Feature Comment: Injunctions in Copyright Not Automatic

By Christopher Reaves

In the face of the Supreme Court’s eBay opinion, two Ninth Circuit panels both found that its command against presumptions of irreparable harm applied to copyright. These decisions harmonize the Ninth Circuit’s law with the Second’s, and continue the trend of standardizing injunctive relief into the four-factor test, full stop.

Military Bid Leads to Infringement Suit, Injunction

In 2008, Precision Lift, Inc. and West Coast Weld Tech sought a contract to design a maintenance platform for the Air Force’s C-130. Under the joint venture agreement, Precision would handle the bidding process and West Coast would design and manufacture the platforms. However, while the bidding was still in progress, Flexible Lifeline Systems purchased most of West Coast’s business, including all IP rights to the design drawings used in the Air Force bid. After Flexible expressed disinterest in continuing the joint venture, Flexible substituted in one of Flexible’s competitors as manufacturer on the bid, but continued to use the original design and drawings.

Flexible then registered the design drawings with the Copyright Office and sought a preliminary injunction to halt their use in the bidding. The District of Montana found that Flexible was likely to succeed on the merits, and that the public interest and equities both supported an injunction save for purposes of the Air Force bidding, which Flexible had shown no interest in participating in. Flexible did not present, and the court did not find, any particular facts showing irreparable harm absent the injunction; both instead relied on Ninth Circuit precedent that irreparable harm is presumed in a copyright case. The court therefore allowed Precision to continue the Air Force bid but otherwise enjoined Precision’s use of the drawings.

But Presumption Rejected in Search Engine War

Perfect 10 supplies nude images through its password-protected website to its subscribers; it holds copyright in those images. Third parties sometimes copy these images to their own websites and blogs, infringing on the copyright and making them available for free. If these copies are on a public website, Google’s “web crawler” inevitably links to these copies, as part of its automatic indexing process. Additionally, Google owns the Blogger service, whose users have posted some of Perfect 10’s images directly. When Perfect 10 began sending take-down requests to Google, Google obeyed some but found others deficient.

Perfect 10 began a lengthy infringement suit against Google, and sought a preliminary injunction to force Google to remove all the images and links. After remand from an earlier appeal on issues of fair use and secondary liability, the Central District of California held that Perfect 10 had failed to show sufficient evidence of irreparable harm. Specifically, it found that Perfect 10’s expert had only shown a decrease in business without demonstrating causation between Google’s actions and the slump. Perfect 10 appealed again, asking the Circuit Court to apply the presumption of harm instead.

Ninth Circuit: The Presumption is Dead, Twice Over

On August 3, 2011, Judge Ikuta, joined by Chief Judge Kozinski and Judge Hawkins, ruled that the presumption was no longer good law, and upheld the rejection of Perfect 10’s injunction. The Supreme Court in eBay v. MercExchange had overturned a similar presumption in the contexts of patent infringement and permanent injunctions. The panel saw no reason to limit the decision to patents, citing the eBay court’s references to the similarities between patent and copyright and its broad language as to the applicability of “traditional equitable principles.” It also looked to the example of the Second Circuit, which had interpreted eBay the same way in Salinger v. Colting the previous year.

As for any distinction between preliminary and permanent injunctions, the panel quoted Amoco Production Co. v. Gambell, where the Supreme Court rejected the distinction while overturning yet another injunctive presumption. The court therefore ruled that the presumption was invalid in the context of a preliminary injunction in a copyright case, and also held that the district court had not abused its discretion in finding that Perfect 10 had not shown evidence of causation between the infringement and the alleged irreparable harm.

Two weeks later, on August 22, Circuit Judges Schroeder, McKeown, and Callahan echoed the Perfect 10 court with a per curiam opinion in Flexible. Repeating much of Ikuta’s reasoning, the panel also noted similar rulings in not only the Second Circuit (Salinger) but also the First (CoxCom v. Chaffee) and Fourth (Christopher Phelps & Assocs. v. Galloway) Circuits, and a supporting shift in post-eBay treatises. Then, having removed the presumption, the panel quickly found that the district court had failed to make any other findings that would support a finding of harm, and remanded for further development of the record.

