Emergency Business Litigation

Greater Protection for Shareholders in the New Year?

Tom Patterson — Mon, 11 Jan 2010 12:49:09 -0600

The Supreme Court’s begins hearing January arguments today. Of interest to shareholders, however, is not a case argued today but rather a case heard in November 2009. Before the end of the current term, the Court will issue an opinion in Merck v. Richard Reynolds. Merck focuses on whether the statute of limitations on a federal securities fraud action begins to run when an investor obtains evidence of scienter of fraud or when any evidence of fraud is uncovered.

The distinction is real and would impact many securities fraud cases. Federal law requires securities fraud cases to be brought within the earlier of two years of knowledge or five years of the violation. Generally speaking, the two year period relating to knowledge does not run until all elements of a violation are discovered. The issue is important in security fraud cases because there is often evidence of fraud before there is evidence of the requisite intent. The evidence of fraud, however, is only recognizable in hindsight based on newer evidence demonstrating the intent to defraud. For example, in Merck, an internal study reached a suspicious but supportable conclusion. It was not until an independent study was published two years later that Merck’s original position demonstrated its intent to defraud.

If the statute of limitations is applied to the first instance of possible fraud, shareholders are put in a position whereby they need to take aggressive action to protect their rights. Such action is expensive, such as instituting preliminary injunction and temporary restraining order actions to preserve possible evidence of intent, and may not uncover any fraud on the part of the corporation. Corporations would also incur an added expense as they are forced to defend preliminary litigation. Waiting until all of the evidence necessary to bring a case is available will not harm corporations that are engaged in ethical practices.

Merck will be an important case to watch not only for its impact on the discovery rule in securities fraud cases. As the Wall Street Journal Law Blog points out today, it may also demonstrate whether the Obama Administration can affect a change in the Court’s pro-business stance under President Bush.

When Do You Need A Preliminary Injunction In An Illinois Corporate Shareholder Dispute?

Tom Patterson — Thu, 19 Nov 2009 14:20:12 -0600

Illinois is supposed to be more shareholder friendly than Delaware. Its Business Corporation Act provides minority shareholders protections if the majority shareholders are

committing waste;
practicing fraud;
acting illegally; or
oppressing minority shareholders.

There was an article in Business Law Today a while ago that contended that minority shares of stock are worthless apart from whatever rights were provided in a shareholders’ agreement, but I disagree: minority shareholders in Illinois--without any shareholders’ agreement-- have the rights given them by the Illinois Business Corporation Act (and this Act influenced the drafting of the Model Business Corporation Act). If they sue to vindicate these rights, the majority shareholders can elect to buy them out, and their buy out price is the fair value (not the fair market value) of their shares.

Listing the rights given by statute begins to answer the question posed. If you are a minority shareholder, you need a preliminary injunction if the majority shareholders are doing one or more of the above acts and you or the corporation is going to be immediately irreparably harmed as a result. Waste of corporate assets might not be recoverable absent immediate action; an illegal act may cause the corporation to be sanctioned by law enforcement officials. Oppression is an elastic concept, but the standard is the reasonable expectation of the shareholders. Most of these defalcations will diminish the goodwill of the corporation, a harm that is difficult to quantify, justifying a preliminary injunction.

In the midst of the ill-will that accompanies actions that necessitate shareholder actions, actual or threatened improper withdrawals from the corporation may require a preliminary injunction or temporary restraining order. Minority shareholders need to be vigilant in guarding the corporate purse. A preliminary injunction can be justified on a constructive trust theory (corporate money is a res that is the subject of dispute over whether the payment is proper). The Illinois Business Corporation Act codifies the court’s power to issue injunctions as well. And the Act provides panoply of remedies available to the court: appointment of a receiver or director, for example, and, more broadly, any order necessary.

Chris Rock's Movie Good Hair Prevails against Motions for Injunctive Relief

Tom Patterson — Mon, 09 Nov 2009 13:23:11 -0600

Regina Kimball was probably pleased when comedian Chris Rock requested to view her film, My Nappy Roots, a documentary that explores the politics, culture and history of African-American hair. However, this happiness inevitably faded after she saw a trailer for Rock’s film, Good Hair, in late September. Kimball believed that Rock’s movie incorporated elements of her film, so she filed suit, alleging copyright infringement and requested that the Court enjoin the film’s October debut. (Kimball v. Rock, et. al., case number 2:09-cv-07249-DSF-E (C.D. Cal.)). However, U.S. District Court Judge Dale S. Fischer ultimately denied Kimball’s request for injunctive relief, and allowed the film to show.

