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Eagle View Technologies, Inc. v. Xactware Solutions, Inc.

United States District Court, D. New Jersey, Camden Vicinage

October 18, 2019

EAGLE VIEW TECHNOLOGIES, INC., et al., Plaintiffs,
v.
XACTWARE SOLUTIONS, INC., et al., Defendants.

          WALSH PIZZI O'REILLY FALANGA LLP By: Liza M. Walsh, Esq. Hector D. Ruiz, Esq. Eleonore Ofosu-Antwi, Esq. And KIRKLAND & ELLIS LLP By: Adam R. Alper, Esq. Brandon H. Brown, Esq. Reza Dokhanchy, Esq. Michael W. DeVries, Esq. Patricia Carson, Esq. Leslie M. Schmidt, Esq. Gianni Cutri, Esq. Kristina Hendricks, Esq. Joel R. Merkin, Esq. Counsel for Plaintiff

          McCARTER & ENGLISH, LLP By: Scott S. Christie, Esq. Matthew A. Sklar, Esq. Four Gateway Center Lee Carl Bromberg, Esq. Thomas R. Fulford, Esq. and GIBSON DUNN & CRUTCHER LLP By: Mark A. Perry, Esq. Counsel for Defendants

          OPINION

          RENÉE MARIE BUMB UNITED STATES DISTRICT JUDGE. [1]

         Approximately three weeks ago, a jury found that Defendants Xactware Solutions, Inc. and Verisk Analytics, Inc. (“Defendants”) willfully infringed six of Eagle View's patents. The jury awarded lost profits damages of $125 million to Eagle View.[2] On September 26, 2019, this Court entered a temporary restraining order (“TRO”) enjoining Defendants from, among other things, selling or offering to sell their Property Insight, Roof Insight, Geomni Roof and Geomni Property products [Docket No. 800] that are produced by computer software programs which the jury found infringed Eagle View's patents. Shortly thereafter, Eagle View filed the instant Motion for a Permanent Injunction. The Court held a hearing on the motion on October 8, 2019. Immediately following the hearing, the Court extended the TRO to October 18, 2019 to allow Defendants to present their equitable estoppel defense at an evidentiary hearing to be held on October 18th. A few days later, however, Defendants notified the Court that they wished to withdraw their equitable estoppel defense [Docket No. 835], and the parties agreed that there was no longer a need for a hearing on that issue. Thus, all that remains for immediate adjudication is Eagle View's Motion for Permanent Injunction. For the reasons stated herein[3], the motion will be granted, in part, and denied, in part.

         I. BACKGROUND

         Eagle View defines itself as a data analytics company, with the “data” being derived from aerial imagery of roofs. [Trial Transcript, p. 705:24-706:1 (“A: . . . Eagle View is in the business of capturing aerial imagery and then extracting roof measurements from the imagery.”). Eagle View's patented processes are applied to that data, and then a roof report is generated. This is Eagle View's “cornerstone product.” [Daga Sept. 26, 2019 Decl. ¶ 4] In contrast to Eagle View, less than half of one percent of Defendants' revenue results from the generation of roof reports. [PTX-138; PTX- 940; Dkt. No. 791-1, Exs. B-E] It is Defendants' generation of their roof reports from their software programs that the jury found to be infringing.

         Putting Defendants' willful infringement of Eagle View's patents aside, ironically, Defendants provide some business value to Eagle View. Through the parties' contractual relationship, Defendants run approximately 25% of Eagle View's roof reports through its Xactimate cost-estimator platform. [Trial Transcript, 1506:17-25 (West Testimony)] That is, in addition to the generation of a roof report, a cost estimate to repair or replace the roof per the measurements of that roof report is also prepared through Defendants' platform. [Trial Transcript, p. 2175:7-15 (Webecke Testimony)] This contractual relationship runs through December, 2020. Suffice it to say it is indeed a paradoxical set of facts: the parties in this hotly contested litigation before the Court are business partners outside the courtroom, at least until the end of next year.

         The developed record of the parties' relationship convinces this Court that the effects of a denial of injunctive relief to protect the patents at issue is far more consequential to Eagle View, a company whose essential existence relies upon the income generated as a result of the patented software, than to Defendants, who are far more diversified. [See infra at Section III., D.] As Eagle View's CEO, Rishi Daga, explained at trial, Eagle View's patents are critically important to its business. To Eagle View, having patent protection means

small companies like [Eagle View] . . . spen[d] a lot of time, energy, money . . . and do research and development, create new technology, and then file a patent . . . so then [it] can go and build a business and grow a business. And if [those patents are not enforced] then any big company can come steal your idea and crush you.

