Stoll, Circuit Judge.
This is an appeal from the grant of a preliminary injunction. The United States District Court for the Eastern District of Texas ruled for the patentee, Tinnus Enterprises, LLC, and entered a preliminary injunction barring Telebrands Corporation from selling its accused product, Balloon Bonanza, or any colorable imitation thereof. Telebrands alleges that the district court abused its discretion by concluding that (1) the asserted claims were likely infringed; (2) the claims were not vulnerable on indefiniteness or obviousness grounds; and (3) Tinnus made a showing of irreparable harm. For the reasons stated below, we disagree with Telebrands and affirm the district court's grant of a preliminary injunction.
Tinnus Enterprises, LLC produces a toy for filling water balloons covered by U.S.
Appellee Br. 11.
Tinnus and ZURU Ltd.
The '066 patent relates to a system and method for simultaneously filling multiple containers with fluid. '066 patent col. 1 ll. 19-21. One application of the '066 patent is the mass-filling of water balloons, as shown in the embodiment depicted in Figure 1:
This embodiment includes a housing 12 with two ends: end A is removably attached to a fluid source, e.g., hose 14, and end B is attached to a plurality of hollow tubes 16. Id. col. 2 ll. 35-37. A plurality of containers 18 — in this instance, balloons — are clamped to the tubes 16 using elastic valves 20, which can include elastic fasteners, such as O-rings. Id. col. 2 ll. 51-59. The patent refers to the force applied by the elastic valves to keep the containers attached to the tubes as the "connecting force." Id. col. 3 ll. 52-64. Once the fluid source is turned on, multiple balloons are filled simultaneously: fluid flows from hose 14, through the housing 12, and into the containers 18 through the tubes 16. Id. col. 3 ll. 41-42.
The '066 patent teaches three ways to overcome the connecting force such that the containers detach from the tubes. These include: (1) pulling the containers away from the tubes, id. col. 3 ll. 48-51; (2) shaking the device to overcome the connecting force holding the containers to the tubes, id. col. 3 ll. 52-57; and (3) allowing the containers to fall off due to gravity, id. col. 3 ll. 65-67. After being detached from the tubes using any of the above-described methods, the elastic valve constricts and seals the balloon. Id. col. 4 ll. 64-67.
Independent claim 1 is illustrative, and it recites:
Id. col. 6 ll. 30-53 (emphasis added to indicate disputed limitations).
Tinnus filed its patent infringement suit against Telebrands on the day the '066 patent issued and filed a motion for a preliminary injunction nine days later. The Magistrate Judge reviewed the briefing and held a hearing to evaluate evidence on the preliminary injunction factors before recommending that Tinnus's motion be granted.
In his infringement analysis, the Magistrate Judge reviewed Tinnus's claim chart, which mapped the claim limitations onto the Balloon Bonanza product. The claim chart explained why each limitation was met and included photographs of the allegedly infringing product, images from the product instruction manual, screenshots of the product, and related product videos. Telebrands countered that its product did not infringe because its tubes can slide in and out of the housing and therefore are not "attached" to the housing, as required by the claims. Relying on the plain and ordinary meaning of "attached" — "connected or joined to something" — the Magistrate Judge concluded that the "tubes of the Balloon Bonanza product are connected to the housing holes in order for the product to function properly." Magistrate Op., 2015 WL 11089479, at *4. Telebrands also asserted that disputes over the meaning of "not less than" in conjunction with the term "connecting force" meant that the elastic fastener limitation was not met.
The Magistrate Judge also found that Telebrands' indefiniteness and enablement arguments failed to raise a substantial
Next, Telebrands argued that claim 1 was obvious over U.S. Patent No. 5,826,803 ("Cooper") in view of U.S. Patent Publication No. 2013/0118640 ("Saggio"), as well as Cooper in view of Saggio and U.S. Patent Publication No. 2005/0004430 ("Lee").