To establish copyright infringement, two elements must be proven: (1) ownership of a valid copyright and (2) copying of constituent elements of the work that are similar. The Court refused to grant Kimball’s request for injunctive because she had failed to demonstrate a likelihood of success on the merits.

First, even though her film debuted in 2005, Kimball’s copyright registration is still pending. The Court noted that there is a disagreement, among various Circuits, about whether a pending registration is enough to confer jurisdiction.

Second, with regard to infringement, Kimball provided the following chart to demonstrate the similarities between the two films:

*My Nappy Roots*	*Good Hair*
Title connotes the perceived negative end of the spectrum of black hair	Title connotes the perceived positive end of the spectrum of black hair
Is socially and politically conscious	Is socially and politically conscious
Kimball was inspired to make the film because of her daughter's hair angst	Rock claims he was inspired to make the film because of his daughter's questions about her hair
Includes an interview with a doctor	Includes an interview with a dermatologist and Chemist
Includes an interview with hair care [sic] George Johnson	Includes an interview with hair care pioneer Joe Dudley
Tells story of weave with film clips of India, focusing on Tonsure ceremony at Temple Tirumala Tirupati	Visits India to explore a principle source of human hair, focusing on Tonsure ceremony at Temple Tirumala Tirupati
Has comedian Tommy Chung for comedic relief	In addition to Rock, has comedian Paul Mooney for comedic relief
Covers the business of black hair care	Covers the business of black hair care
Celebrities tell their own hair stories	Celebrities tell their own hair stories
Tour of manufacturing plant where hair relaxers are made	Tour of manufacturing plant where hair relaxers are made
Interviews Aleila Bundles	Interviews Aleia Bundles
Photos of Madame C.J. Walker graduation ceremony	Footage of J. Dudley graduation ceremony
Discuses controversy over inventor of the "Jheri Curl"	Interviews Willie Morrow the "self-proclaimed Jheri Curl inventor"
Interviews Sam Enos, founder of BOBSA	Interviews Sam Enos, founder of BOBSA

This chart did not convince the court. In particular, when it applied the substantial-similarity test, which has both an intrinsic and extrinsic component, the Court held that the two films differed with regard to their theme, plot, sequence of events, characters, dialogue, setting, mood and pace. The court held that Good Hair is a comedic documentary, while My Nappy Roots takes a serious and holistic view, and is an authority on the history and social dynamics of African-American Hair.

Ten Reasons Your Company Should Not File a Lawsuit To Resolve a Business Dispute

Tom Patterson — Tue, 03 Nov 2009 14:39:08 -0600

While I make my living suing people, I think all clients should be advised of the top ten reasons not to file a lawsuit. I offer this list:

You owe your opponent more money than he or she owes you.
You don’t want to turn over relevant documents to your opponent’s lawyer or they are already shredded.
You fired all of your employees who are knowledgeable about the dispute.
You lack the time to educate your lawyer about the dispute, retrieve relevant documents, or give a deposition.
You think that all witnesses tell the truth.
You regard yourself as superior to jurors or the Judge.
You believe that just by filing the lawsuit, you will get a settlement.
Your opponent has no money to pay a judgment.
Your company or key witnesses must continue to do business with your opponent or his or her allies.
The cost of the lawsuit is more than you would benefit with total victory.

If none of your clients are now contemplating a lawsuit, print and save.

A tale of two orders

Tom Patterson — Fri, 16 Oct 2009 13:54:04 -0600

It was with some excitement that Volterra Semiconductor Corporation announced that U.S. District Court Judge Joseph Spero granted its motion for a preliminary injunction against Infineon Technologies AG, Infineon Technologies North America Corporation and Primarion Inc. (Infineon/Primarion) in its patent infringement lawsuit. (Case No. 08-cv-05129-JCS (N.D. Cal.).

Commentators note that this is a rare decision because, since the Supreme Court’s ruling in eBay, Inc. v. Mercexchange, L.L.C., which eliminated the presumption of irreparable harm in the context of permanent relief, it has been difficult to win injunctions in patent infringement cases.

Thus, Volterra was obviously pleased and stated that “"[w]e believe this ruling signals the likelihood of success on the merits of our case against Infineon/Primarion, and validates the strength of our intellectual property position."

