Aevoe Corp. v. Shenzhen Membrane Precise Electron Ltd.

AEVOE CORP., Plaintiff,

v.SHENZHEN MEMBRANE PRECISE ELECTRON LTD., Defendant.

Case No.: 2:12-cv-00054-GMN-RJJ

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

Dated: May 1, 2012

AMENDED ORDER

(This Amended Order AMENDS the

Order entered at ECF 31 on 01/26/12)

INTRODUCTION

This Court issued a Temporary Restraining Order on January 12, 2012, to enjoin Defendant Shenzhen Membrane Precision Electron Ltd. (Shenzhen Membrane) from selling its allegedly infringing products and allowing seizure of any allegedly infringing products. (See TRO, ECF No. 9.) The Court also issued an Order to Show Cause why a permanent injunction enjoining and restraining Shenzhen Membrane from "practicing or otherwise using U.S. Patent No. 8,044,942, or any reproduction, counterfeit, copy or colorable imitation concerning the same, pending trial." (See id.) The Court held the Order to Show Cause hearing on January 23, 2012.

FACTS AND BACKGROUND

Plaintiff Aevoe Corp. ("Aevoe") is the owner of Patent No. 8,044,942 ("'942 Patent."). (Compl. ¶¶ 6-7.) The patent covers an invention for a touch screen protector for handheld devices such as phones and tablets. (Lin Decl., Ex. 1 attached to Motion for TRO ¶1, ECF No. 8-1.) The touch screen protectors are marketed under the brand name MOSHI. (Id.) The protector includes a slightly raised outer perimeter, so that the transparent portion covering a device's touch screen is suspended just slightly above the screen itself, forming an enclosed airspace and preserving touch screen functionality while avoiding the bubbles that plague fully adhesive prior art touch screen protectors. (Id. at ¶2.) Aevoe is a small and growing company. (Id. at ¶6.)

Shenzhen Membrane has been manufacturing and selling screen protectors for various electronic devices since 2004. (Zheng Decl., Ex. 1 attached to Response ¶3, ECF No. 16-1.) Shenzhen Membrane markets these products under its "I Love My Cover" and "Membrane" brands. (Id.; see Ex. C attached to Response, ECF No. 16-3.) Shenzhen Membrane sells its products on an OEM and ODM basis. (Response 2:28, ECF No. 16.) Its products are sold in the United States, China, United Kingdom, Germany, Italy, Turkey, Japan, South Korea, Singapore, Thailand, Indonesia, Malaysia, Brazil, Venezuela, Canada, and Mexico. (Zheng Decl. at ¶4.)

The International Consumer Electronics Show ("CES") is held in Las Vegas. CES attracts major players in the technology industry from over a hundred companies. Shenzhen Membrane has participated in the show in 2011 and 2012. Aevoe was also a participant in the 2012 show. (Lin Decl. at {6.) While at CES Aevoe learned that Shenzhen Membrane had imported and was marketing products at CES that allegedly infringe upon the '942 Patent. (Id. at ¶ 7.)

Aevoe filed the instant suit alleging patent infringement. (See Compl.) Aevoe also petitioned this Court for a Temporary Restraining Order to prevent Shenzhen from continuing to sell or market the allegedly infringing items as well as a Seizure Order to collect products that appear to be infringing items. (TRO Motion, ECF No. 8.) This Court granted both requests and now addresses the issue of whether or not a preliminary injunction should be issued until a trial on the merits can be held.

DISCUSSION

A. Legal Standard

Under Fed. R. Civ. P. 65(b), the court can issue a preliminary injunction pending a trialon the merits. The Ninth Circuit in the past set forth two separate sets of criteria for determining whether to grant preliminary injunctive relief:

Under the traditional test, a plaintiff must show: (1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in certain cases). The alternative test requires that a plaintiff demonstrate either a combination of probable success on the merits and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in his favor.

Taylor v. Westly, 488 F.3d 1197, 1200 (9th Cir. 2007). "These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Id.

The Supreme Court brought into question the Ninth Circuit's sliding scale test and reiterated that a plaintiff seeking an injunction must demonstrate that irreparable harm is "likely" not just possible. Winter v. NRDC, 129 S. Ct. 365, 374-76 (2008). The Supreme Court has made clear that a movant must show both "that he is likely to succeed on the merits [and] that he is likely to suffer irreparable harm in the absence of preliminary relief . . . ." Winter, 129 S.Ct. at 374 (citing Munaf v. Geren, 128 S. Ct. 2207, 2218-19 (2008); Amoco Prod. Co. v. Gambell, 480 U.S. 531, 542 (1987); Weinberger v. Romero-Barcelo, 456 U.S. 305, 311-12 (1982)) (emphases added).

