I4I v. Microsoft was decided on March 9, 2010 on appeal from the Eastern District of Texas. The case involved a host of issues, but this post will only deal with the injunction. In the case, the jury found that defendant Microsoft willfully infringed the asserted claims of the patent. After trial, the district court granted plaintiff i4i’s motion for a permanent injunction and enhanced damages. Microsoft appealed.
The Federal Circuit affirmed the permanent injunction grant.
A plaintiff seeking a permanent injunction “has the burden of showing that (1) it has suffered an irreparable injury; (2) remedies available at law are inadequate to compensate for that injury; (3) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) the public interest would not be disserved by a permanent injunction.”
The district court did not abuse its discretion in finding that Microsoft’s infringement irreparably injured i4i. “Past harm to a patentee’s market share, revenues, and brand recognition is relevant for determining whether the patentee has suffered an irreparable injury.” Evidence showed “that Microsoft and i4i were direct competitors…, and that i4i lost market share as a result of the infringing Word products.” Moreover, Microsoft’s infringing “products rendered i4i’s software obsolete, as a result of which i4i changed its business model to make software that complemented Microsoft’s infringing products.” In light of this “strong circumstantial evidence,” “i4i was not required to prove that its specific customers stopped using i4i’s products because they switched to the infringing [Microsoft] products.”
The district court did not abuse its discretion in finding that there were inadequate remedies at law to compensate i4i for its injury. Evidence showed that “before and after Microsoft began infringing, i4i produced and sold software that practiced the patented method.” And there was “no evidence that i4i had previously licensed the patent[;] instead …i4i sought to retain exclusive use of its invention.” “In this case, a small company was practicing its patent, only to suffer a loss of market share, brand recognition, and customer goodwill as the result of the defendant’s infringing acts. Such losses may frequently defy attempts at valuation, particularly when the infringing acts significantly change the relevant market, as occurred here,” where the district court found that “Microsoft captured 80%” of the relevant market.
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The balance of the hardships favored i4i. I4i’s business was comprised “almost exclusively of products based on the [patent].” In contrast, Microsoft’s infringing feature was “merely one of thousands of features” within the overall product, and the feature was “used by only a small fraction of Microsoft’s customers.” “[T]he balance of hardships assesses the relative effect of granting or denying an injunction on the parties.” “The far greater importance of the patented method to i4i, combined with the demonstrated past effects of infringement on i4i, favor[ed] issuance of a permanent injunction.” The expenses incurred in creating the infringing products, and the consequences to defendant of its infringement (such as the cost of redesigning the infringing product) are irrelevant to the balance-of-the-hardships analysis.
The district court did not abuse its discretion in finding that “the narrow scope of the injunction and the public’s general interest in upholding patent rights favor[ed] injunctive relief.” “By excluding users who purchased or licensed infringing [Microsoft] products before the injunction’s effective date, the injunction greatly minimize[d] adverse effects on the public. Here, the relevant ‘public’ includes not only individual consumers, but also companies that license infringing [Microsoft] products and manufacturers that are part of Microsoft’s distribution channels.”
The Federal Circuit modified the injunction’s effective date from “60 days from the date of [the injunctive] order” to “5 months from the date of [the injunctive] order.” The “only evidence about how long it would take Microsoft to comply with the injunction was [a] declaration, which gave an estimate of at least five months.”
i4i Ltd. Partnership v. Microsoft Corp., 598 F. 3d 831 (Fed. Cir. 2010)