CAFC rescinds preliminary injunctions against online hoverboard sellers

“An injunction cannot be granted because a trial is necessary or because the products charged are not ‘sufficiently different’ or ‘obviously different’ from the patented design.” – CAFC

In two separate case law opinions published on friday, on October 28, the United States Court of Appeals for the Federal Circuit (CAFC) overturned two separate preliminary injunctive orders granted by the United States District Court for the Northern District of Illinois against hoverboard products alleged to infringe four design patents due to “substantive flaws” in the court’s reasoning for granting the injunctions. Justices Dyk, Taranto and Stoll heard both appeals.

The 2020 injunction and the May 2021 order

The rulings relate to design patent infringement lawsuits filed by Hangzhou Chic Intelligent Technology Co., Ltd. and Unicorn Global, Inc. (referred to as ABC Corporation I and II) in 2020 against a number of defendants who sell hoverboards online. The patents at issue are US patent nos. D737,723 (“Patent D’723”), D738,256 (“Patent D’256”), D784.195 (“patent D’195”), and D785.112 (“Patent D’112”). The district court issued a preliminary injunction against some of the defendants in 2020 and later granted an amendment to add additional defendants in May 2021.

In response to a motion to clarify or vacate the 2020 preliminary injunction for lack of notice to defendants under Federal Rule of Civil Procedure (FRCP) 65(a), ABC was ordered by the District Court of seek a new preliminary injunction, which was granted in October 2021.

FRCP 65(a)(1) reads as follows:

Preliminary injunction.

(1) To remark. The court can only issue a preliminary injunction upon notice to the opposing party.

The CAFC explained that the May 24 order and the 2020 preliminary injunction violated this requirement because “[b]Prior to the entry of the 2020 Preliminary Injunction, no notice or opportunity to object was given even to the then-named defendant Gyroor-US, let alone the other appellants before us. Neither prior notice nor an opportunity to object was given to GaodeshangUS of the motion granted in the May 24 order; and the same applies to the other two appellants (Fengchi-US and Urbanmax) added to the list of defendants by this order. »

While ABC argued that Amazon’s freeze of Gyroor-US’s account on October 20, 2020 represented “notice” and that GaodeshangUS received notice through a lawyer at the time, the CAFC disagreed on both points. The court said there was no basis to assume that Amazon’s freezing of the account “informed Gyroor-US of the pending motion for (or consideration of) a preliminary injunction in order to to give Gyroor-US the required opportunity to object,” and the record did not support the claim that the named attorney represented GaodeshangUS prior to May 24. Thus, there was no evidence that the required notice had been provided and the The CAFC overturned both the 2020 preliminary injunction and the May 24 order granting ABC’s motion to vary to add additional defendants.

The 2021 injunction

Separately, the CAFC considered whether the 2021 preliminary injunction, which the district court ordered ABC to seek, met the requirements of FRCP 65(d) and the court’s precedent in its finding that the plaintiffs were likely to succeed on the merits. Because the district court’s analysis was in part “directly contrary” to CAFC precedent, the court quashed and remanded the case.

FRCP 65(d) reads as follows:

(d) Content and Scope of Each Injunction and Restraining Order.

(1) Contents. Any order granting an injunction and any restraining order must:

(A) state the reasons for which it was issued;

(B) specifically state its terms; and

(C) describe in sufficient detail – and not by reference to the complaint or other document – the prohibited or required act or acts.

(2) Related Persons. The order binds only the following persons who are effectively notified by personal service or otherwise:

(A) the parties;

(B) the officers, agents, servants, employees and attorneys of the parties; and

(C) other persons who concert or actively participate in any person described in Rule 65(d)(2)(A) or (B).

First, the CAFC said the District Court failed to apply the “proper legal standard” in issuing the 2021 injunction, pointing in particular to the following two statements made by the District Court:

“Resolving this expert dispute will likely require a trial. I think the need for a trial is sufficient in this case to satisfy the plaintiff’s burden of demonstrating a likelihood of success on the merits.”

and

“[P]plaintiff will likely succeed on the merits of his design patent. . . offense. The designs of the claims of the infringing products are not sufficiently dissimilar, or manifestly dissimilar. . . .”

The CAFC said these statements are “directly contrary to our precedent” and, citing Amazon.com, Inc. v. Barnesandnoble.com, Inc.., explained that a likelihood of success on the merits must be proven by a patentee demonstrating that he “is likely to prove infringement of the claimed claims. ‘Whether [the defendant] raises a fundamental question concerning . . . offense. . . , i.e. invokes an infringement. . . defense that the patentee cannot prove that it “lacks substantial foundation”, the preliminary injunction should not be granted. “The court clarified that”[a]An injunction cannot be granted because a trial is required or because the accused products are not “sufficiently different” or “obviously different” from the patented design. »

Second, the District Court failed to perform the “ordinary observer” test provided for in Egyptian Goddess vs. Swisa, which requires the court to conduct a “three-pronged analysis comparing the accused product, the patented design and the prior art”. Since the dominant feature of the accused goods and the patented design is the hourglass shape, “the analysis of substantial similarity of the infringement will in most cases focus on other features of the design . The shared dominant feature of the prior art will be no more than a background feature of the design, necessary to find substantial similarity but insufficient on its own to support a finding of substantial similarity . On the other hand, the expert report on which the district court relied “far from recognizing that the hourglass figure of the claimed patents could not be relied upon to establish substantial similarity, incorrectly relied on this characteristic to show substantial similarity,” the CAFC said.

The third legal error made by the District Court is that it then failed to apply the ordinary observer test “on a product-by-product basis” as required. This is particularly problematic here, the CAFC said, where the four offending products are starkly distinct from each other.

And finally, the CAFC said the wording of the preliminary injunction, even if properly granted, was too broad. Citing International Rectifier Corp. against IXYS Corp.., 383 F.3d 1312 (Fed. Cir. 2004), the court explained that “[t]The order does not specifically mention or prohibit “Accused Products A through D”. While the order allows plaintiffs to request Amazon to remove specific product identifiers and orders Gyroor to remove specific product URLs, it does not reduce the scope of the injunction’s general prohibition of “any reproduction , colorable copy or imitation” of the patented designs. In the end, said the CAFC, under International rectifier“injunctions which by their terms apply to ‘any device’ within the scope of the patent claims do not meet the specificity requirement of Rule 65(d).”

About Margaret L. Portillo

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