Lost Connection: Preliminary Injunction Against Unreleased Product Is a No-Go | McDermott Will & Emery
Addressing a preliminary injunction motion directed to a competitor’s yet-to-be-released product, the US Court of Appeals for the Federal Circuit determined that the district court did not abuse its discretion in finding that the patent holder failed to establish irreparable harm based on speculative evidence. SmartSky Networks, LLC v. Gogo Bus. Aviation, LLC, Case No. 23-1058 (Fed. Cir. Jan. 31, 2024) (Cunningham, Chen, Hughes, JJ.) (non-precedential).
SmartSky Networks and Gogo Business Aviation are competing aviation network providers that offer air-to-ground in-flight internet networks for aircrafts. SmartSky sued Gogo in early 2020, alleging that Gogo’s 5G network infringed four patents related to wireless in-flight internet connections. SmartSky also moved to preliminarily enjoin Gogo from selling its 5G network, which is not yet operational and has yet to be released. In late 2022, the district court denied SmartSky’s motion for preliminary injunction, finding that SmartSky had not shown a likelihood of success or irreparable harm. SmartSky appealed.
SmartSky first moved to supplement the record with new materials relevant to market share, sales and switching costs. The Federal Circuit first denied SmartSky’s motions to supplement the record, noting that it would not consider new evidence on appeal absent extraordinary circumstances, such as instances where the court can take judicial notice of new facts or where the facts would alter the appropriateness of injunctive relief. Because the district court found no likelihood of irreparable harm, despite acknowledging that SmartSky had shown consumer stickiness and direct competition between the parties, the Court concluded that documents related to market share, sales and switching costs would not alter the appropriateness of injunctive relief. The Court further declined to take judicial notice of the facts, which were subject to dispute.
The Federal Circuit then turned to SmartSky’s argument that the district court erred in finding no likelihood of irreparable harm from lost sales and market share, price erosion, lost reputation and goodwill, and lost research and development and investments. Regarding lost sales, SmartSky argued that the district court ignored Gogo’s sales of AVANCE L5 equipment (used for Gogo’s 4G and 5G networks) and that Gogo’s 5G network was not “yet-to-be-released” because it had been on sale since late 2021. The Court found these arguments unpersuasive. The Court noted that SmartSky did not dispute that Gogo had yet to launch its 5G network and found that the district court did not abuse its discretion in concluding that any such sales were quantifiable. As for AVANCE L5, the Court observed that the equipment was currently sold as part of Gogo’s unaccused 4G network, and that the alleged harm would only occur if Gogo launched its 5G network and customers upgraded. Thus, the Court found that any harm from the sales of AVANCE L5 was highly speculative, particularly because the parties are not the only two players in the market and customers may have other non-infringing options.
SmartSky next argued that the district court ignored testimony that customers used Gogo’s pricing to negotiate discounts from SmartSky. The Federal Circuit disregarded this evidence as speculative, noting that SmartSky’s prices were set before Gogo announced its 5G network and the alleged discounts were based on Gogo’s unaccused 4G network. SmartSky similarly contended that the district court erred in disregarding testimony concerning harm to its reputation, goodwill, and current and future research investments. The Court again found this evidence speculative because SmartSky’s president attributed the loss of consumer and investor interest in SmartSky to Gogo’s existing market power and issues with SmartSky’s own product.
Finally, the Federal Circuit rejected SmartSky’s catch-all argument that its case presented all the “hallmark” indicators of irreparable harm because the parties were direct competitors, the consumers were sticky, and the competition from the allegedly infringing product concerned SmartSky’s flagship product. Distinguishing the present case from SmartSky’s cited caselaw, the Court noted that the parties did not belong to a two-player market with a small number of important customers and limited sales opportunities. The Court thus concluded that the district court did not abuse its discretion in finding that SmartSky did not establish a likelihood of irreparable harm. The Court declined to address SmartSky’s arguments related to likelihood of success.
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