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Presidio Components, Inc. v. American Technical Ceramics Corp.

United States District Court, Ninth Circuit

August 12, 2013

PRESIDIO COMPONENTS, INC., Plaintiff,
v.
AMERICAN TECHNICAL CERAMICS CORP., Defendant.

ORDER: (1) GRANTING MOTION FOR PERMANENT INJUNCTION [Doc. No. 432]; (2) AWARDING SUPPLEMENTAL DAMAGES IN THE AMOUNT OF $1, 508, 114 [Doc. No. 431]; (3) DENYING AS MOOT MOTION TO STRIKE RABE DECLARATION [Doc. No. 446]; (4) DENYING MOTION TO STRIKE NEWMAN DECLARATION [Doc. No. 454]; and (5) DENYING AS MOOT MOTION TO STRIKE DEVOE DECLARATION [Doc. No. 454].

IRMA E. GONZALEZ, District Judge.

Presently before the Court are the motions of Plaintiff Presidio Components Inc. ("Presidio") for a permanent injunction and for supplemental damages. [Doc. Nos. 432; 431.] Presidio has also filed a motion to strike the Rabe declaration. [Doc. No. 446.] Defendant American Technical Ceramics Corporation ("ATC") has filed a motion to strike the Newman and Devoe declarations. [Doc. No. 454.] For the following reasons, the Court GRANTS the motions for a permanent injunction and for supplemental damages. The Court awards supplemental damages in the amount of $1, 508, 114 to Presidio. The Court DENIES AS MOOT Presidio's motion to strike the Rabe declaration. The Court DENIES ATC's motion to strike the Newman declaration and DENIES AS MOOT ATC's motion to strike the Devoe Declaration.

BACKGROUND

The Court summarizes the procedural history of the above-captioned case following the parties' post-trial motions. On April 13, 2010, this Court denied Presidio's post-trial motions for a permanent injunction, enhanced damages, and attorney's fees, but granted Presidio supplemental damages. [Doc. No. 348, Order on Post-Trial Mots.] In response to ATC's post-trial motions, this Court vacated the willfulness verdict and set an ongoing royalty rate of 12% of the 545L capacitor's wholesale price. [Id.] The Court denied ATC's motions for judgment as a matter of law ("JMOL") or a new trial, and JMOL on the jury's lost profit damages award and on false marking prior to October 24, 2008. [Id.] This Court also fined Presidio $0.35 per unit for false marking. [Id.]

On December 19, 2012, the Federal Circuit affirmed-in-part, vacated-in-part, and remanded this Court's orders on the post-trial motions of ATC and Presidio. Presidio Components, Inc. v. Am. Tech. Ceramics, Corp. , 702 F.3d 1351 (Fed. Cir. 2012). The Federal Circuit affirmed the majority of this Court's determinations, with the exception of its finding of no irreparable injury, the related denial of a permanent injunction, and the ongoing royalty determination. Id. at 1354. The Federal Circuit stated that this Court's "finding of no competition for the purpose of irreparable harm conflicts with the clear finding of competition for the purpose of awarding damages" and that "the record shows direct and substantial competition between the parties." Id. at 1363. The Federal Circuit also stated that the jury's finding that ATC's 545L capacitor sales caused Presidio to lose sales of its BB capacitors "squarely supports a finding of irreparable harm." Id. at 1363. Because the Federal Circuit held that this Court clearly erred in finding no irreparable injury, it vacated this Court's denial of Presidio's motion for a permanent injunction and remanded for a re-weighing of the four factors consistent with the Federal Circuit's opinion. The Federal Circuit also vacated this Court's ongoing royalty determination, which was predicated on the denial of the permanent injunction. Id. at 1364.

