secrets and willfully infringed the ’981 patent. The Plaintiff argues that the evidence at trial
established that the Defendant deliberately copied the Plaintiff’s ambient light sensors to develop
the Infringing and At-Issue Products in order to become a competitor in the ambient light sensor
market. The Plaintiff further argues that the evidence at trial established that weeks after the parties
engaged in the June 2004 due diligence discussions, the Defendant changed the structure of its
EL7903 product (which became ISL29001) to mirror the Plaintiff’s not-yet-released TSL256x
product. The Plaintiff reminds the court that its expert witness, Mr. McAlexander, testified at trial
that he found “zero evidence of any independent design” by the Defendant. Additionally, the
Plaintiff’s president, Mr. Laney, testified that the Defendant’s data sheet for ISL29001 followed that
of the Plaintiff’s ’981 patent. Thereafter, the Plaintiff contends that the evidence at trial revealed
that the Defendant became the Plaintiff’s direct competitor in the digital ambient light sensor market.
Additionally, the Plaintiff argues that the evidence at trial showed that the Defendant made a
concerted effort to compete with the Plaintiff for Apple’s business. According to the Plaintiff, “[b]y
its misappropriation and patent infringement, Intersil gained market share at TAOS’ expense, caused
a drop in ALS prices, and almost put TAOS out of business.” PL. REPLY IN SUPPORT OF MTN. FOR
PERM. INJ., p. 2.
The Plaintiff further argues that the Defendant currently sells the At-Issue and Infringing
Products. Specifically, the Defendant sells ISL29003 on its website. The Plaintiff also contends that
the Defendant sells ISL76683, a product that was introduced after this lawsuit was filed, but
allegedly made with the same die as ISL29003. Ultimately, the Plaintiff argues that it will be injured
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irreparably if it is forced to compete again with the Defendant’s products that incorporate the
Plaintiff’s trade secrets and infringe the Plaintiff’s patent.
In response, the Defendant first argues that with respect to the Plaintiff’s trade secret
misappropriation claims, the Plaintiff has not suffered irreparable harm, nor will it suffer irreparable
harm in the future. The Defendant advises the court that the technical or financial secrets in question
do not form the basis for injunctive relief because the same is no longer a secret. In support of their
argument, the Defendant argues that the evidence at trial revealed that the Plaintiff publicly
disclosed its trade secrets no later than February 2005 when the Plaintiff publicly released its 2560
ambient light sensor product. The Defendant notes, then, that as of February 2005, the 2560
product’s combination of technical information was publicly available through reverse engineering.
The Defendant argues that since the Plaintiff’s technologies at issue have been in the public domain
since 2005, the Plaintiff is not entitled to future trade secret protection in the form of an injunction.
The Defendant further contends that the parties’ “Confidentiality Agreement” (non-disclosure
agreement) expired in 2007, thus suggesting that the Plaintiff did not expect for its trade secrets to
remain secret beyond 2007.
Finally, the Defendant notes that while the Plaintiff claims it lost Apple’s business in 2007,
the Plaintiff has won Apple’s business for each of the last four generations of iPhones over the past
six years. The Defendant contends that even if the Defendant almost put the Plaintiff out of business
in 2007, the Plaintiff has offered no evidence that the Plaintiff’s business with Apple, or any other
customer for that matter, is at risk today absent an injunction.
With respect to the Plaintiff’s misappropriation of trade secrets claim, the court finds that
the Plaintiff has failed to establish that, “in the absence of an injunction, [it] has suffered, and is
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likely to continue suffering, irreparable injury for which there is no adequate remedy at law.”
Bianco, 2014 WL 1049067, *2. “The Texas common law of trade secret protection provides for
injunctions to issue in appropriate cases, but the core right in the case of trade secrets is not the right
to exclude others from practicing the trade secret.” Id. “For example, the owner of a trade secret,
unlike a patentee, has no right to bar a party from practicing the technology that is the subject of the
trade secret, as long as the party has not obtained access to that technology by misappropriating the
trade secret. Thus, the core right that attaches to a trade secret is the right against misappropriation,
not the right to exclude a user of the technology.” Id.
Here, as in Bianco, supra., the court begins its analysis with the jury’s verdict. The jury
found that the Defendant misappropriated the Plaintiff’s trade secrets. See id. at *3. For purposes
of the matter at hand, this issue is settled. See id. The jury was instructed that if it found that the
Defendant misappropriated the Plaintiff’s trade secrets, the jury must determine an appropriate
remedy for such misappropriation. The jury was instructed that it could award the Plaintiff either
disgorgement of the Defendant’s profits for the products at issue or a reasonable royalty for the
Defendant’s sales of the products at issue. See COURT’S INSTRUCTIONS TO THE JURY, Dkt. #506, p.
