Irreparable Injury: Lost Market Share

 

By: Tyler Hampy

Pursuant to the well-established principles of equity, a patentee seeking an injunction against an infringer must satisfy a four-factor test before a court may grant such relief. The patentee must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by granting the injunction. The court will weigh the above factors to determine whether the alleged infringer’s conduct should be enjoined.

What if the only injury that the patentee has suffered or will suffer is lost market share or lost prospective clients? Can the court find that the patentee has suffered irreparable injury?

The court in In I-Flow Corp. v. Apex Medical Technologies, Inc., 2010 WL 141402 at *1 (S.D. Cal. 2010), found that loss of market share, loss of the right to control the terms of a patent license, and loss of the competitive advantage as a result of the defendants’ infringing conduct was sufficient to demonstrate irreparable injury, thereby favoring granting the injunction. Additionally, evidence of loss of prospective customers or goodwill can support a finding of irreparable harm.

Any argument based on lost market share or loss of prospective clients must be proven, or at least substantiated with some evidence, in order for it to support entry of an injunction.

There is a distinction to be made when dealing with lost market share in a two-player market. In Conceptus, Inc. v. Hologic, Inc., 2012 WL 44064 (N.D. Cal 2012), Conceptus sold a transcervical permanent contraceptive product called Essure. Hologic owned and marketed the infringing Adiana contraceptive system. This was a two-product market: Essure and Adiana. Those were the only two products available for transcervical hysteroscopic sterilization.

The court found that, “the existence of a two-player market may well serve as a substantial ground for granting an injunction—for example, because it creates an inference that an infringing sale amounts to a lost sale for the patentee.”

Conceptus argued that it had suffered irreparable injury because its sole product Essure competes with Adiana in the two-supplier market. Hologic’s marketing strategy siphoned off Conceptus’ prior investments in creating the market for transcervical hysteroscopic sterilization. Conceptus also argued that prior to Adiana’s launch, Essure was the only FDA-approved product in the market; however, since Adiana’s launch, Conceptus has had to compete leading to loss of market share, loss of customers, and loss of access to potential customers. The court found this was indicative of irreparable harm.

The court also noted that Essure was the core of Conceptus’ business, and harm to the core of the business also supports a finding of irreparable harm. The court found that the irreparable harm factor weighed in favor of granting the injunction, although the court ultimately denied the injunction.

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