Judge Randa Denies Preliminary Injunction Motion & Stays Case Pending Reexamination

| July 12, 2011

In recent days, a number of writers in the blogosphere have remarked on the strength of reexamination as a defense for parties accused of patent infringement, some bemoaning that strength, others cheering it on.  The influence of reexamination on an infringement case, however, largely depends upon the strength of the prior art asserted.  This link between reexamination and the strength of prior art was much in evidence in Judge Rudolph Randa’s decision last week on competing motions to stay and for a preliminary injunction in Generac Power Systems v. Kohler, 2011 U.S. LEXIS 72817 (E.D. Wisc.)).

Generac sued Kohler last October for infringing U.S. Patent No. 7,230,345 related to a specific method of operating engine-driven electrical generators.  Kohler defended by filing a request for ex parte reexamination in December and a more robust request for inter partes reexamination at the end of February.  The PTO granted both requests for reexamination and might soon merge them.  Kohler also moved to stay the case pending completion of the reexamination proceedings.  In the meantime, Generac asked that Kohler be preliminarily enjoined from “making, using, selling [or] offering to sell generators that feature the method” of the ‘345 patent. 

Judge Randa addressed the stay motion first, but his primary interest was clearly directed to the request for preliminary relief.  The Judge first considered the likelihood that Generac would ultimately succeed on the merits.  Since Kohler “neither contested nor conceded infringement,” the sole issue on the merits was Kohler’s challenge to the validity of the ‘345 patent.  Kohler “must [therefore] put forth a ‘substantial question of validity’ to show that the claims at issue are vulnerable, [though] the showing of a substantial question of invalidity requires less proof than the clear and convincing standard to show actual invalidity” at trial (emphasis added). 

Significantly, Judge Randa noted that the grant of reexamination by the PTO does not establish “a substantial question of validity” because “the PTO does not appear to equate the ‘substantial new question of patentability’ standard for whether reexamination should take place . . . with the ‘substantial new question of validity’ standard by which a defendant may prevent a patentee from demonstrating a likelihood of success on the merits.” Accordingly, the “results of a reexamination are relevant to Generac’s likelihood of success, but the fact that a reexamination has been granted does not itself show a substantial question of validity”  (emphasis added).  The Judge also explained that the “granting of a reexamination request – which occurs for 92% of all ex parte reexamination requests – does not mean that the patent is invalid.  Nor, is it dispositive of whether there is a substantial new question of validity.”  He therefore concluded that “the PTO’s granting of Kohler’s reexamination request does not by itself raise a substantial new question of validity for preliminary injunction purposes.”

Judge Randa then proceeded to analyze closely the specific references relied upon by Kohler here and in the reexaminations.  He found that the modification of one reference in light of two others “would allow a person of ordinary skill in the art to implement a predictable variation of the ‘345 patent, and § 103 likely bars its patentability. See KSR Int’l Co., 550 U.S. at 417.  Using the undisclosed prior art, it would have been obvious for a person of ordinary skill to create a method of exercising a generator at a speed less than the operating speed to reduce the noise, which is what the ‘345 patent claims.”  Judge Randa concluded “that Kohler [had] met its burden of proposing a substantial question of invalidity in light of the undisclosed prior art, and Generac has failed to demonstrate that Kohler’s defense lacks substantial merit.”

The decisive factor in Judge Randa’s ruling for Kohler was not the reexamination, but the perceived strength of the newly cited prior art references.  Still, the ruling occurred in the context of the two reexamination grants, and those reexaminations must have made him more comfortable in ruling as he did. 

Judge Randa also briefly commented on the issue of irreparable harm, finding essentially that Generac’s proof was speculative.  Generac’s failure to show irreparable harm was therefore an additional basis for the Judge’s denying the motion for preliminary relief.

With respect to the stay motion, Judge Randa applied the traditional three-factor test: considering the stage of the infringement case, the likelihood that reexamination would simplify the issues for trial, and asking whether the stay would unduly prejudice the patentee or is sought by the accused infringer for some tactical purpose. 

According to Judge Randa, each factor favored staying the case.  First, the case is in its early stages.  With respect to simplification, Judge Randa found that “even if all the claims are not invalidated, the Court and the parties will benefit from the PTO’s expert analysis in simplifying the issues for trial.”  On the question of prejudice, Generac argued that the parties compete directly in the market and that it had lost market share because of Kohler’s infringement of the ‘345 patent.  The Judge disagreed, holding that “Generac has failed to provide evidence of price erosion or lost market share and has an appropriate remedy at law,” i.e., if Generac prevails in the end, it will be adequately compensated by money damages.

Judge Randa therefore stayed the infringement case.

 

 

Category: Evidence, Stays/District Courts

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