On May 15, 2013, Presidio filed motions for permanent injunction and for supplemental damages. [Doc. No. 432, Mot. for Permanent Injunction ("PI"); Doc. No. 431, Mot. for Supp. Damages.] On June 12, 2013, ATC filed sealed oppositions to both motions. [Doc. No. 443, Opp. to Mot. for PI; Doc. No. 444, Opp. to Mot. for Supp. Damages.] On June 13, 2013, Presidio filed sealed reply memoranda in support of both motions. [Doc. No. 447, Reply to Mot. for PI; Doc. No. 448, Reply to Mot. for Supp. Damages.] Also on June 13, Presidio filed a motion to strike the declaration of Mr. Stephan Rabe. [Doc. No. 446, Mot. to Strike Rabe Decl.] On June 18, 2013, ATC filed a motion to strike the declarations of Mr. Glenn Newman and Mr. Lambert Devoe. [Doc. No. 454, Mot. to Strike Newman and Devoe Decl.] On June 19, 2013, the Court ordered ATC to file a surreply addressing the merits of Presidio's reply memorandum in support of its motion for supplemental damages. [Doc. No. 460.] On June 21, 2013, ATC filed a sealed surreply memorandum. [Doc. No. 465, Surreply to Mot. for Supp. Damages.] On June 26, 2013, the Court held oral argument on the motions for permanent injunction, for supplemental damages, and to strike. [Doc. No. 472.]

DISCUSSION

I. Motion for Permanent Injunction

In eBay Inc. v. MercExchange, L.L.C., the Supreme Court overruled the Federal Circuit's "general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances." 547 U.S. 388, 390-94 (2006). The Supreme Court held that a "plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (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. at 391. The Court must balance the four factors to determine whether an injunction is appropriate. Acumed LLC v. Stryker Corp. , 551 F.3d 1323, 1329 (Fed. Cir. 2008); Canadian Lumber Trade Alliance v. United States , 441 F.Supp.2d 1259, 1264 (C.I.T. 2006) (citing Amoco Prod. Co. v. Village of Gambell , 480 U.S. 531, 542, 546 n.12 (1987)) ("All parties agree, as they must, that the four-factor test' is a balancing test.").

"[T]he decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and... such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards." eBay, 547 U.S. at 394. However, the Federal Circuit recently reaffirmed that "[w]hile a patentee is not entitled to an injunction in every case, it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.'" Presidio Components , 702 F.3d at 1363 (quoting Robert Bosch LLC v. Pylon Mfg. Corp. , 659 F.3d 1142, 1149 (Fed. Cir. 2011)).

In its post-trial motions, Presidio initially moved for a permanent injunction in light of the jury's finding that the '356 patent is valid and infringed. [Doc. No. 348, Order on Post-Trial Mots. at 62.] When ruling on the post-trial motions, this Court found that Presidio failed to carry its burden in demonstrating irreparable injury, inadequacy of money damages, and that the public interest tips in its favor, and denied the motion for a permanent injunction. [Id. at 68.] On appeal, the Federal Circuit held that "the district court clearly erred in finding no irreparable injury" and "abused its discretion when it denied Presidio a permanent injunction." Presidio Components , 702 F.3d at 1364. The Federal Circuit did not specifically address any of the other permanent injunction factors. See id. at 1362-64.

Presidio requests that the Court enter a permanent injunction in light of the Federal Circuit's ruling that there was irreparable injury. [Doc. No. 432-1, Mot. for PI at 6-7 (citing Presidio Components , 702 F.3d at 1354, 1362-64).] ATC stresses that the Federal Circuit did not direct the Court to enter an injunction, but rather remanded for "re-weighing of the four [eBay] factors." [Doc. No. 443, Opp. to Mot. for PI at 1 (quoting Presidio Components , 702 F.3d at 1364).] ATC argues that the "[r]eevaluation and reweighing of the eBay factors is prospective." [Doc. No. 443, Opp. to Mot. for PI at 1.] The Court considers each factor in turn.

A. Irreparable Injury

"The essential attribute of a patent grant is that it provides a right to exclude competitors from infringing the patent." Acumed , 551 F.3d at 1328 (citing 35 U.S.C. § 154(a)(1) (2000)). "In view of that right, infringement may cause a patentee irreparable harm not remediable by a reasonable royalty." Acumed , 551 F.3d at 1328. "Direct competition in the same market is certainly one factor suggesting strongly the potential for irreparable harm without enforcement of the right to exclude." Presidio Components , 702 F.3d at 1363.

The Federal Circuit disagreed with the Court's initial finding on the post-trial motions that ATC and Presidio are not direct competitors for the purpose of irreparable harm. In the context of the four-factor Panduit test for lost profits, the Federal Circuit affirmed the Court's finding that Presidio and ATC are direct competitors. Presidio Components , 702 F.3d at 1363 (citing Panduit Corp. v. Stahlin Bros. Fibre Works, Inc. , 575 F.2d 1152 (6th Cir. 1978)). The Federal Circuit highlighted the tension between this Court's clear finding of competition for the purpose of awarding damages and the finding of no competition for the purpose of irreparable harm. Id. at 1362.