Saggio teaches a system, shown in Figure 7 below, that fills multiple tie-less water balloons simultaneously using a one-way valve, as depicted in Figure 5 reproduced below. When water flows into the balloon through channel 20, the water pressure pushes seal 16 and inner membrane 18 up against the outer wall of the balloon 12, thereby locking in the water and preventing it from escaping. J.A. 741.
Lee discloses a method and apparatus for endoscopically inserting a balloon into a person's stomach to treat obesity. J.A. 753. As shown in Figure 6, a balloon is attached to the inner guide pipe 3 using a rubber band 2 with a high elastic force that stably binds the balloon to the inner guide pipe when it is expanded. J.A. 754. The outer guide pipe 4 can slide forward towards the balloon once the endoscope and balloon are properly placed inside the stomach, which pushes the rubber band off of inner guide pipe 3 and seals the balloon. Id.
The Magistrate Judge found the combination of Cooper and Saggio deficient because neither reference disclosed the required "elastic fasteners." The combination of Cooper and Saggio with Lee fared no better because the Magistrate Judge found no evidence that Lee's rubber band would provide the claimed connecting force. Moreover, the Magistrate Judge was not convinced that a person of ordinary skill in the art ("POSA") would have been motivated to combine Lee with Cooper and Saggio because the references come from diverse fields: endoscopic balloon insertion devices for obesity treatment, garden sprinklers, and water balloon filling systems, respectively. Finally, even if Telebrands were able to establish a prima facie case of obviousness, the Magistrate Judge noted that secondary considerations, such as commercial success and copying, would be relevant because the Balloon Bonanza product appeared to be "a near identical replica" of the patented Bunch O Balloons product. Magistrate Op., 2015 WL 11089479, at *7.
With respect to irreparable harm, the Magistrate Judge found evidence of price erosion, consumer confusion, reputational harm, and loss of goodwill based on customer calls, emails, and online reviews. As evidence of price erosion, the Magistrate Judge explained that, while ZURU initially sold Bunch O Balloons for $17 in August 2014, in response to direct competition from Balloon Bonanza, ZURU reduced the price of Bunch O Balloons to $12.99, and eventually to $9.99 by mid-2015. According to the Magistrate Judge, the "market entry and continually reduced sale prices of Telebrands' allegedly infringing product has driven down the price at which the Bunch O Balloons product has sold," leading to the "harm that is ultimately irreparable here" in the form of the "now lowered price of sale for the present monopoly right." Id. at *8 (citing Douglas Dynamics, LLC v. Buyers Prods. Co., 717 F.3d 1336, 1345 (Fed. Cir. 2013) ("Where two companies are in competition against one another, the patentee suffers the harm — often
To establish consumer confusion, reputational harm, and loss of good will, Tinnus provided evidence of conversations and reviews from confused customers. For example, the Magistrate Judge cited evidence that one customer called ZURU to inquire about her product order when, in fact, the customer had purchased Balloon Bonanza instead and that another customer left a review online stating "the inventor of the Balloon Bonanza who invented this product was formerly called Bunch O Balloons." Id. Customers also sent emails to Tinnus asking whether Balloon Bonanza was invented by Mr. Malone, Tinnus's founder, and wondering whether he had licensed his invention to Telebrands. This evidence convinced the Magistrate Judge that consumers were confused about which product is sold by which company and that the patented Bunch O Balloons product had "been diluted in the minds of the consuming public." Id. Aside from the consumer confusion, the false association between the products harmed Tinnus because Bunch O Balloons received better ratings than Balloon Bonanza on Amazon.com and ToysRUs.com. Even though most of these examples pre-dated the issuance of the '066 patent, the Magistrate Judge found that several of the harms, including customer confusion, were ongoing.
The Magistrate Judge also concluded that the balance of hardships and public interest factors weighed in Tinnus's favor due to the relative size of the parties and the strong public interest in enforcing valid patents. Because Tinnus established all four factors required for a preliminary injunction, the Magistrate Judge recommended granting Tinnus's motion.
