Preliminary Injunction Maintained Despite Adverse Decision in Parallel Post-Grant Review
Addressing the merits of an injunction in a case where the district court and the Patent Trial and Appeal Board (PTAB) disagreed as to the validity of a patent in parallel proceedings, the US Court of Appeals for the Federal Circuit affirmed the preliminary injunction by citing to the different standards applied by each forum. Tinnus Enterprises, LLC, Zuru LTD v. Telebrands Corporation, Bed Bath & Beyond, Inc., Case No. 16-1410 (Fed. Cir., Jan. 24, 2017) (Stoll, J).
Tinnus produces the “Bunch O Balloons” toy for filling water balloons and owns a patent covering the toy. Telebrands sells a competing “Balloon Bonanza” product. Both products attach to a hose in order to simultaneously fill multiple water balloons. Tinnus sued Telebrands and Bed Bath & Beyond (collectively, Telebrands) for patent infringement and moved for a preliminary injunction. The magistrate judge issued a report and recommendation (R&R) recommending the injunction, which the district court entered. Telebrands appealed. At about the same time, the PTAB instituted a post-grant review (PGR) requested by Telebrands. Telebrands did not move for a stay pending the PTAB decision, so the litigation and the PGR proceeded concurrently. In a final written decision, the PTAB found all of the claims invalid as indefinite.
Telebrands appealed the district court’s conclusions with respect to the likelihood of success on the merits and irreparable harm. Because Telebrands failed to object to the R&R’s indefiniteness determination, that determination was reviewed under a plain error standard, rather than the abuse of discretion usually applied on appeal. The Federal Circuit found no plain error in the district court’s indefiniteness analysis, despite the contrary finding by the PTAB. In this case, the difference in result can be attributed to the different standards used to evaluate indefiniteness in district court and the PTAB. In a PGR proceeding, indefiniteness is evaluated under the Packard test, while in district court, indefiniteness is evaluated under the Supreme Court of the United States’ Nautilus standard. The difference is that the Packard test sets a threshold for indefiniteness when a claim contains words or phrases whose meaning is unclear and demands at least as much clarity, and potentially more, than Nautilus’s reasonable certainty requirement.
Telebrands also faulted the district court for its purported failure to construe several terms. However, the Federal Circuit noted that the R&R adopted by the district court acknowledged the parties’ disagreement with respect to construction of certain claim terms, but concluded that Tinnus was likely to succeed regardless of those terms’ interpretation. Telebrands also argued that each claim limitation must be found in the accused product itself and that reliance on an instruction manual to show one of the claimed features was clear error. The Federal Circuit again disagreed, explaining that a patentee is entitled to rely on circumstantial evidence such as instruction manuals to establish infringement.
Telebrands next argued that it was clear error for the magistrate judge to rely on evidence pre-dating patent issuance in support of its irreparable harm finding. The Federal Circuit disagreed, finding that the pre-issuance evidence demonstrated the possibility of identical harm post-issuance. Moreover, the Court found that the record also contained sufficient post-issuance evidence to support the district court’s finding of irreparable harm.
Practice Note: Depending on the applicable circuit law, and at least in the Fifth Circuit, practitioners should adequately object to a magistrate judge’s report and recommendation in order to avoid the more deferential plain error standard of review on appeal.