A recent Ninth Circuit decision has clarified whether the slide scale approach is still a valid test under Winter. In Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, (9th Cir. 2011), the court held that the "serious questions" prong of the sliding scale test for preliminary injunctions remains viable after the Supreme Court's decision in Winter. "[T]he 'serious questions' approach survives Winter when applied as part of the four-element Winter test. That is, 'serious questions going to the merits' and a balance of hardships that tips sharply towards the plaintiff can support issuance of a preliminary injunction, so long as the plaintiff also showsthat there is a likelihood of irreparable injury and that the injunction is in the public interest." Id. at 1135.

B. Analysis

1. Success on the Merits

A patent infringement claim has two elements: the existence of a valid U.S. patent, and proof of infringement of the patent's claims by the accused device, either literally or via equivalents. 35 U.S.C. § 271. In order to establish a likelihood of success on the merits for its claim of patent infringement, Aevoe must show it is likely that a trier of fact would find the '942 Patent is valid and infringed. See Gillette Co. v. Energizer Holdings, Inc., 405 F.3d 1367, 1370 (Fed. Cir. 2005). An issued patent is presumed valid. 35 U.S.C. § 282; Medical Instrumentation & Diagnostics Corp. v. Elekta AB, 344 F.3d 1205, 1220 (Fed. Cir. 2003).

a. Patent Validity

Shenzhen Membrane argues that at the preliminary injunction stage, the burden is on the patentee to show that its patent is valid and enforceable. See Chrysler Motors Corp. v. Auto Body Panels of Ohio Inc., 908 F.2d 951 (Fed. Cir. 1990); Nutrition 21 v. United States, 930 F.2d 862, 869-870 (Fed. Cir. 1991); Atlas Powder Co. v. Ireco Chemicals, 773 F.2d 1230, 1233 (Fed. Cir. 1985). At the preliminary injunction stage, the Court considers the evidence in light of the presumptions and burdens that will apply at trial. Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1376 (Fed.Cir.2009). At trial, Aevoe will bear the burden of proving that Shenzhen's devices do infringe its patent and that it can defend against a challenge of invalidity. However, this does not change the fact that at the preliminary injunction phase the patent is presumed valid. The initial burden is on Shenzhen Membrane to produce evidence of invalidity. Id. If evidence is provided that questions the validity of a patent then the court must weigh the evidence both for and against validity that is available at the preliminary injunction stage. Id. at 1379. "If the [court] concludes there is a 'substantial question' concerning the validity of thepatent, 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. (citing New England Braiding Co., Inc. v. A. W. Chesterton Company, 970 F.2d 878, 883 (Fed. Cir. 1992)).

Shenzhen Membrane argues Aevoe's patent is not novel or nonobvious. Shenzhen Membrane presents Apple's iPhone 3G smartphone as evidence that using a spacer to separate a touch screen from a transparent surface is not new to the relevant industry. (See Zheng Decl. at ¶5.) In response, Aevoe admits that the '942 patent involves the idea of using a spacer to place a bubble-free protective cover over the transparent surface of the touch screen that can easily be applied and removed. However, it argues that the patented screen protectors are placed on top of the touch screen devices in contrast to the spacer identified by Shenzhen Membrane in the iPhone 3G which is under the touch screen and part of the internal functionality of the touch screen itself.

A basic requirement for patentability is novelty. See 35 U.S.C. §§ 102, 103. An "anticipated" or unoriginal invention is not novel, cannot be patented and will be found invalid. See Kegel Co., Inc. v. AMF Bowling, Inc., 127 F.3d 1420, 1429 (Fed.Cir.1997). To demonstrate anticipation, the prior art reference must disclose every limitation of the claimed invention either expressly or inherently. Rapoport v. Dement, 254 F.3d 1053, 1057 (Fed. Cir. 2001.) Here, the prior art reference to the iPhone 3G does not disclose each and every element of the claimed invention as arranged in the claim. As explained by Aevoe, the iPhone 3G spacer is internal to the phone while its patented invention is a touch screen protector that can be "removably" mounted onto and over the touch screen device. Accordingly, these differences preclude any finding that it is anticipated.

Differences between a prior art reference and a claimed invention invoke the question of obviousness. Net MoneyIN, Inc. v. VeriSign, Inc., 545 F.3d 1359 (Fed. Cir. (Ariz.) 2008.) "Anobviousness determination is based on underlying factual inquiries including: (1) scope and content of the prior art; (2) the differences...