Telebrands timely filed its objections to the Magistrate Judge's R & R, alleging that it erred (1) by failing to provide a claim construction for the "attached," "connecting force," "elastic fastener," and "shaking" limitations; (2) by improperly shifting the burden of proof to Telebrands on infringement and invalidity; and (3) by relying on insufficient evidence to support findings of commercial success and copying.
Operating in parallel to the district court proceeding was Telebrands' PGR petition seeking to invalidate the '066 patent. The PTAB, relying on the same evidence and arguments before the district court, instituted review on all claims of the '066 patent shortly after the district court granted Tinnus's request for a preliminary injunction.
The PTAB found that claim 1's "shake-to-detach"
Telebrands appeals the preliminary injunction entered by the district court. We have jurisdiction pursuant to 28 U.S.C. § 1292(a)(1) and (c)(1).
On appeal, Telebrands challenges the district court's conclusions on likelihood of success on the merits — including its findings on infringement and invalidity — as well as its conclusions on irreparable harm, which we address in turn.
"A decision to grant or deny a preliminary injunction is within the sound discretion of the district court, based upon its assessment of four factors: (1) the likelihood of the patentee's success on the merits; (2) irreparable harm if the injunction is not granted; (3) the balance of hardships between the parties; and (4) the public interest." Procter & Gamble Co. v. Kraft Foods Glob., Inc., 549 F.3d 842, 847 (Fed. Cir. 2008) (quoting Oakley, Inc. v. Sunglass Hut Int'l, 316 F.3d 1331, 1338-39 (Fed. Cir. 2003)). With respect to establishing a likelihood of success on the merits, "the patentee seeking a preliminary injunction in a patent infringement suit must show that it will likely prove infringement, and that it will likely withstand challenges, if any, to the validity of the patent." Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1376 (Fed. Cir. 2009). An accused infringer "can defeat a showing of likelihood of success on the merits by demonstrating a substantial question of validity or infringement." Trebro Mfg., Inc. v. Firefly Equip., LLC, 748 F.3d 1159, 1165 (Fed. Cir. 2014) (citing Aria Diagnostics, Inc. v. Sequenom, Inc., 726 F.3d 1296, 1304 (Fed. Cir. 2013)).
In general, we review preliminary injunctions using the law of the regional circuit — here, the Fifth Circuit — because "[t]he grant, denial, or modification of a preliminary injunction ... is not unique to patent law." Id. (alteration in
Under Fifth Circuit law, where a party fails to object to a magistrate judge's findings of fact, conclusions of law, or recommendation to the district court, plain error review applies to those unobjected-to factual findings and legal conclusions adopted by the district court. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1430 (5th Cir. 1996) (en banc), superseded by statute on other grounds, 28 U.S.C. § 636(b)(1) (extending time to file objections from ten to fourteen days). "To prevail under [the plain error] standard, the appellant `must show (1) that an error occurred; (2) that the error was plain, which means clear or obvious; (3) the plain error must affect substantial rights; and (4) not correcting the error would seriously impact the fairness, integrity, or public reputation of judicial proceedings.'" Ortiz v. City of San Antonio Fire Dep't, 806 F.3d 822, 825-26 (5th Cir. 2015) (quoting Septimus v. Univ. of Hous., 399 F.3d 601, 607 (5th Cir. 2005)). "When the nature of the claimed error is a question of fact, however, the possibility that such a finding could rise to the level of obvious error required to meet part of the standard for plain error is remote." Casas v. Aduddell, 404 Fed.Appx. 879, 881 (5th Cir. 2010).
On appeal, Telebrands first faults the district court for failing to construe the terms "not less than" and "connecting force." Telebrands also alleges clear error in the district court's conclusions that the Balloon Bonanza tubes are "attached" to the housing and meet the shake to detach limitation. For the reasons explained below, none of these arguments are persuasive.