In support of its holding that Presidio and ATC are direct competitors, the Federal Circuit stressed that the BB and 545L capacitors "are both one-piece broadband capacitors with a substantially monolithic design." Id . The Federal Circuit also cited the testimony of Presidio's damages expert, Mr. Newman, that the two products compete "head-to-head" in the one-piece capacitor market for the same customers and applications. Id . Additionally, in its discussion of the permanent injunction, the Federal Circuit favorably cited this Court's finding on the damages issue that "substantial evidence supported the jury's finding that demand existed for the BB capacitors, which compete with the 545L capacitors." Id. at 1362 (quoting Doc. No. 348, Order on Post-Trial Mots. at 51).

In light of this record evidence of direct competition, the Federal Circuit held that this Court "placed too much weight on Presidio's failure to practice the #356 patent." Presidio Components , 702 F.3d at 1363.[1] The Federal Circuit also held that this Court "correctly found Presidio's unwillingness to license favored finding irreparable injury." Id.

Presidio stresses that "the principal value of a patent is the right to exclude arch competitors from making, selling and using an infringing product." [Doc. No. 432-1, Mot. for PI at 11 (quoting Fresenius Med. Care Holdings v. Baxter Int'l, 2008 U.S. Dist. LEXIS 79689, at *13 (N.D. Cal. Apr. 4, 2008).] It argues that Presidio and ATC are "direct competitors, selling competing capacitor products in the same market and to the same customers and potential customers." [Id.] In view of this direct competition, Presidio argues that it has adequately demonstrated irreparable harm. [Id. at 12.] Presidio also cites its smaller size relative to ATC and the fact that it never licensed the patent in question to support its claim of irreparable injury. [Id. at 14-15.]

ATC contends that the Federal Circuit found irreparable harm on the 2009 trial record. It argues that changed circumstances that are now before the Court, which were not before the Federal Circuit and the jury, show that Presidio had strong marketplace success from 2010-2013. ATC points to Presidio's sales data, which shows growing BB capacitor sales from 2010-2013. [Doc. No. 443, Opp. to Mot. for PI at 3.] ATC argues that in 2013, BB capacitors and 545Ls "do not compete" because 545L capacitors have a lower insertion loss and were designed to compete in a higher performance market than BB capacitors, which have a higher insertion loss. [Id. at 5.]

Although ATC now presents emails from several customers who state that they cannot use BB capacitors when they require a low-insertion-loss capacitor, and instead use the 545L, these statements are insufficient for this Court to reject the Federal Circuit's conclusion that BB capacitors directly compete with the 545L capacitors. The Federal Circuit was aware of the difference in insertion loss between the two capacitors. Presidio Components , 702 F.3d at 1360. Nonetheless, it held that the capacitors directly competed with each other and that there was irreparable harm. Furthermore, as Presidio argues, these emails from customers demonstrate that customers are evaluating the BB and 545L capacitors for the same projects and therefore support the finding that Presidio and ATC are direct competitors. [Doc. No. 439, Presidio's Reply to Mot. for PI at 5.] Therefore, the Court finds that Presidio has shown irreparable harm.

B. Inadequacy of Monetary Damages

"The essential attribute of a patent grant is that it provides a right to exclude competitors from infringing the patent.... In view of that right, infringement may cause a patentee irreparable harm not remediable by a reasonable royalty." Acumed , 551 F.3d at 1328 (internal citation omitted). "[T]he issues of irreparable harm and the adequacy of remedies at law are inextricably intertwined." ActiveVideo Networks, Inc. v. Verizon Comms., Inc. , 694 F.3d 1312, 1337 (Fed. Cir. 2012); see also Acumed , 551 F.3d at 1327-29 (analyzing irreparable harm and adequacy of monetary damages together).

"While money damages are generally considered inadequate to compensate for the violation of a patentee's right to exclude, [the patentee] nonetheless [has] a burden to iterate specific reasons why [the] infringement can not be compensated for with a money award. "Loss of business opportunity or damage to brand recognition could provide a basis for concluding that monetary relief would be inadequate." ActiveVideo Networks, 649 F.3d at 1340. Praxair, Inc. v. ATMI, Inc. , 479 F.Supp.2d 440, 444 (D. Del. 2007) (citation omitted) (emphasis added). Loss of market share, brand recognition, and customer goodwill "may frequently defy attempts at valuation." i4i Ltd. Parternship v. Microsoft Corp. , 598 F.3d 831, 862 (Fed. Cir. 2010). The fact that a patentee has previously chosen to license the patent may indicate that a reasonable royalty does compensate for infringement. Acumed , 551 F.3d at 1328.

