Canon, Inc. v. GCC International Ltd. , 263 F. App'x 57 ( 2008 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2006-1615
CANON, INC.,
Plaintiff-Appellee,
v.
GCC INTERNATIONAL LIMITED, GCC MANAGEMENT LIMITED,
GATEHILL INTERNATIONAL LIMITED, Q-IMAGING (USA), INC.,
and TALLYGENICOM LP,
Defendants-Appellants.
Nicholas M. Cannella, Fitzpatrick, Cella, Harper & Scinto, of New York, New
York, argued for plaintiff-appellee. With him on the brief were Brian V. Slater, and
Joseph B. Divinagracia. Of counsel on the brief was Edmund J. Haughey, of
Washington, DC.
Michael N. Rader, Wolf, Greenfield & Sacks, P.C., of Boston, Massachusetts,
argued for defendants-appellants. With him on the brief were Michael A. Albert and
James J. Foster.
Appealed from: United States District Court for the Southern District of New York
Judge P. Kevin Castel
NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2006-1615
CANON, INC.,
Plaintiff-Appellee,
v.
GCC INTERNATIONAL LIMITED, GCC MANAGEMENT LIMITED,
GATEHILL INTERNATIONAL LIMITED, Q-IMAGING (USA) INC., and
TALLYGENICOM LP,
Defendants-Appellants.
Appeal from the United States District Court for the Southern District of New York in
case no. 06-CV-3324, Judge P. Kevin Castel.
__________________________
DECIDED: January 25, 2008
__________________________
Before MICHEL, Chief Judge, DYK, Circuit Judge, and GARBIS, District Judge. *
GARBIS, District Judge.
Plaintiff Canon, Inc. ("Canon") sued GCC International Limited, GCC
Management Limited, Gatehill International Limited, Q-Imaging (USA) Inc., and
TallyGenicom LP (collectively, "Defendants") for infringement of U.S. Patent No.
6,336,018 ("the '018 Patent"), entitled "Electrophotographic Image Forming Apparatus,
Process Cartridge, and Drive Mount for Photosensitive Drum."
*
Honorable Marvin J. Garbis, Senior District Judge, United States District
Court for the District of Maryland, sitting by designation.
On August 29, 2006, the district court issued its Memorandum and Order
granting Canon a Preliminary Injunction enjoining Defendants from, among other things,
"making, using, offering for sale, or selling in the United States, or importing into the
United States, any product that falls within the scope of claim 58 of U.S. Patent No.
6,336,018, including, without limitation, [certain identified] toner cartridges . . . ." Canon
Inc. v. GCC Int'l Ltd., No. 06-3324 (S.D.N.Y. Aug. 29, 2006).
Defendants appeal from the grant of a preliminary injunction. 1 For the reasons
discussed herein, this court determines that the district court did not abuse its discretion
and, therefore, affirms.
I. BACKGROUND
At all times relevant hereto, Canon has engaged in the business of producing
and selling, inter alia, laser printers and laser fax machines with replaceable toner
cartridges. A user purchasing a Canon printer receives the printer with a replaceable
toner cartridge. When the toner in the cartridge is exhausted, the user can easily
remove and replace the exhausted toner cartridge. The sale of replacement toner
cartridges is a profitable aspect of Canon's business.
At all times relevant hereto, Defendants have engaged in the business of selling
(among many other products) toner cartridges that can be used as replacements in
Canon laser printers and laser fax machines.
Canon is the assignee of the '018 Patent. Claim 58 of the '018 Patent claims:
A process cartridge detachably mountable to a main assembly of an
electrophotographic image forming apparatus, wherein said main
1
Defendants also seek reversal of the District Court's denial of their motion
for summary judgment. However, the denial of summary judgment was not an
appealable Order and will not be addressed herein.
2006-1615 2
assembly includes a motor, a driving rotatable member for receiving
driving force from said motor, and a hole defined by twisted surfaces, said
hole being substantially coaxial with said driving rotatable member, said
process cartridge comprising:
a cartridge frame;
an electrophotographic photosensitive drum;
process means actable on said photosensitive drum, said process means
including a developing roller for developing a latent image formed on said
photosensitive drum, and a charging member for electrically charging said
photosensitive drum;
a projection provided at a longitudinal end of said photosensitive drum,
wherein said projection has an engaging portion for engagement with the
twisted surfaces and a supporting portion for supporting said engaging
portion, wherein said end of said photosensitive drum is provided with a
shaft for supporting said photosensitive drum on said cartridge frame, and
said engaging portion is supported on said shaft by said supporting
portion, and a cross section of said supporting portion in a direction
crossing with a longitudinal direction of said photosensitive drum is smaller
than a cross section of said engaging portion, and said supporting portion
is capable of entering said hole, and wherein when said driving rotatable
member rotates with said hole, and said engaging portion of said
projection engaged with each other, rotational driving force is transmitted
from said driving rotatable member to said photosensitive drum through
engagement between said hole and said projection, and said projection is
urged inwardly of said hole, wherein said engaging portion is contacted to
said twisted surfaces at least three points, and wherein said end of said
photosensitive drum is provided with a drum gear which is effective to
transmit a driving force received by said engaging portion from the main
assembly to said developing roller.
