Watch What You Say to the Press: Statements by Executives That Design-Arounds Were Already In Place Justifies Denial of Stay of Permanent Injunction

After the jury found defendant A10 Networks (“A10”) liable for misappropriation of trade secrets and infringement of patents owned by Brocade Communications Systems, Inc. et al (“Brocade”), the court entered two permanent injunctions against A10, one that prohibited additional patent infringement and another that applied to the misappropriation of trade secrets. Subsequently, A10 moved to stay the injunctions pending appeal or, in the alternative, to stay pending a request for a stay from the Federal Circuit, a modification to the injunction to include a sunset provision or a modification to the terms of the trade secret injunction.

First, the court addressed whether A10 was likely to succeed on appeal. The court found these arguments merely repeated from the arguments made in A10’s motion for judgment as a matter of law and that they were once again without merit. The court also found that A10 had not demonstrated irreparable injury and the balance of hardships also tipped in favor of Brocade because Brocade and A10 are direct competitors. Accordingly, the court declined to stay the injunction with respect to patent infringement.

The discussion of irreparable injury and balance of hardships was particularly noteworthy. As part of the reason the court provided for declining to stay the injunction, it explained that “[a]s the court noted at the hearing regarding A10’s ex parte motion to stay the injunction, A10’s executives have indicated to the press that the design-arounds to the infringing features are already in place and the injunction will not disrupt A10’s shipment of product.”

Second, the court addressed the trade secret permanent injunction. Here, again, the court found that A10’s arguments did not show it was likely to prevail on appeal and were largely repetitive of arguments made previously. The court also confirmed that A10 had not shown sufficient harm to itself to outweigh the harm to Brocade. Accordingly, the court denied the request to stay the injunction with respect to the misappropriation of trade secrets.

Nonetheless, the court did agreed to modify the trade secret injunction to particularly describe the trade secret. The court also found that it was appropriate to carve-out current customers from the injunction. “The court agrees with A10 that a current customer carve-out is an appropriate modification to the injunction to allow A10’s customers to continue to receive service until they decide to upgrade their software.” The court also agreed to carve-out A10’s attorneys and litigation counsel from the injunction.

Finally, the court addressed A10’s request for a six-week sunset period to sell to new customers with respect to the trade secret injunction. The court denied this request, finding that it would be inappropriate to continue to permit A10 to sell to new customers that would potentially use the products with the misappropriated trade secrets for many years. “As both Brocade and A10 have stated, once customers purchase these products they retain them for several years. Permitting A10 to continue selling the product with the trade secrets to new customers and then allowing A10 to serve those new customers until they decide to upgrade circumvents the purpose of the injunction. A10 had notice after the jury’s verdict in August and again in September when Brocade sought an injunction that it may be enjoined from continuing to make and sell its product with the trade secrets. Its timing in making the necessary changes is its right but is not grounds for a sunset provision that would allow it to sell more new customers and through the customer carve-out to continue providing service to those new customers using Brocade’s trade secrets potentially for years.”

Brocade Communications Systems, Inc., et al. v. A10 Networks, Inc., et al., Case No. C 10-3428 PSG (N.D. Cal. Feb. 2, 2013)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.