Opinion
No. ED CV 04-419 RT (RCx).
May 20, 2004
ORDER 1) GRANTING COUNTERCLAIMANT'S MOTION PURSUANT TO 35 U S C § 283 FOR ISSUANCE OF A PRELIMINARY INJUNCTION, AND 2) PRELIMINARY INJUNCTION
The court, Judge Robert J Timlin, has read and considered counterclaimant Precise Exercise Equipment, Inc ("Precise")'s motion pursuant to 35 U S C § 283 ("Section 283") for issuance of a preliminary injunction, counterdefendants Fitness Products International, LLC ("FPI") and Precor Strength Incorporated ("Precor") (collectively, "Counterdefendants")'s opposition, and Precise's reply The court has also read and considered Counterdefendants' surreply and Precise's response to the surreply Based on such consideration, the court concludes as follows
Precise's motion is brought pursuant to Federal Rule of Procedure 65 ("Rule 65"), however, Section 283 particularly grants the district court jurisdiction to grant injunctions in patent infringement actions The court, therefore, will construe Precise's motion as being brought under Section 283.
I. BACKGROUND
Precise, as an assignee, holds two patents, United States Patent Numbers 5,492,520 ("the '520 patent") and 5,577,987 ("the '987 patent") (collectively, "Precise Patents"), for fitness devices known as "Ab Trainer" products On January 18, 2001, Precise filed a previous action in this court for patent infringement against FPI alleging that FPI's product, "Abench", was infringing claims in the Precise Patents On December 11, 2001, the parties entered into a Settlement Agreement and a Manufacturing, Marketing and Distributing Agreement ("Marketing Agreement") As part of the Settlement Agreement, FPI admitted that the Abench product was infringing the Precise Patents Pursuant to the Marketing Agreement, Precise granted FPI an exclusive, non-transferable license under the Precise Patents and a license to the Ab Trainer trademark FPI could thereby sell both the Abench product and the Ab Trainer products Included in the Marketing Agreement were provisions limiting the assignability of rights under that agreement
Around November 2003, Precise became aware that FPI was attempting to enter into an agreement with Precor that would impact Precise's rights under the Marketing Agreement On December 2, 2003, FPI requested that Precise consent to the assignment of its rights and obligations under the Marketing Agreement to Precor Precise refused to sign the consent forms FPI had sent with the request In December 2003, FPI and Precor entered into an agreement, which resulted in the sale of substantially all of FPI's assets to Precor, including the assignment of FPI's rights and obligations under the Marketing Agreement On January 26, 2004, Precise sent a letter to FPI and Precor to notify them that it was terminating the Marketing Agreement as of February 25, 2004
On February 23, 2004, Counterdefendants filed a complaint against Precise seeking a declaration that (1) FPI's rights and obligations under the Marketing Agreement related to the Abench were validly assigned to Precor, (2) Precise unreasonably withheld consent for the assignment of FPI's rights and obligations under the Marketing Agreement as to three other products, (3) Precise breached the Marketing Agreement with FPI on January 26, 2004 when Precise purported to terminate part of that agreement without following the termination requirements of the Marketing Agreement, and (4) Precise is obligated to indemnify FPI and Precor because of the aforementioned breaches
On March 16, 2004, Counterclaimant filed the instant counterclaim against Counterdefendants, counterdefendant Richard Wallace ("Wallace"), and counterdefendant Roes 1-10 for injunctive relief and damages alleging the following claims (1) claim one for patent infringement as against Precor and counterdefendants Roes 1-2, (2) claim two for fraud in the inducement by false promise as against FPI, Wallace, and counterdefendants Roes 3-4, (3) claim three for breach of contract (the Marketing Agreement) as against FPI, Precor, and counterdefendants Roes 5-6, (4) claim four for declaratory relief as against FPI, Precor, and counterdefendants Roes 7-8, (5) claim five for fraud as against FPI, Wallace, and counterdefendants Roes 9-10, and (6) claim six for negligent misrepresentation as against FPI, Wallace, and counterdefendants Roes 9-10
Counterclaimants now move the court to issue a preliminary injunction pursuant to Section 283 restraining Precor from infringing the '987 Patent by making, using, selling, and offering for sale Ab Trainer products
II ANALYSIS
The decision to issue a preliminary injunction pursuant to Section 283 turns on the following four factors 1) the probability that the moving party will succeed on the merits, 2) the threat of irreparable harm to the moving party should a preliminary injunction be denied, 3) the balance between this harm and the harm that granting the injunction will cause to the other parties, and 4) the public interest Nutrition 21 v. United States, 930 F 2d 867, 869 (Fed Cir 1991) None of these factors is dispositive, "rather, the district court must weigh and measure each factor against the other factors and against the form and magnitude of the relief requested" Hybritech Inc v. Abbott Laboratories 849 F 2d 1446, 1451 (Fed Cir 1988) The moving party bears the burden of establishing that a preliminary injunction should issue Hoop v. Hoop, 279 F 3d 1004, 1007 (Fed Cir 2002)A. A Likelihood of Success on the Merits
1. The '987 Patent's Validity
Precise must first show a likelihood of success on the merits in establishing the validity of the '987 patent and that it is being infringed Hybritech Inc, 849 F 2d at 1451 However, under 35 U S C § 282, a patent is presumed valid and this presumption remains at every stage in the proceedings Canon Computer Systems, Inc v. Nu-Kote Intern, Inc, 134 F 3d 1085, 1088 (Fed Cir 1998), see also Anton/Bauer, Inc v. PAG, Ltd, 329 F 3d 1343, 1348 (Fed Cir 2003) (showing of a likelihood of success on the merits is based on the burdens the moving party carries at trial), Roper Corp v. Litton Systems, Inc, 757 F 2d 1266, 1270 (Fed Cir 1985) If the challenger fails to identify any persuasive evidence of invalidity, "the very existence of the patent satisfies the patentee's burden on the validity issue" Canon Computer Systems, Inc, 134 F 3d at 1088 Here, Precor does not urge that the patent is invalid The court also notes that the underlying complaint does not seek to challenge the patent's validity The court, therefore, concludes that Precise has met its burden in showing that the '987 patent is valid