Canon asserts that Defendants' toner cartridges ("the Accused Products"),
usable in Canon laser printers and laser fax machines, infringe Claim 58 of the '018
Patent.
Defendants sought an early claim construction holding that Claim 58 covers the
combination of a "main assembly" consisting, according to Defendants, of the entire
printer or fax machine with a toner cartridge. Defendants contend that if Claim 58 is so
2006-1615 3
construed, they would not infringe Claim 58 because they sell only the cartridge, not the
combination. Accordingly, Defendants assert that their production and sale of the
accused toner cartridges would not infringe Claim 58 by virtue of the doctrine of
permissible repair. Under the doctrine of permissible repair, the owner of patented
property has a lawful right to repair or replace his property. See Aro Mfg. Co. v.
Convertible Top Co., 365 U.S. 336 (1961); see also Everpure, Inc. v. Cuno, Inc., 875
F.2d 300, 302 (Fed. Cir. 1989), cert. denied, 493 U.S. 853 (1989). Defendants
alternatively advance a theory of implied license, relying upon Hewlett-Packard Co. v.
Repeat-O-Type Stencil Mfg. Corp., 123 F.3d 1445, 1455 (Fed. Cir. 1997), cert. denied,
523 U.S. 1022 (1998) ("[W]hen a patentee sells a device without condition, it parts with
the right to enforce any patent that the parties might reasonably have contemplated
would interfere with the use of the purchased device.").
The district court held that Claim 58 claimed the cartridge alone and not as part
of a combination. Therefore, the doctrine of permissible repair was not applicable. The
district court further held that Canon's sale of a printer or fax machine with a toner
cartridge therein did not constitute an implied license to manufacture and sell the toner
cartridge. Thus, the district court concluded that Canon had a likelihood of success on
its infringement claim. Upon further finding that a balance of the hardships and
consideration of the public interest favored Canon, the district court issued the
preliminary injunction at issue.
2006-1615 4
II. DISCUSSION
In patent cases, traditional rules of equity apply to requests for injunctive relief.
eBay, Inc. v. MercExchange, L.L.C., ____ U.S. ____, ____, 126 S.Ct. 1837, 1839
(2006). As stated in Pfizer, Inc. v. Teva Pharms. USA, Inc.:
[District courts] have the power to grant injunctions to prevent the
violation of patent rights. See 35 U.S.C. § 283 (2000). In considering
whether to grant a preliminary injunction, a court must consider whether
the patent owner has shown: (1) a reasonable likelihood of success on the
merits; (2) the prospect of irreparable harm to the patent owner in the
absence of the injunction; (3) that this harm would exceed harm to the
alleged infringer when subject to the injunction; and (4) that granting the
injunction is in the public interest. Jeneric/Pentron, Inc. v. Dillon Co., 205
F.3d 1377, 1380 (Fed. Cir. 2000); Nutrition 21 v. United States, 930 F.2d
867, 869 (Fed. Cir. 1991).
We review the grant of a preliminary injunction for abuse of
discretion. Novo Nordisk of N. Am., Inc. v. Genentech, Inc., 77 F.3d 1364,
1367 (Fed. Cir. 1996). To overturn the grant of a preliminary injunction,
we must find that the district court made a clear error of judgment in
weighing the relevant factors or based on its exercise of discretion on an
error of law or on clearly erroneous factual findings. Id.429 F.3d 1364, 1372 (Fed. Cir. 2005).
A. Likelihood of Success on the Merits
This court does not encourage interlocutory appeals from claim construction
decisions. Moreover, it is not always appropriate for trial courts to single out particular
terms in a claim for "early" construction outside of the contextual setting provided by
consideration of all disputed claim terms. Nevertheless, it can be necessary to consider
the construction of some claim terms in the process of resolving a request for a
preliminary injunction.
In its preliminary injunction decision, the district court construed Claim 58 to
cover the toner cartridge alone and not as part of a combination. If Claim 58 is so
2006-1615 5
construed, the doctrine of permissible repair would be inapplicable altogether. See Fuji
Photo Film Co., LTD v. Int'l Trade Comm'n, 474 F.3d 1281, 1296 (Fed. Cir. 2007).
On the present record, there is a reasonably debatable question of whether
Claim 58 should be construed to cover the cartridge alone or the cartridge as part of a
combination. Therefore, this court is not now reaching its final conclusion as to the
matter. However, even if Claim 58 were construed to cover the cartridge as part of a
combination, Canon would still have a substantial likelihood of success.