An infringement analysis involves the two-step process of "construing the claims and comparing the properly construed claims to the accused product." Advanced Steel Recovery, LLC v. X-Body Equip., Inc., 808 F.3d 1313, 1316 (Fed. Cir. 2015). Infringement is a question of fact, which we review on appeal for clear error. See AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042, 1056 (Fed. Cir. 2010).
Contrary to Telebrands' argument, the R & R, which was adopted by the district court, did not refuse to construe the terms "not less than" and "connecting force." Instead, the R & R acknowledged Telebrands' disagreement regarding those terms but concluded that Tinnus was likely to succeed on its infringement claim "irrespective of the interpretation of these claim terms." Magistrate Op., 2015 WL 11089479, at *4. The R & R reached this conclusion because it found that Telebrands' claim
Next, Telebrands challenges the district court's application of the claim term "attached" to the Balloon Bonanza product because its tubes allegedly "do not connect or join to the housing, but rather slide in and out of the holes in the common face of the housing." Appellant Br. 24-25. The R & R applied the plain and ordinary meaning for the term "attached," i.e., "connected or joined to something," and found that the Balloon Bonanza product's tubes must be "connected to" the housing's holes in order for it to function properly. Magistrate Op., 2015 WL 11089479, at *4 (citing Merriam-Webster Dictionary, https://www. merriam-webster.com/dictionary/attached (last visited Dec. 19, 2016)). This must be so, according to the R & R, because the housing accepts water from the hose at one end and sends the water through the holes at the other end, which are connected to hollow tubes for filling the balloons. The R & R's analysis of the "attached" limitation is reasonable, and the district court's adoption of it does not constitute clear error.
Finally, Telebrands alleges that each claim limitation must be found in the accused product itself, and that it was clear error for the Magistrate Judge to rely on Balloon Bonanza's instruction manual to satisfy the shaking limitation. We disagree. The instructions for the Balloon Bonanza product are at least circumstantial evidence of infringement for any claim elements taught by those materials. A patentee is entitled to rely on circumstantial evidence to establish infringement: "If [Defendant] is arguing that proof of inducing infringement or direct infringement requires direct, as opposed to circumstantial evidence, we must disagree. It is hornbook law that direct evidence of a fact is not necessary." Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986), abrogated on other grounds by Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (en banc), as recognized in VirtualAgility Inc. v. Salesforce.com, Inc., 759 F.3d 1307, 1318 (Fed. Cir. 2014). Indeed, this court has previously approved of the use of instruction manuals to demonstrate direct infringement by customers in the context of induced infringement. Golden Blount, Inc. v. Robert H. Peterson Co., 438 F.3d 1354, 1362-63 (Fed. Cir. 2006) ("We reject [Defendant]'s argument that [the patentee] could not rely on the instruction sheets to prove acts of direct infringement by end-users."); see also Moleculon, 793 F.2d at 1272 (affirming district court's finding of induced infringement based, in part, on instruction sheet).
The cases Telebrands cites to the contrary are not persuasive. MicroStrategy stands for the unremarkable proposition that every claim limitation must be met to establish literal infringement and says nothing about product instructions. MicroStrategy Inc. v. Bus. Objects, S.A., 429 F.3d 1344, 1352-53 (Fed. Cir. 2005). The pertinent portion of the Vita-Mix case relates to an induced infringement analysis where the Plaintiff attempted to use the accused infringer's instructions to establish an intent to induce infringement. Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317, 1328 (Fed. Cir. 2009). There, we
"The burden on the accused infringer to show a substantial question of invalidity at [the preliminary injunction] stage is lower than what is required to prove invalidity at trial." Altana Pharma AG v. Teva Pharm. USA, Inc., 566 F.3d 999, 1006 (Fed. Cir. 2009). "Vulnerability is the issue at the preliminary injunction stage, while validity is the issue at trial." Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1359 (Fed. Cir. 2001). Telebrands contends that the Magistrate Judge improperly shifted the burden of proving invalidity to Telebrands, rather than requiring Tinnus to establish a likelihood of success in proving the patent's validity. This argument is not compelling.