[Trial Transcript, p. 800:17-801:1] The CEO's fears were born out by the trial evidence: in September, 2015, Defendants announced in their formal, written business strategy that they viewed Eagle View as a “threat” [PTX-530.0023], and so they set out to “aggressively” erode Eagle View's market share and undercut Eagle View's prices. [PTX-530.0001] Indeed, within three years of the 2015 Five Year Business Strategy, Defendants had successfully eroded Eagle View's market share by as much as 20% [Trial Transcript, p. 1511:2-10] and undercut Eagle View's prices by as much as 50%. [Trial Transcript, p. 1504:17-18] In short, the record evidence supports a finding that Defendants deliberately set out to, and did cause, irreparable harm to Eagle View. Further, as explained below, Defendants have provided the Court little assurance that, going forward, Defendants will not continue their aggressive business strategy of what the jury has found to be willful infringement and unfair competition. Unless an injunction issues, there remains, in this Court's mind, a possibility that Eagle View could be pushed out of business altogether. It is a risk this Court is not willing to take.

         II. LEGAL STANDARD

         The Patent Act provides that injunctions “may” issue “in accordance with the principles of equity.” 35 U.S.C. § 283. “To obtain a permanent injunction, ‘[a] plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.'” TEK Glob., S.R.L. v. Sealant Sys. Int'l, Inc., 920 F.3d 777, 792 (Fed. Cir. 2019) (quoting eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006)). A patentee must establish each of these eBay factors for an injunction to issue. Amgen, Inc. v. Sanofi, 872 F.3d 1367, 1381 (Fed. Cir. 2017).[4]

         III. ANALYSIS

         A. Irreparable injury

         “To prove irreparable injury, a patentee must show (1) that absent an injunction, it will suffer irreparable harm, and (2) that a sufficiently strong casual nexus” connects the alleged irreparable harm “to the [] infringement.” Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 875 F.3d 1369, 1383 (Fed. Cir. 2017).[5] “To determine whether the patentee will suffer irreparable harm absent an injunction, the court may consider factors such as the nature of competition between the patentee and the infringer, the willingness of a patentee to license, and any lost sales the patentee has proven.” Id. The court may also consider the harm to the patentee's reputation in the market. See Douglas Dynamics, LLC v. Buyers Prod. Co., 717 F.3d 1336, 1344 (Fed. Cir. 2013) (“Irreparable injury encompasses different types of losses that are often difficult to quantify, including lost sales and erosion in reputation and brand distinction.”). The record before this Court amply supports a finding of each of these factors.

         i. Competition between the parties

         The trial evidence establishes that the market for roof reports is essentially a two-player market consisting of Eagle View and Defendants. Both are each other's direct competitors. [Trial Transcript, p. 792:22-794:12 (Daga Testimony, “Q: . . . [D]oes Eagle View have any effective competitors other than the defendants? A: No.”), p. 1491:2-3 (West Testimony, “Q: Are there any other [roof report] alternatives [other than Defendants and Eagle View] in the marketplace? A: No, there are not.”), p. 1511:2-10 (“Q: . . . what is EagleView's market share[?] A: I would say somewhere between 80 and 90 percent. . . . Who has the other 10 to 20 percent? A: The defendants.”)][6] With respect to the insurance carrier portion of the market, Defendants' own witness, Xactware's President, Mike Fulton, testified that Eagle View is Defendants' only “significant or relevant” competitor. [PTX-961, Deposition Transcript at 251:7-17] Indeed, in opposition to the instant motion, Defendants concede that the insurance carrier portion of the market is a two-player market, arguing that only the construction contractor portion of the market is not a two-player market. [Dkt. No. 825, Opposition Brief, p. 6][7]However, the evidence does not support a finding, by a preponderance of the evidence, that there are other significant or relevant competitors to Defendants and Eagle View in the construction contractor portion of the market. Defendants' evidence in this regard is vague and undeveloped. Defendants' expert, Philip Green, in his declaration filed in opposition to the instant motion[8], merely identifies three companies--“Roof Shots/Roofers”, “SkyMeasure”, and Home Depot-- which he asserts, in conclusory fashion, “offer reports that are based on imaging such as that used by Eagle View and Xactware.” [Dkt. No. 825-2, Green Decl. ¶ 18][9] This evidence is insufficient because Defendants provide no evidence that any of the three vendors are bona fide competitors to Eagle View and Defendants. Even if this Court were to assume-- which it does not--that the reports “offered” by these companies are comparable to Eagle View's roof reports in terms of similarity and accuracy[10], nothing in the record provides any information concerning how many reports these alleged competitors actually sell or have sold. In the absence of such evidence-- and in light of Eagle View's evidence to the contrary[11]-- the Court concludes that these companies' presence in the roof report market is de minimus, and therefore Defendants' proffered evidence does not alter this Court's finding that the entire market for roof reports (the insurer and construction contractor portions combined) functions as a two-player market for purposes of assessing irreparable harm.