While the Judge orally ruled on the issue of granting the preliminary injunction, a formal order has not yet been issued. Instead, the court directed the parties to both file briefs on the amount of the bond and submit proposed orders. Not surprisingly, the parties’ proposed orders are vastly different. The language of an injunction order is important because it defines who is to be restrained, what acts are to be restrained, and essentially protects a judge from an embarrassing appeal. Fed. R. Civ. P. 65 (d) dictates what each order must contain:

The reasons the court issued the injunction: Volterra’s proposed order states that a preliminary injunction is appropriate because the Company proved all the necessary elements, including that “Volterra is likely succeed on the merits of its patent infringement claims.” Conversely, Infineon’s proposed order simply notes that the preliminary injunction is “warranted.” While I understand why Infineon would probably not want to elaborate on the reasons why the Court granted the injunction, unfortunately, the language in its proposed order does not adhere to the mandate of Rule 65.
The persons or entities to be restrained: Volterra and Infineon’s orders are fairly similar in that they restrain the defendants and the defendants’ affiliates. However, Infineon’s order would exempt third parties, who have either purchased or have already contracted to purchase enjoined products.
The acts to be restrained: Volterra’s order would halt all sales, manufacturing or marketing of any product that contained its patents. Conversely, Infineon’s order is much more liberal and would not enjoin the defendants from:
1. shipping enjoined products that have already been sold to customers or have already been promised to customers
2. providing support for enjoined products that have already been sold or otherwise provided
3. selling enjoined products that have been manufactured, but not yet sold.

Infineon’s order also cautions that any relief not granted in the order is denied.

Bond: Volterra’s order does not speak to bond. Infineon’s order, on the other hand, would have Volterra post a $20 Million Bond.
The date and hour of issuance: Infineon’s order states that the order shall not take place until the Plaintiff has posted bond. Infineon’s order also states that the order shall not take effect until 60 days until after the entry of the Order, so as to give the defendants time to review the Court’s Order and to explore a potential design-around.
The order’s expiration date: Infineon’s order states that the injunction shall run until trial, unless there is an earlier order modifying, terminating, or vacating the order. Volterra’s order simply contains standard language stating that the order shall remain effect until further order of the Court.

The parties are currently briefing the issue of the proper bond amount. (As is the case in patent litigation, most portions of the briefs are redacted, and the exhibits are sealed). Judge Spero is expected to issue a formal order soon, and I will let you know when he does, as it will be interesting to see which order was more persuasive.

Antitrust TRO: mandatory injunctions and hold orders

Tom Patterson — Fri, 09 Oct 2009 15:14:30 -0600

My prior two posts noted that in Hart Intercivic, Inc. vs. Diebold, Inc., the District Court for the District of Delaware denied a request for a TRO but ordered discovery and scheduled a hearing for a preliminary injunction in a case in which one voting machine company challenged a merger between its dominant competitor and another failing company.

The court’s opinion noted that the plaintiff requested the mandatory relief of undoing a merger. And the plaintiff did request in part an order of divestiture and the appointment of a trustee or receiver.

But the plaintiff also requested a hold order by which the assets, personnel, accounts, customers, technology and intellectual property of the acquired company would be kept separate from the acquired company while the litigation pended. Based on Federal Trade Comm’n v. Weyerhaeuser Co., 665 F.2d 1072, 1075 n. 7 (D.C. Cir. 1981), a hold order keeps the acquired unit as a separate entity during the litigation to keep the assets “unscrambled” while the litigation pends, making divestiture easier if the plaintiff is successful after the final trial. Perhaps the court will consider this in more depth at the preliminary injunction hearing.

Antitrust TRO: Delay in Seeking a TRO

Tom Patterson — Fri, 09 Oct 2009 15:08:26 -0600

My prior post noted that in Hart Intercivic, Inc. vs. Diebold, Inc., the District Court for the District of Delaware denied a request for a TRO but ordered discovery and scheduled a hearing for a preliminary injunction in a case in which one voting machine company challenged a merger between its dominant competitor and another failing company that would result in the merged company controlling 68% of the market for voting machines.