13. Notably, the jury determined that a reasonable award for the misappropriation of the Plaintiff’s
trade secrets was the disgorgement of the Defendant’s profits in the amount of $48,783,007.00.
The evidence at trial revealed that in June 2004, the parties entered into a Confidentiality
Agreement to explore a possible business relationship. While negotiations concerning this business
relationship ultimately failed, the Plaintiff’s entry into the Confidentiality Agreement showed the
Plaintiff’s willingness to share its trade secrets in order to engage in a business venture. Further,
pursuant to the terms of the Confidentiality Agreement, the parties were bound by the terms of the
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agreement until June 2007. Once the Plaintiff’s products were on the market, however, the
Defendant was permitted to reverse engineer those products after the terms of the Confidentiality
Agreement expired in June 2007. See Bianco, supra. at *4. Whatever potential “head start” the
Defendant may have gained from its misappropriation of the Plaintiff’s trade secrets occurred years
ago and has no bearing on any future harm. Since an injunction is designed to alleviate future harm,
and since the threat of any future harm has long passed, the issuance of an injunction does not appear
to be appropriate. See i4i Ltd. P'ship, 598 F.3d at 861-62.
Additionally, the court finds that the Plaintiff’s argument that it will be irreparably harmed
if it is forced to compete with the Defendant’s products that incorporate the Plaintiff’s trade secrets
is unpersuasive. While the Plaintiff and the Defendant compete in the ambient light sensor market,
the evidence showed that the Plaintiff won Apple’s business for each of the last four generations of
iPhones over the past six years. The court agrees with the Defendant that even if the Defendant
almost put the Plaintiff out of business in 2007, the Plaintiff has offered no evidence that the
Plaintiff’s business with Apple, or any other customer for that matter, is at risk today absent an
injunction.
The court further questions the Plaintiff’s ability to establish irreparable injury and the need
for an injunction with respect to the Defendant’s misappropriation of the Plaintiff’s trade secrets
since “trade secret misappropriation under Texas law is not a continuing tort.” Bianco v. Globus
Medical, Inc. 53 F. Supp. 3d 929, 938 (E.D. Tex. 2014), citing TEX. CIV. PRAC. & REM. CODE §
16.010(b). “Instead, the tort of misappropriation, as viewed under Texas law, occurs at the moment
of misappropriation.” Id. (citation omitted). “Thus, while a patent infringer commits a new tort of
infringement each time it makes, uses or sells the patented product, a trade secret misappropriator
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commits only a single tort at the time of misappropriation.” Id. This leads the court to next review
the Plaintiff’s ability to establish irreparable injury, the inadequacy of money damages, and the need
for an injunction with respect to the patent infringement claims.
“[T]he patent right is explicitly defined as a right of the patent owner to exclude others from
practicing the invention protected by the patent.” Bianco, 2014 WL 1049067, *2, citing 35 U.S.C.
§ 154(a)(1) (remaining citations omitted). “Although the Supreme Court in eBay made it clear that
the statutory right to exclude does not justify a general rule favoring injunctions in patent cases, 547
U.S. at 392, the right to exclude is frequently invoked as being a significant factor supporting the
grant of injunctive relief in particular cases.” Id.
Again, the court’s analysis begins with the verdict of the jury. The jury found that the
Defendant infringed claims 16, 17, 18, 43, 45, and 46 of the ’981 patent. The jury was instructed
that if it found that the Defendant infringed any valid claim of the ’981 patent, then the Plaintiff was
entitled to at least a reasonable royalty to compensate it for that infringement. See COURT’S
INSTRUCTIONS TO THE JURY, Dkt. #506, p. 33. The court notes that the Plaintiff only sought to
recover a reasonable royalty. The jury subsequently awarded the Plaintiff a reasonable royalty for
the Defendant’s infringement of the ’981 patent in the amount of $73,653.51.
It is clear to the court from the moving papers as well as the discussion that ensued at the
January 19, 2016 hearing on this matter that the Defendant continues to sell at least one Infringing
Product on its website. TR., JAN. 19, 2016 HEARING, pp. 55-58. While the court might have
determined that the Defendant’s continued sale of an Infringing Product amounted to irreparable
harm, the court declines to do so in light of the fact that the Plaintiff viewed a reasonable royalty as
sufficient compensation for the Defendant’s past infringement. See Bianco, 2014 WL 1049067, *3.
