Post-KSR obviousness arguments cast sufficient “doubt” on validity to vacate preliminary injunctionFebruary 20, 2008

In a decision yesterday, the Federal Circuit vacated a preliminary injunction entered in the Northern District of Ohio enjoining the selling and copying of a product used to practice a method claimed in a patent. In doing so, the Federal Circuit utilized of the traditional four–factor test for preliminary injunctions and specifically analyzed the first factor, likelihood of success on the merits. The court noted that a defendant need not prove actual invalidity of a patent in order to challenge this factor, only a substantial question of invalidity. Therefore, it found that there was sufficient evidence of invalidity of the patent such that the factor of likelihood of success on the merits was not met. Judge Newman dissented, arguing that the "substantial question of validity" standard was inappropriate.More details of Erico Int'l Corp.. v. Vutec Corp. after the jump. In 1998, Erico International Corp. (Erico) received a patent for a fastener called a J-Hook used secure electrical and communication cables to a wall. The patent covered both the apparatus and method for its use. In 2000, the USPTO reexamined the patent and cancelled all apparatus claims based on several references, one of which OBO Bettermann Publication. The asserted method claim survived reexamination. In 2005, Erico discovered the defendant, Doc's Marketing Corp. was copying and selling the J-Hook. When contacted by Erico, Doc's stated that it would not sell or copy the fastener anymore, but it soon continued to do so. Erico filed suit to enjoin Doc's, claiming Doc's engaged in contributory infringement of its method claim by selling knock-off J-Hooks to third parties. To evaluate Erico's claim, the district court looked at the traditional four factors relevant to preliminary injunctions: (1) likelihood of the patentee's success on the merits; (2) irreparable harm if the injunction is not granted; (3) the balance of hardships between the parties; and (4) the public interest. Doc's argued that the first factor was not met because Erico's reexamined patent was invalid, thus Erico's substantive claims of contributory infringement could not be successful. Doc's challenged the validity of the patent in three ways: (i) Erico had engaged in inequitable conduct; (ii) the patent was invalid under the on-sale bar of § 102(b); and (iii) the patent was obvious under § 103 in light of the OBO Bettermann standards and electronic and telecommunication industry spacing standards (EIA/TIA standards). The district court found that inequitable conduct was not shown because Doc's did not prove an intent to defraud the PTO by not disclosing the EIA/TIA standards, and that the on-sale bar was not applicable because there was no evidence that anyone actually practiced the method claim more than one year before the filing date. Further, even though the method claim incorporated "conforming standards" which were the same as the EIA/TIA standards, the district court found that the USPTO had sufficient information before it during prior examinations, and thus the obviousness claim would have been addressed during prior examinations. Further, secondary indicia of nonobviousness favored Erico. As a result, the district court entered a preliminary injunction, and Doc's appealed.On appeal, the Federal Circuit agreed with the district court's conclusions regarding inequitable conduct and the on-sale bar, but came to a different conclusion on obviousness. Doc's argued on appeal that the grant of a second reexamination by the USPTO raised substantial questions of validity, and further that the EIA/TIA standards were not actually cited in the reexamination proceeding. The Federal Circuit agreed, noting that the general rule is that a validity challenge can be successful during a preliminary injunction proceeding with only substantial questions of validity, not proof of actual invalidity. The court went on to note how the EIA/TIA standards were common cable practices prior to the filing date of Erico's patent, and that the inventor of the J-Hook had recognized that this was the common practice prior to the filing date. Thus, a person could be "implicitly motivate[d]" to use those EIA/TIA spacing standards with J-Hooks under a KSR–Dystar analysis. Because a "showing of a substantial question of invalidity requires less proof than the clear and convincing standard to show actual invalidity," the court found that this implicit motivation was enough to cast doubt on the validity of the patent, making a preliminary injunction inappropriate. Judge Newman dissented. She found that, because the standard of review for preliminary injunctions is an abuse of discretion, the district's courts decision should be given more discretion. The district court decided that the preliminary injunction was necessary to preserve the status quo during litigation. Therefore, the majority's decision to reverse the district court ignored the district court's discretion and the corresponding standard of review. Judge Newman also felt that the court should have given more consideration to the other three equitable factors of a preliminary injunction finding, including the fact that money damages would have made Doc's whole had the preliminary injunction been improperly granted. Further, she took issue with the majority's view that a preliminary injunction should not issue when doubt was cast about the validity of the patent. She stated that this standard shifts the burdens of proof during the preliminary injunction stage, and that the correct evaluation was whether the defendants have shown that they are likely to succeed on the merits at trial. Thus, the majority's standard of a "substantial question" is not adequate for the preliminary injunction stage, even though the Federal Circuit had used the "substantial" language in similar contexts. Lastly, Judge Newman noted that the district court had evaluated the obviousness issue under KSR, and that the district court had utilized the secondary Deere factors as well, finding factors weighing both for and against the patentee. However, on review, the majority never mentioned factors that weighed in favor of the patentee, which should be utilized when determining likelihood of proving invalidity. To read the full decision in Erico Int'l Corp. v. Vutec Corp., click here.