2. Infringement of the '987 Patent
Precise must also demonstrate a likelihood of success in establishing that the '987 patent has been infringed Normally, a court analyzes an infringement claim utilizing a two-step analysis, first construing the scope and meaning of the patent claims and then comparing these to the allegedly infringing device Amazon com, Inc v. Barnesandnoble com, Inc, 239 F 3d 1343, 1351 (Fed Cir 2001) However, Precor does not dispute the claims of the '987 patent In addition, the underlying action does not concern an infringing product but rather the continuing validity of FPI's license under the Marketing Agreement
Specifically, Precise contends here that Precor is infringing the '987 patent because it is manufacturing, distributing, and selling the Ab Trainer products without a license from Precise Precise argues that due to the non-assignment clause in the Marketing Agreement, FPI could not assign its license to manufacture, distribute, and sell the Ab Trainer products to a third party without Precise's consent To support its argument, Precise relies on the plain language of the Marketing Agreement, which states "FPI, however, shall not have the right to assign any right or obligation created in this Agreement to any other party, without the express written consent of Precise "The only exception to this non-assignment clause regards the Abench product, which is not at issue in the instant motion Based on this language, Precise argues that the purported assignment of licensing rights with regard to the Ab Trainer products is "null and void" In its opposition to the instant motion, Precor does not present any arguments challenging Precise's interpretation of the Marketing Agreement For the purpose of this motion, the court finds that the language of the Marketing Agreement states that FPI could not validly assign licensing rights to Ab Trainer products to Precor without Precise's consent Precise has presented competent evidence that Precor did not give such consent and did not unreasonably withhold such consent
The court, therefore, concludes that Precise has shown a likelihood of success in establishing that Precor has infringed the '987 patent
B. Irreparable Harm
Once the moving party has established a likelihood of success by making a clear showing of validity of the subject patent and the infringement thereof, it is entitled to a presumption of irreparable harm if the preliminary injunction is not grantedPolymer Technologies, Inc v. Bridwell, 103 F 3d 970, 973 (Fed Cir 1996) (Polymer) To overcome this presumption, the nonmoving party must produce evidence sufficient to establish that the moving party would not be irreparably harmed Id at 974
Counterdefendants contend that they have rebutted the presumption of irreparable harm because Precor has voluntarily agreed to stop making, using, selling, or offering for sale Ab Trainer products during the pendency of this litigation As evidence of this voluntary cessation, Precor's counsel sent a letter on April 13, 2004 to Precise's counsel stating that Precor would forebear selling Ab Trainer products during the pendency of the litigation for the purpose of mooting Precise's preliminary injunction ("April 13, 2004 letter") Counterdefendants citePolymer, 103 F 3d at 974 to support their contention that voluntary cessation is sufficient to rebut a presumption of irreparable harm
However, in Polymer, the court simply listed voluntary cessation as an example of ways in which a defendant might rebut irreparable harm Id The Polymer court was citing Reebok Intern Ltd v. J Baker, Inc, 32 F 3d 1552, 1557-58 (Fed Cir 1994), in which the court determined that because stores were no longer stocking the allegedly infringing product, the defendant had rebutted the presumption of irreparable harm As proof of cessation, the defendant in that case submitted a declaration from the Manager of Product Development stating that he had visited numerous stores that had previously stocked the infringing product and that virtually all had stopped advertising, stocking, or selling the infringing product Id at 1558 The patentee in that case did not refute defendant's evidence that the infringing product was not being sold or advertised Id Here, Precor has not presented any evidence that it has stopped making, using, selling, or offering for sale Ab Trainer products, after the April 13, 2004 letter
Moreover, in its reply Precise has presented evidence that Precor has not ceased selling or marketing the product Specifically, Precise presents sworn declarations of three buyers who called Precor after April 13, 2004 to purchase Ab Trainer products, as well as receipts from those sales The first buyer bought one Ab Trainer product on April 15, 2004 from Precor and a second product through Full Circle after being contacted by it, Precor had given Full Circle the buyer's information ("McKee Declaration") The second buyer purchased one Ab Trainer product from Club Purchasing Service, Inc on April 19, 2004, after being directed to the dealer by Precor ("Naclerio Declaration") The third buyer placed an order for one Ab Trainer product from Precor on April 20, 2004 Precor accepted that order, but the buyer was "inexplicably" sent a purchase order for an Abench product, which he had not ordered, on April 21, 2004 ("Tomsoo Declaration") In addition, Precise presents a sworn declaration of David M Augustine, an officer of Precise, which states that between April 19-23, 2004 he contacted two Precor dealers who stated that they are "currently purchasing Ab Trainer products from Precor and have had no problems acquiring the product" ("Augustine Declaration) Together, these declarations demonstrate that Precor has not stopped selling or offering for sale Ab Trainer products, despite the assurances in the April 13, 2004 letter
In their surreply, Counterdefendants refer to these dealers as "independent fitness equipment dealers" and that Precor has no ability to stop those third parties from selling out their inventory In contrast, Precise refers to these dealers as Precor distributors Neither side has presented any legal argument or evidence of the relationship between Precor and these dealers Regardless, it is evident from the Augustine Declaration that Precor has continued to sell Ab Trainer products to at least one of these dealers/distributors In addition, it is apparent from the McKee and Naclerio Declarations that Precor has directed dealers/distrubtors to contact buyers or vice versa regarding the sale of Ab Trainer products.
