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November 03, 2022

Heads Up: Defendants Deserve Fair Notice of Preliminary Injunctions

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In one of two concurrent opinions concerning the same design patent case, the US Court of Appeals for the Federal Circuit vacated a district court's grant of a preliminary injunction and an order extending the preliminary injunction to new defendants for lack of notice under Rule 65(a). ABC Corp. I v. P'ship & Unincorporated Ass'ns Identified on Schedule "A", Case No. 21-2150 (Fed. Cir. Oct. 28, 2022) (Taranto, Dyk, Stoll, JJ.)

On August 17, 2020, ABC Corporation I and ABC Corporation II (collectively, ABC) brought a design patent infringement action asserting four "hoverboard" design patents against several online merchants. The ABC patents claim designs for handle-less, two-wheeled, motorized, stand-on vehicles commonly referred to as hoverboards. Attached to its original and amended complaints, ABC provided a list of defendants in a Schedule A that was amended throughout the proceedings as new defendants were identified. Gyroor-US was an originally named defendant on Schedule A, but it was not served with the complaint and summons until January 29, 2021.

On November 24, 2020, the district court granted ABC's November 20, 2020, motion for a preliminary injunction against the defendants then listed on Schedule A, including Gyroor-US, which had not yet been served and was not given notice of the motion under Fed. R. Civ. P. 65(a). On May 24, 2021, the court also granted ABC's May 6, 2021, motion to amend Schedule A to add GaodeshangUS, Fengchi-US and Urbanmax, binding them to the 2020 preliminary injunction even though they too had not received Rule 65(a) notice and were not served with process until June 25, 2021. GaodeshangUS filed a notice of appeal immediately following the court's May 24 order. After several unsuccessful motions to vacate the 2020 preliminary injunction for lack of notice, Fengchi-US, Urbanmax and Gyroor-US also filed notices of appeal.

The Federal Circuit first determined that it had jurisdiction to hear the three appeals by GaodeshangUS, Fengchi-US, Urbanmax and Gyroor-US under 28 U.S.C. § 1292(c)(1), which grants the Federal Circuit exclusive jurisdiction of an appeal from an "interlocutory order[] . . . granting, continuing, modifying, refusing or dissolving [an] injunction[], or refusing to dissolve or modify [an] injunction[]" in any case over which the Federal Circuit would have jurisdiction of an appeal under 28 U.S.C. § 1295, such as cases arising under the patent laws. The Court began by considering GaodeshangUS's May 24, 2021, notice of appeal, which stated that the appeal was from the preliminary injunction "entered in this action on November 24, 2021 [sic]," rather than the May 24, 2021, order. The parties disputed whether GaodeshangUS's notice of appeal was timely filed within 30 days of the relevant order and whether the May 24 order was appealable as a modification of the 2020 preliminary injunction. The Federal Circuit concluded that GaodeshangUS's appeal should be interpreted to refer to the May 24 order because it was filed on the same day as the order and "a mistake in designating the judgment appealed from" is not fatal if "the intent to appeal from a specific ruling can fairly be inferred" from the notice and the other party was not prejudiced. The Court further concluded that the May 24 order was appealable as an order modifying the 2020 preliminary injunction because it made ABC's enforcement easier and altered the legal relationship between ABC and GaodeshangUS.

The Federal Circuit also concluded that it had jurisdiction to consider Fengchi-US and Urbanmax's September 2, 2021, appeal of the district court's August 9, 2021, order continuing the 2020 preliminary injunction. The Court acknowledged that the 30-day jurisdictional time limit under 28 U.S.C. § 2107(a) may limit appellate review of a denial of a motion for dissolution or modification of an injunction based on a ground that was available to the appellant when the injunction was initially entered. However, the Court refused to apply the time limit in this case, as Fengchi-US and Urbanmax had not been served when the 2020 preliminary injunction was entered or when the May 24 order added them to Schedule A, and a party cannot be required to take an appeal before being properly served. The Court similarly reasoned that Gyroor-US's August 28, 2021, appeal of the district court's August 24, 2021, denial of Gyroor-US's motion to dissolve the 2020 preliminary injunction was timely filed. Like Fengchi-US and Urbanmax, Gyroor-US was not properly served within 30 days of the issuance of the preliminary injunction.

Turning to the 2020 preliminary injunction, the Federal Circuit summarily concluded that both the injunction and the May 24 order violated the Rule 65(a) notice requirement. Under Rule 65(a), a court may enter a preliminary injunction "only on notice to the adverse party," which necessitates a hearing at which the defendant is given a fair opportunity to oppose the injunction. The Court noted that no such notice was provided to GaodeshangUS, Fengchi-US, Urbanmax or Gyroor-US for either interlocutory order.

Notwithstanding the violation of Rule 65(a), ABC argued that GaodeshangUS received notice through its counsel, who also represented Gyroor-US. The Federal Circuit recognized that "notice to counsel is notice to all parties represented by him" and conceded that GaodeshangUS's lawyer had received electronic notice of ABC's May 6 motion to add defendants to Schedule A. However, the Court reasoned that the lawyer's notice could not be imputed to GaodeshangUS because the lawyer did not enter an appearance for GaodeshangUS until just after the May 24 order was entered. Having concluded that the 2020 preliminary injunction and the May 24 order violated Rule 65(a)'s notice requirement, the Court vacated both orders.

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