Each issued patent carries with it a presumption of validity under 35 U.S.C. § 282. Titan Tire, 566 F.3d at 1376-77. This presumption is sufficient to establish a likelihood of success on the validity issue, absent a challenge by the accused infringer. Id. at 1377. Where the alleged infringer attacks the validity of the patent, "the burden is on the challenger to come forward with evidence of invalidity," which the patentee must then rebut. Id. at 1377-78. "[I]f the trial court concludes there is a `substantial question' concerning the validity of the patent, meaning that the alleged infringer has presented an invalidity defense that the patentee has not shown lacks substantial merit, it necessarily follows that the patentee has not succeeded in showing it is likely to succeed at trial on the merits of the validity issue." Id. at 1379. The district court properly applied this analytical framework.
Telebrands contends that the claim term "substantially filled" is indefinite because a POSA would not be able to determine whether an expandable container meets this limitation.
"[A] patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention." Nautilus, Inc. v. Biosig Instruments, Inc., ___ U.S. ___, 134 S.Ct. 2120, 2124, 189 L.Ed.2d 37 (2014). Because Telebrands did not object to the R & R's indefiniteness determination, we review the district court's determination on indefiniteness for plain error. Douglass, 79 F.3d at 1430.
Telebrands attempts to circumvent this deferential standard of review by arguing that objecting to the R & R's claim construction, or lack thereof, put the Magistrate Judge on notice that it was contesting the definiteness of "substantially filled." We disagree. Nowhere in its objections to the R & R does Telebrands mention the word "indefinite," J.A. 1986-88, and "substantially filled" is not even among the terms flagged by Telebrands —
Turning to the merits, Telebrands argues on appeal that the '066 patent creates a subjective standard for determining whether a container is "substantially filled" because the specification makes frequent references to detaching the containers when they reach a "desired size." Appellant Br. 13-14. The specification, however, does not define or equate "substantially filled" with "desired size." And the claims themselves teach that shaking causes the containers to detach from the hollow tubes when they are "substantially filled" with water, '066 patent col. 6 ll. 46-51, meaning that shaking will not detach the containers if they are not "substantially filled." To put a finer point on it, if the balloons detach after shaking, then they are "substantially filled." The R & R cited a portion of this claim language to support its conclusion that the '066 patent provided "specific parameters" for determining when the containers are "substantially filled." Magistrate Op., 2015 WL 11089479, at *5.
Telebrands alleges that the R & R's reliance on a portion of this claim language for determining when a container is "substantially filled" was based on a truncated and incorrect reading of the claim. The R & R says, "containers are substantially filled with water when the `water overcomes the connecting force and causes the containers to detach from the hollow tubes.'" Id. (quoting '066 patent col. 6 ll. 48-52). According to Telebrands, shaking, not the water, overcomes the connecting force. Although shaking does contribute to the detachment, as discussed above, the claims specifically call for detachment by shaking when the container is "substantially filled" with water. Thus, we do not find this argument persuasive.
In addition to the reasons set forth in the R & R, the level of ordinary skill in the art plays an important role in an indefiniteness analysis. Telebrands asserts that a POSA has "a general knowledge about and experience with expandable containers, including without limitation balloons, and at least an associate's degree in science or engineering." J.A. 835-36 ¶¶ 10-13. We find it difficult to believe that a person with an associate's degree in a science or engineering discipline who had read the specification and relevant prosecution history would be unable to determine with reasonable certainty when a water balloon is "substantially filled."