The defendant effectively argued the plaintiff’s delay, stating the following:

”On September 11, 2009, eight days after the public announcement of the Transaction, [Plaintiff] filed its initial complaint. That complaint never was served upon [Defendant]. Three days later, on September 14, 2009, [plaintiff] filed an amended complaint. Again, [Plaintiff] chose not to serve the pleading.”
”On September 23, 209, some twenty (20) days after the Transaction was publicly announced, Plaintiff suddenly was struck with a sense of urgency and filed its Motion for TRO. The following day, [Defendant] received by Federal Express a copy of the Amended Complaint, a request to waive service, the Motion for TRO and supporting papers. Two days later, without contacting Defendants’ counsel, [Plaintiff’s] counsel apparently contacted the Court and arranged for a hearing to be held on Tuesday, September 29, 2009.”

The title for this section was “Plaintiff’s Schizophrenic Litigation Approach.”

When an injunction is not an injunction--Part II

Tom Patterson — Thu, 08 Oct 2009 10:29:13 -0600

Continuing our discussion of the Illinois Appellate Court case Santella v. Kolton, in the second part of the opinion, the court determined that it lacked jurisdiction to hear the appeal of a trial court order requiring the return of bonus money paid to the individual defendants who were officers of a close corporation.

The order requiring the return of bonus money was found to be an injunction but the appellate court declined to assert jurisdiction on this aspect of the order as well. Rule 307(a)(1) only grants jurisdiction for appeals of injunctions “that merely preserve the status quo pending a decision on the merits, conclude no rights, and are limited in duration, in no case extending beyond the conclusion of the action.” As the mandated return of money altered the status quo and did not provide for the return of the money to the defendants, it was a permanent injunction and jurisdiction was not available under Rule 307(a)(1). The court refused jurisdiction under Rule 304, which provides for appeal of final judgments that do not dispose of an entire proceeding, because the trial court did not provide the requisite finding that no just reason exists to delay enforcement or appeal of the order.

Parties seeking to appeal injunction orders now need to be especially vigilant to ensure that the order has the necessary language that it is temporary, that is, that it lasts only until a further order or to the end of the case. The court’s decision that Rule 307 does not permit the appeal of mandatory injunctions will cause problems. Parties will argue over whether the injunction was mandatory or prohibitory. What should be a fast vehicle to review the propriety of a preliminary injunction will morph into arguments over the meaning of the rule. If this cannot be changed by another appellate opinion, the rule itself should be amended.

When an injunction is not an injunction

Tom Patterson — Wed, 07 Oct 2009 16:39:03 -0600

In Santella v Kolton, a derivative and individual action alleging corporate waste and mismanagement of a close corporation, the plaintiff filed an emergency motion to enjoin the defendants from dissipating assets of the company and remove the m as officers pursuant to Illinois Business Corporation Act § 12.56. After an evidentiary hearing, the trial court ordered the defendant officers replaced and three years of their bonuses returned to the company. The defendants then appealed the trial court’s order under the Illinois rule permitting an interlocutory appeal from orders “granting, modifying, refusing, dissolving, or refusing to dissolve or modify an injunction.”

The appellate court never reached the merits. It held that under Rule 307(a)(1), the order removing the officers was not appealable for these reasons:

Removing the individual defendants as officers and directors did not operate in personam as they were not required to do or refrain from doing a particular thing.
Their removal was a statutory remedy that changed their legal status within the corporation.
Requiring the return of bonus money lacked a temporal scope and thus was permanent and not temporary.

Preliminary injunction orders that lack a temporal scope are often deemed overbroad; they should be written to end upon the conclusion of the trial on the merits or some other event. In support of its determination that there was no injunctive action in removing the officers and directors, the court cites a treatise and the CJS for the proposition that the removal of officers or directors cannot be done through an injunction.

While removal of the officers is a statutory remedy, the statute also provides that injunctions can be entered to enforce its provisions. This may be the first case that decided that the Act provided a remedy easier to obtain than an injunction and impossible to appeal as an injunction. The statements about the lack of in personam jurisdiction ignored that they were removed from their positions and restrained from exercising their rights as officers.

The other half of the opinion will be commented upon tomorrow.

Injunctive Relief--Use the four-factor test to make your case

Tom Patterson — Thu, 24 Sep 2009 13:56:43 -0600

A few days after the Court granted the Bank of America’s motion for an ex parte TRO, the Federal Deposit Insurance Corporation (“FDIC”), in its capacity as receiver for Colonial Bank, was substituted as the real party in the case, and moved the court to dissolve the TRO. The FDIC argued that, pursuant to 12 U.S.C. § 1821 (j), the Court lacked subject matter jurisdiction to restrain the FDIC in exercising its powers and functions as a receiver. Because the Court determined that the sale proceeds and loan agreements, which the Bank seeks the return of, are outside the receivership estate, it denied the FDIC’s jurisdiction argument.