"Difficulty in estimating monetary damages is evidence that remedies at law are inadequate." Id . However, record evidence must establish these losses. See ActiveVideo Networks, 649 F.3d at 1340 (holding that money damages were adequate when there was no record evidence that the patentee had "lost any market share or any customers at all due to [the] infringement").

In Praxair, a case cited by this Court in its previous order on the post-trial motions, the district court found that the patentee's product was in "direct and head-to-head competition" with the infringing product. Praxair , 479 F.Supp.2d at 442. The Praxair court also found that the two products were the only ones of their kind on the market and that therefore, the infringing product was "taking sales from the [patentee's product]." Id. at 442-43. The Praxair court ultimately found, however, that the patentee did not "[meet] its burden under eBay to put forward sufficient proof vis-a-vis the broad scope of relief requested." The district court found the patentee's general arguments that the infringing products' presence in the market will cause it to "likely lose additional market share, profits, and goodwill" without further explanation did not make a sufficient showing of the inadequacy of monetary damages. Id. at 443-44.

This Court previously found that Presidio did not meet its burden to show the inadequacy of monetary damages. [Doc. No. 348, Order on Post-Trial Mots. at 66.] The Court stated that although "Presidio argue[d] that the effects of future infringement cannot be fully measured in dollars, [it] fail[ed] to explain why money damages would not adequately compensate it for any alleged lost market share' or any future lost opportunities." [Id.] The Court found that Presidio "provide[d] no evidence that it lost or will lose any specific customers or sales due to ATC's infringement, or that it has suffered any lost market share' or price erosion.'" [Id. at 67.]

In its motion for a permanent injunction, Presidio centers its argument regarding inadequacy of monetary damages on Federal Circuit case law stating that irreparable harm and inadequacy of monetary damages are "inextricably intertwined." [Doc. No. 432-1, Mot. for PI at 15 (citing ActiveVideo Networks , 694 F.3d at 1337).] Presidio argues that when the Federal Circuit "determined that... Presidio demonstrated that ATC's infringement causes irreparable harm[, ]... the Federal Circuit effectively determined that ATC's infringement has resulted in the type of harm which no monetary compensation can cure." [Doc. No. 432-1, Mot. for PI at 15.] Presidio also uses the fact that it has never licensed the '356 patent and the fact that the 545L is competing with Presidio's main product to support a finding of the inadequacy of monetary damages.

Presidio also makes speculative arguments regarding harm to its reputation and goodwill. In its motion, Presidio cites the trial testimony of Mr. Lambert Devoe, a principal with Presidio: "[I]f someone comes up to [Presidio] at a trade show and says, hey, I just saw this ATC product. I thought you guys were innovators. What do you guys have that's new? That's very difficult for us because essentially, you know, in our opinion, it's, that's our design and they're basically taking away our relationship that we have with our customer, basically. So that has a strong negative impact on our future business." [Doc. No. 280, Tr. Transcript Day 2 at 110.] This speculative testimony, however, does not explain how ATC's 545L capacitors negatively impact Presidio's future business on the grounds of innovation. In fact, this testimony is just a hypothetical - there is no indication that this situation ever arose. Furthermore, Presidio does not cite to any actual examples where customers have switched from Presidio to ATC on the basis of believing that Presidio is no longer an innovator.

ATC argues that "[a] finding of irreparable harm does not ipso facto produce a finding of inadequacy of monetary damages." [Doc. No. 443, Opp. to Mot. for PI at 8.] ATC cites the Court's previous finding that there "is no evidence... that Presidio's reputation as [an innovator and] provider of unique solutions [was] damaged by the infringement." [Id. at 8-9 (quoting Doc. No. 348, Order on Post-Trial Mots. at 67).] ATC then argues that the damage to Presidio's goodwill and reputation is due to Presidio's "inability or refusal to design a capacitor that solves the very high insertion loss present in BBs." [Doc. No. 443, Opp. to Mot. for PI at 9.] ATC also contends that Presidio is not the only innovator in the market, and that ATC has launched a new market segment for customers who previously made their own broadband capacitors. [Id.] ATC again reiterates its argument from the irreparable harm prong that BBs and 545Ls are in different markets. [Id.] Finally, ATC concludes that "any economic and tangential interests such as reputation and goodwill of Presidio have been and can be adequately compensated with money damages." [Id. at 10.] However, ATC's only attempt at an explanation for this statement is that Presidio's sales of BBs and other capacitors skyrocketed, which "proves" that 545Ls "did no actual harm to Presidio or BBs." [Id.]