For these reasons, the district court's conclusion that Telebrands' indefiniteness argument failed to raise a substantial question of validity does not suffer from a "clear or obvious" error, Ortiz, 806 F.3d at 825-26, requiring reversal under plain error review. Because we find no clear or obvious error, we need not address the other plain error factors articulated by the Fifth Circuit in Ortiz.
On appeal, Telebrands advances several arguments relating to the combination of the Cooper, Saggio, and Lee references. Because Telebrands did not object to the factual findings and legal conclusions in the R & R relating to obviousness, we review the district court's obviousness analysis for plain error.
Telebrands argues that the district court erred because it found there was no motivation to combine the prior art references without first considering whether Lee was reasonably pertinent to the particular problem the inventor solved. More specifically, Telebrands alleges that Cooper, Saggio, and Lee each relate to the same problem addressed by the '066 patent: "automatically sealing a balloon or multiple balloons at one time." Appellant Br. 17-18. A prior art reference is analogous and thus can be used in an obviousness combination if it "is from the same field of endeavor, regardless of the problem addressed" or "is reasonably pertinent to the particular problem with which the inventor is involved," even if it is not within the inventor's field of endeavor. Unwired Planet, LLC v. Google Inc., 841 F.3d 995, 1000-01 (Fed. Cir. 2016) (quoting In re Clay, 966 F.2d 656, 658-59 (Fed. Cir. 1992)). The particular problem confronting the inventor here was how to rapidly fill multiple containers with fluid. This is far removed from the problems associated with an endoscopic balloon insertion device for treating obesity, and Telebrands has not demonstrated that Lee is reasonably pertinent to the problem addressed in the '066 patent. Therefore, under a plain error review, we cannot say that the district court committed a clear or obvious error when it found insufficient motivation to combine these disparate references. Absent a motivation to combine, Telebrands' remaining obviousness arguments are unavailing.
Finally, Telebrands alleges that it was clear error for the Magistrate Judge to rely on evidence pre-dating the '066 patent's issuance in support of its finding of irreparable harm. Citing GAF Building Materials Corp. v. Elk Corp. of Dallas, 90 F.3d 479 (Fed. Cir. 1996), Telebrands asserts that irreparable harm must be measured from the date the patent issues because that is the date on which the right to exclude others arises. The GAF case is inapposite, however, because it addresses the dismissal for lack of jurisdiction of an action for declaratory judgment of invalidity and noninfringement of a design patent that had not yet issued. Id. at 481-83. And Telebrands cites no case prohibiting reliance on evidence of irreparable harm pre-dating the patent's issuance.
Evidence of consumer confusion, harm to reputation, and loss of goodwill pre-dating the patent is, at the very least, circumstantial evidence demonstrating the possibility of identical harms once the patent issues. Neither party has suggested that the issuance of a patent would somehow mitigate or otherwise eliminate those harms. Similarly, the pre-issuance price erosion evidence may be relevant to show what would happen if Balloon Bonanza was
Nonetheless, the irreparable harm analysis does not depend solely on evidence pre-dating the patent. The record contains additional evidence of harm after the '066 patent's issuance that is sufficient to support a finding of irreparable harm. For example, a review for Tinnus's Bunch O Balloons product on Amazon — dated a few weeks after the patent issued — states that the customer liked the "off brand" Bunch O Balloons product better than the "name brand" Balloon Bonanza. J.A. 1436. This establishes persisting harm to Tinnus's reputation and tarnishes its status as the innovator in this market. See Celsis In Vitro, Inc. v. CellzDirect, Inc., 664 F.3d 922, 930 (Fed. Cir. 2012) ("Price erosion, loss of goodwill, damage to reputation, and loss of business opportunities are all valid grounds for finding irreparable harm."). Although the post-issuance evidence is thinner, we are unable to find any clear error in the district court's conclusion that Tinnus had demonstrated irreparable harm.
For the reasons stated above, the district court did not abuse its discretion in granting the preliminary injunction. Accordingly, we affirm the district court's judgment.
Costs to Appellees.