         Indeed, some of the strongest evidence of the present competitive landscape is what has happened since this Court entered its temporary restraining order: rather than turning to some third, non-infringing provider of roof measurements, Defendants' roof report customers-- insurers and construction contractors alike-- have returned to Eagle View. [Daga Oct. 1, 2019 Decl., Docket No. 817-2, ¶¶ 5-10] As counsel for Eagle View correctly observed at the permanent injunction hearing, Defendants have not provided any evidence of even a single customer choosing an option that was not Defendants or Eagle View. [Oct. 8, 2019 Hearing Transcript, p. 11, 14, 77] Thus, Defendants' gain is Eagle View's loss, and vice versa. Cf. Presidio Components, 875 F.3d at 1384 (“Since March 17, 2017, the injunction against [the infringer] from selling [the infringing product] has been in effect. Based on the evidence presented to this Court, it appears that, fortuitously, this injunction may have created the hypothetical market necessary to determine whether consumers would purchase [the patent holder's product] in the absence of [the infringer's product]. On remand, the district court should consider whether consumers have turned to noninfringing alternatives to the [patent holder's product] . . . after the [the infringing product] became unavailable or whether [the patent holder's] sales of the [patented product] have increased because the [infringing product] is no longer on the market.”).

         ii. Eagle View's lost sales and lost market share to Defendants

         Eagle View has also proven that it has lost highly valuable customers to Defendants because of Defendants' ability to undercut Eagle View's price. [Trial Transcript p. 1504:17-18 (West Testimony) (“we consistently see the defendants' products in the market at 30 to 50 percent below Eagle View's pricing.”)] Indeed, the trial evidence demonstrated that Defendants intended to aggressively compete, head-to-head, with Eagle View with the express goal of luring away Eagle View's customers and decreasing Eagle View's market share. As mentioned, in September 2015, Defendants created a “Five Year [Business] Strategy” which set forth “how” Defendants planned to “aggressively grow [their roof report] market share”: “[t]here is nothing more important at this time that [sic] to support and sell Roof InSight to U.S. markets and beyond where possible. . . . [Eagle View] is very active in the market . . . . We need to erode their market share by selling Roof InSight right now[.]” [PTX-530.0001, p. 14, 21-22] Defendants specifically identified insurance customers State Farm and Nationwide as business Defendants sought to “take, ” from Eagle View thereby “hav[ing] [a] significant impact on the competition.” [Id. at p. 14-15] Defendants also planned to “be aggressive on price.” [Id. at p. 23]

         The trial evidence further supports a finding that Defendants were successful in achieving their acquisitive goals. Nationwide did, in fact, switch to Defendants, as did MetLife, USAA, Travelers, and Country Financial, among others. [Trial Transcript, p. 797:18-798:2 (Daga Testimony), p. 1483:23-1485:24 (West Testimony); Daga Oct. 1, 2019 Decl. ¶ 7]. Why these customers did so is clear: Defendants were offering their roof reports “at a significantly lower price.” [Trial Transcript, p. 1485:6-9, 1488:19-25 (West Testimony)]

         Moreover, although Eagle View did not completely lose all of its customers to Defendants, Eagle View was nonetheless forced to lower the prices it offered to both its insurance and construction customers in order to compete with Defendants. [Trial Transcript, p. 1489-96, 1503-04 (West Testimony); PTX-641][12]

         The effects of Defendants' aggressive competition strategy persist, post-verdict[13], to today. Mr. Daga states that at least one of Eagle View's customers is delaying negotiations on a contract renewal with Eagle View so that the customer may potentially take advantage of a lower price offered by Defendants. [Daga Sept. 26, 2019 Decl. ¶ 5-6]

         This mountain of evidence notwithstanding, Defendants erroneously assert that Eagle View's market share has remained constant over the relevant time period, and therefore assert that Eagle View has not proven that it has lost market share to Defendants. This argument is not supported by the evidence. Defendants' own document, the “Five Year Strategy”, illustrates that between 2013 and 2015, Defendants “command[ed] a ~10% market share vs. [Eagle View] for roof reports” in the U.S. insurance carrier market. [PTX-530.0001, p. 21-22] Similarly, the evidence shows that Eagle View's overall market share (insurance customers and construction contractors combined) did not remain steady at 90%, as Defendants assert. Rather, Eagle View's market share has dipped as low as 80%. [Trial Transcript, p. 1511:2-10 (West Testimony)][14]

         iii. Eagle View's unwillingness to license its patents

         It is undisputed that Eagle View has not licensed the patents at issue. This factor also weighs in favor of a finding of irreparable harm. See Presidio Components, 702 F.3d at 1363 (“The district court correctly found [the patent holder's] unwillingness to license favored finding irreparable injury.”). That Defendants' opposition to Eagle View's Motion completely ignores this fact is quite telling.

         iv. Reputational harm

         The evidence also demonstrates that Eagle View's roof reports have lost some of their “distinctiveness and market lure” as a result of Defendants' infringement. Douglas Dynamics, 717 F.3d at 1344. The confusion and uncertainty in the market created by Defendants' infringement has negatively impacted Eagle View's relationships and business negotiations with its customers. [Dkt. No. 792-1, Sept. 22, 2019 Daga Decl. ΒΆΒΆ ...


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