Of interest to me today, however, is the fact that the FDIC admitted, in its motion to dissolve the TRO, that the Court properly issued the injunction. While declining to torture the FDIC with this admission, the Court noted that there may have been “public interest considerations contemplated by the injunctive-relief analysis,” in light of Colonial Bank’s collapse and subsequent involvement of the FDIC, but the FDIC’s failed to raise the issue. The FDIC could have strengthen its motion if it demonstrated how the four factor test weighed against the issuance of an injunction, emphasizing the public interest in supporting the FDIC in its role as receiver.

Ex Parte Injunctive Relief--Demonstrating Gravity

Tom Patterson — Mon, 21 Sep 2009 09:38:16 -0600

Bank of America, N.A. v. Federal Deposit Insurance Corp. (Receiver for Colonial Bank), Case No. 09-22384-CIV-JORDON, currently before U.S. District Court Judge Adalberto Jordan of the Southern District of Florida, has garnered some media attention in the Atlanta Business Chronicle and The New Times, but is of interest to us in today’s post because the court granted an emergency motion for an ex parte TRO in a billion dollar case.

Facts

Bank of America (“the Bank”) filed a lawsuit on August 12, 2009 against Colonial Bank (Colonial) to obtain the return of loan agreements, mortgages and sale proceeds valued in excess of a billion dollars. The Bank had sent Colonial a demand for all sale proceeds and loan agreements held by Colonial Bank. Colonial refused to return the loans, and the Bank filed suit for breach of trust and other agreements.

Motion for an Emergency ex parte TRO

Along with the complaint, Colonial filed a motion for an emergency temporary restraining order (TRO), which sought to enjoin Colonial from liquidating, transferring or otherwise encumbering the assets. The motion recited the familiar four-factor test, but is of interest to me today for these three reasons:

The Bank didn’t rest solely on its motion; as new developments occurred, it filed supplemental papers. This is important because TROs are decided on the papers alone, so if new information develops after you have filed your motion, be sure to update the court with new information. Used appropriately, it builds momentum: “yesterday these terrible events took place; today it got worse; Judge please stop them!”
The Bank used newspaper stories effectively. Under Fed. R. Evid. 902(6), newspaper stories are admissible. The Bank intelligently used this Rule.
The Bank used supplemental sources of law. Rather than relying solely on its agreements (which should have and probably would have been sufficient), the Bank also asserted Fla. Stat. § 812.035(6), which relaxes the traditional “irreparable harm” requirement in cases involving civil theft, and instead only requires the movant to make “a showing of immediate danger of significant loss[.]” It is a good practice to always search for supplemental sources of law that may assist you in stating a claim.

Our next post will discuss a few other interesting aspects of this case.

Irreparable harm in patent law

Tom Patterson — Tue, 07 Jul 2009 16:33:17 -0600

In my prior post (The Federal Circuit Clarifies Injunction Requirements in Patent Cases), I reviewed the Titan case, but my curiosity was piqued by the Court of Appeals noting that irreparable harm, the balance of harms, and the public interest all weighed in favor of the movant; the injunction was denied only because of an unlikelihood of success. So I pulled the lower court’s opinion to see what it said on these subjects: of interest to those who can show a likelihood of success and need to argue these other factors as well.

Patent holders have an interest in not being forced to license their invention. The right to exclude is important. So many cases hold that a presumption of irreparable harm arises from infringement itself. Most injunction cases rely on an inability to prove money damages to justify irreparable harm arguments, but patent infringement allows money damages, and permits tripling them if the infringement is willful. Why an injunction, then?

The court noted that the potential loss to the moving party may include loss of trade, sales, reputation, and goodwill, some of which may never be remedied with money damages, and the size of the parties’ relative investment. The court spent time analyzing only a few of these elements.