The Court finds that this factor does not tip in favor of either party. The fact that Federal Circuit case law states that irreparable harm and inadequacy of monetary damages are inextricably intertwined supports the inadequacy of monetary damages, as the Federal Circuit held that Presidio was irreparably damaged. Furthermore, although Presidio does not specifically mention the difference in size between ATC and Presidio, Mr. Lambert Devoe testified that when customers see that ATC, a much larger supplier, offers the same product as Presidio, they may be more likely to buy from ATC because they want to consolidate their component suppliers. [Doc. No. 280, Tr. Transcript Day 2 at 111-12.] The difference in size between the two companies could be circumstantial evidence of the inadequacy of monetary damages.

However, because irreparable harm and inadequacy of monetary damages are two separate factors under the eBay test, Presidio may not simply rely on the Federal Circuit's holding of irreparable harm to demonstrate inadequacy of monetary damages. In the present motion, Presidio failed to address the shortcomings of Presidio's arguments regarding inadequacy of monetary damages that the Court identified in the order on post-trial motions. More specifically, Presidio failed to provide evidence to support its claims of lost customers and sales, and explanations as to why monetary damages would not compensate for future lost opportunities and lost market share. Therefore, the Court finds that this factor does not support Presidio. However, in light of the fact that irreparable harm and inadequacy of monetary damages are "inextricably intertwined, " this factor also cannot tip in favor of ATC as Presidio has shown irreparable harm.

C. Balance of Hardships

The balance of hardships prong considers only the balance between a plaintiff and a defendant. Acumed , 551 F.3d at 1330. "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." Windsurfing Int'l, Inc. v. AMF, Inc. , 782 F.2d 995, 1003, n.12 (Fed. Cir. 1986).

The Court previously found that the balance of hardships tips in Presidio's favor because the mere fact that ATC would have to stop selling the infringing 545L capacitors is not a hardship. [Doc. No. 348, Order on Post-Trial Mots. at 68.] Although the Federal Circuit did not specifically address this finding, it did state at the outset of its opinion that it "affirms the vast majority of [this Court's] determinations, " subject to a few exceptions. Presidio Components , 702 F.3d at 1354. Accordingly, and because circumstances have not changed to tip the balance of hardships in favor of ATC, this Court again finds that the balance of hardships favors Presidio.

D. Public Interest

Public interest is implicated where the product at issue is of unusual social benefit. Advanced Cardiovascular Sys., Inc. v. Medtronic Vascular, Inc. , 579 F.Supp.2d 554, 561 (D. Del. 2008). The Court previously found that the public interest favors ATC because "enjoining the sale of the 545L capacitors will hurt important government, military, space, and infrastructure projects, as well as many critical civilian industries." [Doc. No. 348, Order on Post-Trial Mots. at 68.] The Court found that the interests advanced by Presidio, (1) the interest in maintaining a strong patent system; (2) the interest in fair and healthy competition; and (3) the interest in discouraging future wrongdoing, are always present in a patent case. [Id.]

Presidio acknowledges that the Court determined this factor favors ATC, but states that its slight weight should not outweigh the other factors. [Doc. No. 432-1, Mot. for PI at 20.] Presidio also argues that at the present time, ATC's infringing 545L capacitor "is not so important as to significantly affect society or the public's interest" because ATC has stated that it can provide its customers a different, non-infringing product and because ATC appears to be discontinuing the 545L capacitor. [Id. at 21-22 (citing Doc. No. 323-7, Decl. of Joseph Tierney ¶ 7; Doc. Nos. 432-3, 432-4, 432-5, Ex. B-D).]

In light of the Court's previous finding that 545L capacitors are used in government, military, space, and infrastructure projects, the Court again finds that this factor still favors ATC. However, in light of the fact that ATC is discontinuing the 545L ...


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