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“It also provides a sound basis from which to conclude that a continuing royalty would have the
same effect on any continuing injury into the future.” Id. Accordingly, this factor weighs against
the issuance of an injunction.
2.
Balance of Hardships
“Because the ‘balance of hardships’ assesses the relative effect of granting or denying an
injunction on the parties,” the court may consider such factors as “the parties’ sizes, products, and
revenue sources.” i4i Ltd. P'ship, 598 F.3d at 862. The Plaintiff notes that as of January 3, 2014,
the Defendant had $194.8 million in cash and a net worth of approximately $957 million. At trial,
Alan Ratliff, the Defendant’s damages expert, testified that the Defendant’s sales from ambient light
sensors made up 1.3% of the Defendant’s total revenue from 2006 to 2013. Mr. Ratliff further
testified that a large portion of the Plaintiff’s business is derived from the sale of ambient light
sensors. The Plaintiff argues that the Defendant’s direct competition with the Plaintiff through the
use of the Plaintiff’s patented technology and trade secrets deprives the Plaintiff of revenue from
its ambient light sensors. The Plaintiff argues that this is a hardship to the Plaintiff because a greater
portion of its product portfolio, as compared to that of the Defendant’s, is comprised of ambient light
sensors.
The Defendant argues, and the court agrees, that without establishing irreparable harm, the
Plaintiff cannot demonstrate that it will be faced with a hardship if an injunction does not issue.
Accordingly, this factor weighs against the issuance of an injunction.
3.
Public Interest
“[T]he 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
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from the injunction's adverse effects.” i4i Ltd. P'ship, 598 F.3d at 863 (citation omitted). The
Plaintiff argues that a permanent injunction is necessary to prevent the Defendant from continuing
to misuse the Plaintiff’s trade secrets and patented technology. As noted by the Defendant, the
Plaintiff’s argument does not address how the public would be protected from the injunction’s
adverse effects. Accordingly, this factor weighs against the issuance of an injunction.
SUPPLEMENTAL DAMAGES
The Plaintiff argues that it is entitled to seek damages for sales of the Infringing Products and
the At-Issue Products from April 2014 through the entry of a final judgment. For all of the reasons
already stated, the Plaintiff is not entitled to supplemental damages for the Defendant’s
misappropriation of the Plaintiff’s trade secrets.
With respect to patent infringement damages, the jury did not have before it evidence of the
Defendant’s sales data from March 2014 through March 2015 (the jury’s verdict). The Defendant
does not dispute (providing that the patent infringement verdict stands) that the Plaintiff is entitled
to supplemental damages for sales in the United States of products found to infringe the Plaintiff’s
patent from March 2014 until the expiration of the patent. The court notes that the Plaintiff seeks
supplemental damages from March 2014 until the entry of a permanent injunction; however, for all
of the reasons provided herein, the Plaintiff’s request for injunctive relief is denied.
CONCLUSION
Having reviewed the four factors necessary to obtain permanent injunctive relief, the court
finds that the factors weigh against the issuance of a permanent injunction. Accordingly, the
Plaintiff’s motion for a permanent injunction (docket entry #518) is hereby DENIED. TAOS’
motion for supplemental damages (docket entry #554) is GRANTED IN PART.
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In the event the Plaintiff’s request for injunctive relief was denied, the Defendant moved the
court for a running royalty for any future patent infringement. The court finds that the request is
well taken and should be granted. Since the Defendant has admitted to the ongoing sale of at least
one Infringing Product, a running royalty is appropriate. The court notes that the running royalty
is only appropriate with respect to the patent infringement claim, not the trade secret
misappropriation claim for the reasons stated above.
The Defendant has requested the opportunity to negotiate a royalty rate to address any future
harm to the Plaintiff for the remaining life of the ’981 patent. The parties are hereby
ORDERED to negotiate a royalty rate to address any future harm to the Plaintiff for the
remaining life of the ’981 patent. Such supplemental damages shall be for sales in the United States
of products found to infringe the Plaintiff’s patent from March 2014 until the expiration of the
patent. The parties shall have 30 days from the entry of this order to negotiate a royalty rate. If the
parties require additional time, they may so move the court. If the parties are unable to successfully
negotiate a royalty rate, the Plaintiff may move the court to impose an ongoing royalty rate.
IT IS SO ORDERED.
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SIGNED this the 22nd day of April, 2016.
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RICHARD A. SCHELL
UNITED STATES DISTRICT JUDGE
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