Post-Case Analysis: It’s Over, But Not Over

The Supreme Court has a long history of eliminating presumptions, and even lenient standards (see Winter v. NRDC), in the context of injunctive remedy, regularly pushing courts back into the four corners of the traditional equitable test. IP infringement held out against this pattern longer than most, due to its ties to trespass of traditional property. Nonetheless, once eBay came down, the copyright presumption was not long for this world, as other circuits quickly realized. Thus the only question in either of these cases was whether the Ninth Circuit would put it out of its misery or leave that job for an inevitable appeal to SCOTUS. And with both major copyright circuits in agreement, the matter seems quite settled.

Yet this is hardly the end for IP injunctions. The Federal Circuit very recently stated in Robert Bosch LLC (in the context of patents) that “[w]hile the patentee’s right to exclude alone cannot justify an injunction, it should not be ignored either.” It then emphasized the property nature of patents, and the heavy likelihood of harm in any competitive environment. In other words, the exclusive rights of IP are still to be considered as part of the irreparable harm analysis. The factor is no longer the instant win it once was, but when the parties are competitors, as they were in Robert Bosch, it should not be a hard point to argue.

The Perfect 10 opinion (99 U.S.P.Q.2d 1533, No. 10-56316) is available at: http://www.ca9.uscourts.gov/datastore/opinions/2011/08/03/10-56316.pdf

Oral arguments can be heard at: http://www.ca9.uscourts.gov/media/view_subpage.php?pk_id=0000007250

 

The Flexible Lifeline opinion (99 U.S.P.Q.2d 1837, No. 10-35987) is available at: http://www.ca9.uscourts.gov/datastore/opinions/2011/08/22/10-35987.pdf

Oral arguments can be heard at: http://www.ca9.uscourts.gov/media/view_subpage.php?pk_id=0000007437

Feature Comment: Traps for the Unwary: An Overview of Patent Issues For The Commercial Company Entering Into Federally Sponsored Research and Development Projects

By James G. McEwen[1]

Background

For the uninitiated, contracts and agreements with the Federal Government present a dizzying array of acronyms and terms which seemingly add a layer of confusion above the already-complex subject of patent rights for parties under research and development agreements.   However, it is important to realize that, generally, contracts with the Federal Government are similar to commercial contracts (i.e., consideration, offer, and acceptance).  Thus, while generally similar in terms of appearance, the difference in a government contact becomes apparent when you realize one important fact: the contract is with the rule maker who may or may not have consented to suit according to the particular circumstance.   As a result, a Government contract can be thought of in terms of a controlled taking since the Government creates laws that govern all contracts, and is therefore in a better position as a contracting party to create mandatory clauses, and to ensure their inclusion in all contracts.

For instance, in a contract between private parties, if one party fails to include a clause, that clause is not part of the contract.  In contrast, since certain clauses are required by law, where a Government contract is concerned, omitted clauses can be included as if in the contract since the contract is otherwise ultra vires. [2]

In the context of intellectual property, many intellectual property rights are governed by such laws or by strong Federal procurement policies, and are thus “read in” to all contracts.[3]  Therefore, unlike commercial contracting, one cannot assume that since a Government contract lacks a provision that the missing provision will not be later automatically included.

This requirement is especially strong in the context of intellectual property.  For instance, when inventions are created or made under a procurement agreement with the Government, such inventions are generally referred to as “subject inventions.”  These inventions are defined by law in the Bayh-Dole Act,[4] which requires Government rights in certain inventions made in conjunction with a Government contract.[5]  Similar statutes apply in the context of other intellectual property, most notably for technical data for contracts with the Department of Defense[6].  However, since patents represent a core protection for many companies whose existence is based on exclusive use of knowledge and who are interested in working with the Government, it is important for these companies to recognize the Government’s requirements for patents, and how to account for these requirements in a manner that fits their particular marketing model. Continue reading