Equitable Remedy of Injunctive Relief is Not Guaranteed

June 2017

 

Nichia Corp. v. Everlight Americas Inc. 16-1585 (Fed. Cir.)

Preliminary injunctions have historically been granted in a majority of patent cases upon a finding of infringement.  In Nichia, the Federal Circuit applied the eBay factors and focused on a lack of irreparable harm to the plaintiff in finding that no injunctive relief was warranted.

Nichia is the world’s largest supplier of LEDs.  Everlight manufactures LEDs from components purchased from third-party suppliers.  Nichia asserted three patents against Everlight in the Eastern District of Texas directed to LED manufacturing methods and package designs.  Following a bench trial, the district court entered judgment for Nichia upon a finding that Everlight infringed each of the asserted patents.  Nichia moved for the entry of a permanent injunction.  However, that request was denied.  Nichia appealed to the Federal Circuit.

A party requesting an injunction must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate; (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.  These four factors are known as the eBay test.

The Federal Circuit reviewed the lower court’s refusal to enter an injunction for an abuse of discretion and found that Nichia had failed to prove it would suffer irreparable harm absent the injunction.  Everlight’s sales accounted for a “drop in the bucket” compared to Nichia’s total sales.  Nichia failed to establish that Everlight was responsible for any lost sales in the U.S., and Nichia’s evidence of price erosion was found to be attributable to other competitive factors.  Nichia’s willingness to license its technology to other, larger competitors who posed major threats to its flagship products also weighed against a finding of irreparable harm.  Because an injunction may be issued only where all of the factors of the eBay test can be proven, the district court’s denial of an injunction for failure to prove irreparable harm was justified.

Key Takeaway:  A successful patent plaintiff’s request for a permanent injunction will only be granted upon a showing of all four factors of the eBay test.  An injunction may be denied, despite a finding of infringement, where irreparable harm cannot be proven through lost sales, price erosion or other evidence of injury that cannot be remedied through money damages or a reasonable royalty.