Court Grants Injunction, Then Stays Case Pending Re-Exam

2009-1158 Automated Merchandising v. Crane
ND/WV 08-cv-97
Judge John Preston Bailey

Defendants appeal from the grant of a preliminary injunction by Judge John Bailey against the sale of their new vending machines.  The 4 patents in suit relate to "optical vend detection systems" in vending machines, devices that are supposed to determine whether or not the selected item has actually dispensed and, if not, refund the money.  No more rocking the machine to free stuck Frito's. 

There are several facts that make this case interesting, including:

• a 7 year delay by plaintiff between believing defendants were infringing and seeking the PI;
• the patents are currently in re-exam; and
• after granting the PI the court stayed the case pending the re-exam.

The court first addressed defendants' invalidity contentions, based on KSR.  The court does not actually discuss the specifics of the obviousness contentions (or of the claims), but notes that the cited prior art was before the PTO and therefore, apparently, it cannot constitute a sufficient defense against a PI:

As such, the prior art references raised by defendants were examined by the Patent and Trademark Office prior to issuing the ‘220 and the ‘915 patents. See American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1359 (Fed. Cir. 1984). Thus, the defendant bears this additional burden:

When no prior art other than that which was considered by the PTO examiner is relied on by the attacker, he has the added burden of overcoming the deference that is due to a qualified government agency presumed to have properly done its job, which includes one or more examiners who are assumed to have some expertise in interpreting the references and to be familiar from their work with the level of skill in the art and whose duty it is to issue only valid patents. Ultra-Tex Surfaces, Inc. v. Hill Bros. Chem. Co., 204 F.3d 1360, 1367 (Fed. Cir. 2000) (quoting American Hoist, 725 F.2d at 1359). Based on the presumption accorded a valid patent under 35 U.S.C. § 103, and the added burden discussed in American Hoist, defendant has failed to overcome the presumption of validity of the ‘915 and ‘220 patents.

Arguably because KSR ‘altered’ the TSM test to include ‘obvious to try’ in the definition of obviousness, the prior art cited by the defendant, although, reviewed by the Patent and Trademark Office when examining the ‘915 and ‘220 patents, could lead the Patent and Trademark Office to a new conclusion as to obviousness after KSR (i.e. in reexamination). This possibility, however, does not rise to the level of a “substantial question” as to the validity of the patent.

[The court follows Judge Newman's opinion in Abbott v. Sandoz, 2008 WL 4636167 (Sept. 21, 2008) that evidence of vulnerability to invalidity should be considered in conjunction with all other evidence to assess "likelihood of success on the merits.']

After rejecting defendants' obviousness defense, the court then engages in claim construction and concludes that the accused vending machine likely infringes claim 28 of 7,343,220.

The court runs through the remaining PI factors, finding that the delay in this case did not preclude the issuance of PI.  Defendants had apparently been selling vending machines with allegedly infringing optical systems since 2001, but had only recently introduced such a vending machine with refrigeration--a much sought after feature in the market--that appears to have hurt plaintiff's sales.  The court was not troubled by the delay because the accused machine was just introduced, thus providing a newly arisen irreparable harm. 

Motion to Stay

The court then granted defendants' motion to stay the case pending the re-examination...a motion apparently filed well before the PI was granted.  The court noted it had control over its docket, the case was in its early stages, and waiting for the PTO to decide matters would conserve judicial resources.  The court did not mention the potential unfairness to defendants by issuing the injunction and then staying the case.

More reading: PI Order

Counsel:

Automated: Bowles Rice McDavid (Martinsburg, WV); Davidson Berquist Jackson (Arlington, VA)
Crane/Seaga: Munck Carter (Dallas); Reinhart Boerner (Milwaukee); Spilman Thomas (Morgantown, WV).