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Sealant Systems International, Inc. v. Global

United States District Court, N.D. California, San Jose Division

October 13, 2014

SEALANT SYSTEMS INTERNATIONAL, INC. et al., Plaintiffs,
v.
TEK GLOBAL, S.R.L., et al., Defendants.

ORDER DENYING MOTION TO STAY, DENYING MOTION TO EXTEND SUNSET PERIOD, AND GRANTING MOTION TO MODIFY INJUNCTION (Re: Docket No. 312)

PAUL S. GREWAL, Magistrate Judge.

After a jury rendered its verdict on all triable issues, this court enjoined Defendants TEK Global S.R.L. and TEK Corporation from various acts found to infringe United States Patent No. 6, 789, 581.[1] Despite the irreparable harm to Plaintiff Accessories Marketing Inc. supporting the permanent injunction, the court also ordered a ninth-month sunset period for TEK to get its affairs in order and minimize any unjustified impact on third parties.[2] These nine months were on top of the 11 months since a jury found that TEK infringed multiple valid patent claims. 20 months are 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 Circuit.[3] TEK's request for relief from the injunction is not its first-as an alternative to denying the injunction outright TEK sought precisely the same stay in opposing the injunction at the outset.[4] As before, the court finds that neither a stay of the injunction or nor an extension of the sunset period is warranted, but that a modest modification to the injunction's terms is.

I.

Especially in the aftermath of the Supreme Court's 2006 decision in eBay v. MercExchange , 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 principles of equity."[5] One tool trial courts may use in applying such principles lies in Fed.R.Civ.P. 62(c), which authorizes the suspension or modification of an injunction pending appeal from a final judgment granting the injunction.[6]

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 appeal; (2) whether the movant will be irreparably injured absent a stay; (3) whether the issuance of the stay will substantially injure other parties interested in the proceeding; and (4) the public interest.[7] While the undersigned has expressed its doubts, other courts have equitably applied these factors on a "sliding scale, " so that even where the movant only demonstrates a "substantial" chance of success on the merits, a stay may be appropriate if the balance of the hardships weigh in the movant's favor.[8] Similarly, if the movant is more likely to win on appeal, the balance of harms may weigh less heavily in its favor.[9] Among other factors, "evidence of employee layoffs, immediate insolvency, and possible extinction of a company provide a basis of irreparable harm that militates in favor of granting a stay."[10]

While a permanent injunction may have been warranted, this "does not preclude a granting of a stay of that injunction pending appeal as both issues require different analyses."[11] Though the harm to the alleged infringer receives limited weight in the context of a motion for a permanent injunction, the "analysis changes in the context of a request for a stay on appeal because of the 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 International, Inc. with infringement of TEK's U.S. Patent No. 7, 789, 110 in the Southern District of New York.[14] SSI then sued TEK for a declaratory judgment of noninfringement of the 110 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 granted AMI's motion for summary judgment that it did not infringe the 110 patent and set the remainder of the case for trial.[18] A jury found for AMI on the 581 infringement claims.[19] After careful consideration of the eBay factors, including TEK's strenuous claims at trial that the 581 patent was not necessary for a successful tire repair kit and could be quickly designed-around, as 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, offering to sell, or importing in the U.S. any tire repair kit that includes features infringing specified claims of the 581 patent; (2) providing customer service or technical support related to 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 months, until December 10, 2014.[22] During this period, TEK may continue to sell infringing kits for certain pre-qualified Original Equipment Manufacturers' platforms.[23]

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 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]

In its opposition to AMI's permanent injunction motion, TEK initially sought a stay as an alternative.[26] Relying on what it claims are "changed circumstances" hindering the implementation of a non-infringing design that threaten TEK's very existence, TEK now seeks a stay for the second time, pending a hearing and decision on TEK's appeal to the Federal Circuit. In the alternative, TEK requests that the court extend the injunction's sunset period until April 10, 2015.[27] TEK further requests that the court narrow the sunset provision's customer certification requirement, which requires TEK to obtain agreements to restrict the use of the products from customers who have purchased TEK products after April 25, 2013.[28]

II.

This court has jurisdiction under 28 U.S.C. § 1338. The parties further consented to the jurisdiction of the undersigned magistrate judge under 28 U.S.C. § 636(c) and Fed.R.Civ.P. 72(a).

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


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