The Federal Circuit today affirmed a decision by the District Court denying defendant Thales DIS AIS Deutschland USA's motion for preliminary injunction to prevent patentee plaintiff Koninklijke Philips N.V. from obtaining an exclusion order from the International Trade Commission (ITC) under Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337), in Koninklijke Philips N.V. v. Thales DIS AIS Deutschland USA LLC.

The ITC provides relief in the form of an exclusion order against importation of goods shown to infringe a U.S. patent.  After the Supreme Court's decision in eBay v. MercExchange, the more reliable access to injunctions available from the ITC became attractive to patent plaintiffs under circumstances where all or a portion of patented product was imported into the U.S.  Section 337 proceedings are also amenable to motions for preliminary injunction, with all the strategic benefits such motions can have (for a patent holder or, as here, an accused infringer wishing to avoid an injunction that would halt importation until district court litigation was completed or the case settled).  But such injunctions are not automatic, as Thales found in this case.

The subject matter at issue was telecommunications equipment and technology, including wireless networks.  After fruitless negotiations regarding licensing of Philips' disputed standard essential patents (SEP) and Thales infringement thereof in its products, Philips filed an infringement suit in the U.S. District Court of Delaware and for an exclusion order before the ITC.  Thales counterclaimed for breach of contract and for a declaratory judgment on the FRAND rate determination, as well as a preliminary injunction to bar Philips from seeking a Section 337 exclusion order.  The District Court denied Thales' preliminary injunction motion and this appeal followed.

The Federal Circuit affirmed, in an opinion by Chief Judge Moore joined by Judges Dyk and Chen.  As the Court explained, whether a preliminary injunction is granted is within the sound discretion of the district court and Federal Circuit review of the district court's decision was for an abuse of discretion.  The Court's assessment of this question was grounded on the sufficiency of Thales' satisfaction of the requirements for a preliminary injunction, which were that the moving party is "likely to succeed on the merits, that [it] is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in [its] favor, and that an injunction is in the public interest," citing Luminara Worldwide, LLC v. Liown Elecs. Co., 814 F.3d 1343, 1352 (Fed. Cir. 2016) (quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)).  The basis for the panel's opinion that the District Court found Thales was properly not entitled to a preliminary injunction was the insufficiency of their allegations regarding the likelihood of irreparable harm.  "[M]ere possibility or speculation of harm is insufficient," according to the opinion, citing Winter.  Speculation (exemplified in the opinion as "customers merely expressing concern that a potential future ITC exclusion order could affect Thales' ability to deliver products down the road") does not evince a likelihood of irreparable harm, according to the Court (emphasis in opinion), citing Ferring Pharms., Inc. v. Watson Pharms., Inc., 765 F.3d 205, 219 (Fed. Cir. 2014), and Takeda Pharms. U.S.A., Inc. v. Mylan Pharms. Inc., 967 F.3d 1339, 1349 & n.8 (Fed. Cir. 2020).  The panel found no clear error by the District Court in finding Thales' evidence "conclusory" because it presented no evidence that "[Thales] lost customers, had customers delay purchases, or struggled to acquire new business because of the ongoing ITC proceedings."  Instead, Thales produced affidavits from clients that they had "voice[d] concerns" and "expressed doubt" regarding Thales' continued reliability as a supplier (expressed at oral argument as living under a "cloud on the business").  This is not sufficient evidence to satisfy the likelihood of irreparable prong of the test for obtaining a preliminary injunction, the Court held, citing Takeda Pharms and Celsis In Vitro, Inc. v. CellzDirect, Inc., 664 F.3d 922, 930 (Fed. Cir. 2012).

Accordingly, the Court affirmed the District Court's denial of Thales' preliminary injunction motion; the opinion also ordered Thales to pay costs.

Koninklijke Philips N.V. v. Thales DIS AIS Deutschland USA LLC (Fed. Cir. 2022)
Panel: Chief Judge Moore and Circuit Judges Dyk and Chen
Opinion by Chief Judge Moore