Precor also cites Roper Corp v. Litton Systems, Inc, 757 F 2d 1266 (Fed Cir 1985) to support its contention that the presumption of irreparable harm is rebutted when the non-movant ceases or promises to cease the allegedly infringing activity However, Roper Corp is distinguishable in that the nonmoving party had ceased making the infringing product prior to the filing of the motion for a preliminary injunction and had no plans to make the product in the future Id at 1273 The court determined that there was no "present infringement or an immediate threat of renewed infringement" Id Here, the court cannot make the determination from the evidence before it that there is no present or immediate threat of infringement Precor has stock of the infringing product, with which it could easily resume sales In addition, in light of the evidence that Precise has submitted, it is not evident that Precor has stopped selling or offering for sale Ab Trainer products
Counterdefendants also assert that, on April 20, 2004 their counsel contacted Precise's counsel in an attempt to arrange the transfer to Precise of orders for Ab Trainer products They offer a sworn affidavit by Michael R Levinson, counsel for Counterdefendants to that effect In addition, they attach a letter from Precise's counsel, which states that Precise would wait until the court had decided the instant motion before working out an agreement with Precor regarding the transfer of sales orders Counterdefendants contend that Precise's refusal to work with Precor to transfer sales orders belies Precise's claim of irreparable harm However, this conclusion rests entirely on speculation Counterdefendants also state "Precise's request for a preliminary injunction should be denied because Precise refuses to fill orders for products that it wants to enjoin Precor Strength from selling" However, the issue here concerns Precor's ability and inclination to lawfully sell Ab Trainer products and not the arrangements Precise has made to serve its potential customers
The court concludes that Precor has not rebutted the presumption of irreparable harm
C. Balance of Hardships
To determine which party the balance of hardships favors, the court must balance the harm the moving party will suffer from the denial of the preliminary injunction with the harm that the non-moving party will incur if the injunction is grantedHybritech Inc, 849 F 2d at 1457 Precise contends that the balance of hardships tip in its favor It argues that it is a small business whose livelihood depends on its ability to prevent others from infringing its patents Precor, in contrast, is a large company selling a wide range of products, and its inability to manufacture or sell one product will not have a large impact As evidence of Precor's size, Precise submits a press release from Precor's website, which indicates that Precor is one of the largest fitness equipment manufacturers in the United States and has offices in six cities outside the United States In addition, Precise argues that since Precor only recently purported to acquire the Ab Trainer products license, no significant harm will be caused by enjoining it from manufacturing or selling Ab Trainer products Precor does not refute Precise's contention that the balance of hardships favors Precise The court, therefore, concludes that this factor favors granting a preliminary injunction
D. Public Interest
Under this factor, the court generally focuses its analysis on whether there exists some critical public interest that would be injured by the grant of preliminary relief Hybritech Inc, 849 F 2d at 1458 Precise contends that were its motion for a preliminary injunction granted, no critical public interest would suffer injury Precor does not dispute this contention This factor favors granting Precise's motion
Based on the foregoing discussion, the court will grant Precise's application for a preliminary injunction
IV. DISPOSITION
ACCORDINGLY, IT IS ORDERED THAT1) Counterclaimant's motion for a preliminary injunction is GRANTED,
2) Pending the final determination of the action, Precor, its subsidiaries, distributors, officers, agents, servants, employees and all those acting in concert with them or at their direction are restrained from infringing upon the '987 Patent by making, using, selling and offering for sale Ab Trainer products, and
3) Pursuant to Federal Rules of Civil Procedure, Rule 65(c) Plaintiffs shall give security in the amount of $5,000 00