If Claim 58 were construed as covering a combination, it is unlikely that the
covered combination would include the toner cartridge and the entirety of the printer or
fax machine since most of the components of such machines are not claimed. On the
contrary, as appears from the claims, the most likely combination would be one
consisting of the toner cartridge and the claimed "hole defined by twisted surfaces."
'018 Patent cl.58.
In respect to such a combination, it is likely that the replacement of the toner
cartridge part of the combination would not constitute a permissible repair. We have
divided permissible repair into two categories—replacement of readily replaceable parts
and refurbishment. In each instance the concept of proportionality is pertinent, though
less so in the case of readily replaceable parts. A part is not readily replaceable if the
part in question constitutes the bulk of the value of the patented item. And
refurbishment is not a permissible repair if, for example, "the extent of the refurbishment
. . . [would be] disproportionate to the overall value of the parts that were not replaced."
Fuji Photo Film, 474 F.3d at 1296; see also Husky Injection Molding Sys., Ltd. v. R & D
Tool & Eng'g Co., 291 F.3d 780, 786-87 (Fed. Cir. 2002) (noting that replacing the
2006-1615 6
entirety of a patented car except for its spark plugs would be impermissible
reconstruction). Thus, it appears that under the facts of this case, the replacement of
the toner cartridge would constitute impermissible reconstruction because it would
essentially be a "second creation of the patented entity." Aro Mfg. Co., 365 U.S. at 346(citations omitted).
In sum, Canon has established a substantial likelihood—albeit not a certainty—of
success on its claim that Defendants have infringed Claim 58 of the '018 Patent.
B. Irreparable Harm Balance
At the preliminary injunction stage, irreparable harm consists of harm that could
not be sufficiently compensated by money damages or avoided by a later decision on
the merits. DAN B. DOBBS, LAW OF REMEDIES 193-94 (2d ed. 1993). To reach an
irreparable harm balance, a trial court compares the irreparable harm that would be
sustained by the movant if a preliminary injunction were erroneously denied with the
irreparable harm that would be sustained by the non-movant if a preliminary injunction
were granted in error. Id. at 187.
As the trial court found, competition from Defendants will likely result in
substantial price erosion of Canon's patented product as well as loss of Canon's market
share. Due to the difficulty (if not impossibility) of determining the damages resulting
from price erosion and loss of market share, an award of money damages would not be
sufficient. Moreover, Defendants' business operations are geographically "far-flung,"
making the enforcement of a money judgment "exceedingly difficult." Canon Inc. v.
GCC Int'l, Ltd., 450 F. Supp. 2d 243, 255 (S.D.N.Y. 2006). Thus, to the extent that
money damages against Defendants were awarded, there appears to be a reasonable
2006-1615 7
basis for the district court's finding that there would be little probability that Canon could
effect the collection of a money judgment.
On the other hand, as the district court found, there is little, if any, harm that
would be suffered by Defendants by virtue of an erroneous grant of a preliminary
injunction that could not be fully compensated by a money damage award against
Canon under Fed. R. Civ. P. 65(c).
In light of Canon's demonstration of the potential of substantial irreparable harm,
and Defendants' failure to make any such demonstration, this court agrees with the
district court's conclusion that the irreparable harm balance favors Canon.
C. Public Interest
As the district court noted, the public benefits from lower prices resulting from
free market competition. However, the public also has an interest in the enforcement of
patents. Hence, consideration of the public interest favors neither side.
D. The Ultimate Balance
The ultimate decision in a preliminary injunction context requires a flexible
balancing of the parties' respective showings of potential irreparable harm and the
movant's likelihood of success on the merits. "If, after balancing [the irreparable harm
to plaintiff against that of the defendant], the balance tips decidedly in favor of the
plaintiff, a preliminary injunction will be granted if the plaintiff has raised questions going
to the merits so serious, substantial, difficult and doubtful, as to make them fair ground
for litigation and thus for more deliberate investigation." Direx Israel, Ltd. v.
Breakthrough Med. Corp., 952 F.2d 802, 813 (4th Cir. 1991) (internal quotation marks
omitted). "A request for a preliminary injunction is evaluated in accordance with a
2006-1615 8
'sliding scale' approach: the more the balance of irreparable harm inclines in the
plaintiff's favor, the smaller the likelihood of prevailing on the merits he need show in
order to get the injunction." Kowalski v. Chicago Tribune Co., 854 F.2d 168, 170 (7th
Cir. 1988).
In the instant case, the district court reasonably evaluated Canon's likely success
on the merits and the irreparable harm balance and did not abuse its discretion in
granting the preliminary injunction.
CONCLUSION
For the foregoing reasons, the district court's grant of the preliminary injunction is
affirmed.
COSTS
No costs.
2006-1615 9