The court considered delay, noting that delay in pursuing rights under a patent can negate an argument of irreparable harm, but here the movant explained the delay by its lack of knowledge of infringement, its immediate retention of counsel once discovered, and the short time that elapsed between that time and its sending the cease and desist letter, the investigation of the claims, followed by the lawsuit. The timeline satisfied the court and negated the delay argument.
The reputation component. The inventor can select the companies he or she wants to make the product; if they do so badly, the inventor’s reputation suffers. The opponent failed to offer proof to this argument, so the court deemed that irreparable harm was proven.
Loss of goodwill. It is difficult to quantify the costs of customer confusion. This occurs if one company is licensed to manufacture the product or if the inventor manufactures it; another similarly appearing or functioning product bleeds off sales. Why can’t this be compensated in money damages from the bleedor? The value of a one-time purchase is more than the profit from the sale. Collateral products might be purchased, or the buyer might return for later sales to the same source at a later time, and it is difficult to determine the value of those sales, all of which is captured in the concept of goodwill, damage to which is a harm that cannot easily be quantified.
The movant explained its great investment in developing the products based on the patent. This went unrebutted by the opponent (who could have explained how much it spent to develop its allegedly infringing product).

Protecting the Judge

Tom Patterson — Wed, 01 Jul 2009 12:23:58 -0600

At a presentation last week to the DuPage County Bar Association, I mentioned that the federal courts required the movant to present a draft order along with the motion for a temporary restraining order or preliminary injunction. Illinois and many other states lack this requirement, but following a suggestion made by Maxwell II and Jacobs, I said it was useful to focus your attention on the exact relief you needed: who you are going to enjoin and what you are going to prohibit or require, because“[t]he first thing the court wants to know is precisely what action it is being asked to take.” Edward B. Maxwell II & Jack B. Jacobs, How to Win an Injunction, 10 Litig. 20, 21 (1983).

Afterward, Dupage County Circuit Court Judge Kenneth L.Popejoy agreed that it was useful for a Judge to see exactly what the movant was proposing, but mentioned a more important point: Judges are required to make specific findings of fact and conclusions of law. A draft order helps them focus on what facts have been shown and what conclusions the movant thinks are required by the facts. As a practitioner, I instantly agreed.

One of the functions of an injunction requestor is to protect the court from being reversed on appeal or having to reconsider an order. To some extent this is true in every case, but injunctions happen quickly and interlocutory appeals are permitted, so an early mistake might not be as recoverable in injunction actions as it would be in ordinary litigation. Why embarrass a Judge by persuading him or her to enter an order that on its face is erroneous?

In a recent case, for example, my opponent got an ex parte TRO and tendered a draft order without mentioning a bond. In federal court, a bond is required, although the court has discretion to set the amount. Failure to discuss the bond required is a reason to vacate the TRO. In our motion opposing the extension of the TRO, we pointed out how the movant (not the Judge) had erred in failing to post a bond, and the Judge ruefully noted that perhaps he should have required one, and thereafter brokered a reasonable agreed order. I liked being able to challenge the credibility of an opponent on a clear requirement in my first appearance in the case.

The Federal Circuit clarifies injunction requirements in patent cases.

Tom Patterson — Thu, 25 Jun 2009 12:18:16 -0600

In Titan Tire Corporation v. Case New Holland, Inc, Case no. 208-1078 (June 3, 2009), the Court of Appeals for the Federal Circuit clarified confusing language from prior cases—or did it? The District Court had refused the injunction notwithstanding finding that irreparable harm, the balance of harms and the public interest favored a preliminary injunction. Why? Because the plaintiff was not likely to withstand a challenge to the validity of the patent. Clarification was required because prior cases held that where the alleged infringer raises a substantial question of invalidity, the patentee must show that the alleged infringer’s defense lacks substantial merit, a formulation that “leaves room for different interpretations.”

The court held that the “raises a substantial question” phrase referred to a conclusion to be reached by the trial court after considering evidence on both sides rather than a burden of production procedural step before the conclusion was reached, yet the ultimate question “remains that of the patentee’s likelihood of success on the merits” because “there is no room for making the substantial question test a substitute or replacement for the established test for injunctions. That test places the burden on the plaintiff to prove likelihood of success.”

Further clarification issued to ensure that the “substantial question” standard regarding invalidity should not be confused with the “substantial evidence” standard by which jury verdicts and administrative law matter were reviewed. The latter is not the evidentiary test to decide whether to grant or deny a preliminary injunction.

Finally, the infringer does not need to prove invalidity by clear and convincing evidence at the preliminary injunction stage, while it will have to meet that standard at the trial on the merits. Yet the trial court must keep this standard in mind at the preliminary injunction stage. “This decision process, which requires the court to assess the potential of a ‘clear and convincing’ showing in the future, but in terms of what is ‘more likely than not’ presently, rests initially in the capable hands and sound judgment of the trial court.”

Is everyone clear now?