EDNY Grants Preliminary Injunction in Patent Infringement Case

In Veeco Instruments Inc. v. SGL Carbon, Judge Chen in the Eastern District of New York granted Veeco’s motion for preliminary injunction. In her opinion, Judge Chen addressed two of my favorite topics in damages: irreparable harm and extraterritoriality.

Irreparable harm in patent infringement cases requires the patent owner to show irreparable harm absent an injunction and a “sufficiently strong causal nexus” between the harm and the alleged infringement. It can be difficult to establish no amount of money can compensate the patent owner for the alleged infringement, much less to connect that fact to the alleged infringement. 

In Veeco, Veeco provided details of the metal-organic chemical vapor deposition (MOCVD) reactor market through its expert. For example, relying on Wall Street analysts following the market, in addition to its own experience, Veeco described the competitive landscape from 2010 to 2017, including the noticeable changes in 2016 and 2017. While Veeco’s market share rose to 70% in 2016, AMEC’s market share was 10% in 2016 and was projected to “eclipse” Veeco in 2017. The other three market players had fallen out of favor; customers preferred removable wafer carriers mounted on susceptorless wafer-supporting assemblies, which they did not offer. Only Veeco and AMEC offered those assemblies. Through the details of economic realities of the MOCVD reactor market, Veeco effectively established a two-competitor market, the easiest circumstance in which to show irreparable harm. What’s more, these same details satisfied the causal nexus requirement.

On top of the two-competitor market, the Court found Veeco marshalled evidence showing a clear likelihood of harm beyond the past or near-term harm due to lost sales, lost customers, and price erosion that typically seen in preliminary injunctions. For example, Veeco was able to show (a) loss of customer feedback would hamper its ability to innovate its MOCVD designs to remain competitive; (b) loss of near term revenue, asset impairment, and loss of goodwill and market share would limit Veeco’s ability to invest in research and development (it had spent more than $475 million in research and development for MOCVD); (c) lost sales now will mean lost sales later because of the incumbency effects of the MOCVD market; and (d) the impact of lost sales and lost market share would be difficult to predict since the historical market data would be less reliable in the expansionary market cycle. Using its experience in the MOCVD market, Veeco detailed what the harm was and how that harm would impact it beyond the near-term pecuniary losses. With the certainty of harm and the inability to quantify that harm, the Court concluded Veeco established irreparable harm.   

Now, what about extraterritoriality? SGL Carbon argued Veeco could not establish irreparable harm because all of the alleged harm would arise from AMEC’s sales which are outside the United States. A few more facts: SGL Carbon manufactures and sells wafer carriers for MOCVD reactors to Veeco and to Veeco’s customers under a limited license. In 2013, SGL Carbon began manufacturing and selling the allegedly infringing wafer carriers to AMEC, a company based in China. SGL Carbon manufactures the allegedly infringing wafer carriers in the United States. The Court held Veeco may recover lost profits under 35 U.S.C. § 271(f)(2) because the alleged lost profits “arise from the sale of a product that incorporates a component manufactured in the United States.” Relying on WesternGeco LLC v. ION Geophysical Corp., 791 F.3d 1340 (Fed. Cir. 2015), cert. granted, judgment vacated, 136 S. Ct. 2486 (2016), reinstated in relevant part, 837 F.3d 1358 (Fed. Cir. 2016), the Court said “to determine Veeco’s available remedies for infringement in this case, the Court should treat SGL Carbon as having exported the final product into which its component was combined. In other words, under WesternGeco, Veeco’s alleged lost profits are recoverable to the extent that they would be recoverable if SGL Carbon exported the final product—i.e., an MOCVD reactor incorporating the patented wafer-supporting assembly.” Accordingly, the presumption against extraterritoriality is not a bar to a preliminary injunction.