Open Text, S.A., v. Box, Inc. and Carahsoft Technology Corporation, Case No. 5:13-cv-04910 (Judge Edward Davila)
Judge Davila last week denied Plaintiff Open Text's request for preliminary injunction against Defendant Box. Open Text, an enterprise software provider, moved to enjoin Box, a well-known, IPO-tracked cloud storage provider, from providing its "Box Edit" feature to customers. Box Edit is a cloud-based document editing service that permits users to access documents stored in the cloud via a web browser and automatically syncs local edits to the cloud copy. Open Text alleged that Box Edit infringes two sets of patents – one set that allegedly claims data "syncing" features and one set that allegedly claims network-based collaboration features. In denying Open Text's motion, Judge Davila identified some of the hurdles a patent plaintiff must overcome to obtain a preliminary injunction:
Likelihood of Success (Validity) –To show a likelihood of success on the merits, a patent plaintiff must show a likelihood of success on both the issues of validity and of infringement. Here, Judge Davila did not even reach the question of infringement because he concluded that the substantial validity questions raised by Box meant that Open Text could not show a likelihood of success on the merits no matter the merits of infringement.
Judge Davila's analysis of the prior art shows how many moving parts the parties have to deal with in patent preliminary injunction issues. Box identified thirteen pieces of prior art and six claim construction issues that had to be resolved. Judge Davila found that Open Text did not provide sufficient evidence to support its "empty allegations" that the prior art at issue did not invalidate the asserted claims. Judge Davila also found that Open Text failed to provide any "compelling evidence to support its position." Judge Davila's focus on validity shows the significant issues a patent plaintiff must contend with. Even assuming a patent plaintiff has a solid infringement case (and there is no way to tell if Open Text does based on this opinion), it may not matter at all if the patents are in a crowded field of prior art or have claim terms of debatable scope.
Judge Davila also rejected Open Text's argument that the commercial success of Box's "Box Edit" feature was strong evidence of secondary considerations of nonobviousness for the patents-in-suit. Open Text was relying on the accused infringer's software, rather than its own software, as proof of secondary considerations. The Judge found that Open Text had to meet a significant burden of proof in showing a nexus between the commercial success of Box Edit and the claimed invention.
Irreparable Injury – Though Judge Davila found that a strong showing of irreparable harm could, in some cases, "offset a failure to show a likelihood of success on the merits," he found that Open Text's showing falls short. Open Text's main theories of irreparable injury were lost profits from direct competitor and the loss of a "first mover" advantage in the enterprise cloud market. Judge Davila rejected both theories. He determined that the cloud market in which Box competes had at least sixteen competitors and that Open Text did not provide the Court with any level of specificity as to what portion of the market Open Text competes with Box. Judge Davila found that Open Text did not identify specific sales or customers that have been lost to Box. Thus he could not determine if Open Text is losing market share to Box or even whether the parties meaningfully compete. Additionally, Open Text could not show that the patented feature drove demand for the allegedly infringing Box software or that Open Text was a first-mover into the market.
Judge Davila's opinion illustrates some of the difficulties that may arise for a patent plaintiff seeking a preliminary injunction against a competitor in a multi-player market where the products at issue contain both patented and non-patented features. In addition, at least according to Judge Davila, the challenge may be greater if the plaintiff does not have a clear showing that it was the "first mover" in a relevant market.
Delay – Finally, the Court determined that Open Text unduly delayed in pursuing an infringement action, thus undercutting its irreparable harm argument. The Court found that the Box Edit feature was released in October 2012, yet Open Text did not file suit until almost a year later. Open Text explained that it filed for a preliminary injunction a month after learning of Box's release of the Elite Plan, which, Open Text contended, coupled with the Box Edit feature makes Box a direct competitor of Open Text. Judge Davila rebuffed this excuse, stating that Box had other similar products that could have competed with Open Text in as late as 2012. Furthermore, Judge Davila noted that Open Text's assertion "is opposite" of its statement in its June 2013 complaint, where Open Text claimed that Box was already in "direct competition," yet Open Text did not ask for a preliminary injunction until September 2013. This finding appears to place the onus on a plaintiff to pursue injunctive relief against a competitive product as soon as reasonably possible under the circumstances. According to Judge Davila, even a 3-month delay (the period between filing a complaint and the motion for preliminary injunction) may be fatal. This standard of diligence poses a significant challenge given the many issues regarding prior art, claim construction, infringement and market conditions undergirding the irreparable injury analysis that may arise in a preliminary injunction motion.
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