                      NOTE: This disposition is nonprecedential.


 United States Court of Appeals for the Federal Circuit


                                      2006-1615


                                    CANON, INC.,

                                                      Plaintiff-Appellee,

                                           v.


          GCC INTERNATIONAL LIMITED, GCC MANAGEMENT LIMITED,
          GATEHILL INTERNATIONAL LIMITED, Q-IMAGING (USA), INC.,
                         and TALLYGENICOM LP,

                                                      Defendants-Appellants.


      Nicholas M. Cannella, Fitzpatrick, Cella, Harper & Scinto, of New York, New
York, argued for plaintiff-appellee. With him on the brief were Brian V. Slater, and
Joseph B. Divinagracia. Of counsel on the brief was Edmund J. Haughey, of
Washington, DC.

      Michael N. Rader, Wolf, Greenfield & Sacks, P.C., of Boston, Massachusetts,
argued for defendants-appellants. With him on the brief were Michael A. Albert and
James J. Foster.

Appealed from: United States District Court for the Southern District of New York

Judge P. Kevin Castel
                      NOTE: This disposition is nonprecedential.


 United States Court of Appeals for the Federal Circuit
                                       2006-1615


                                     CANON, INC.,

                                                              Plaintiff-Appellee,

                                           v.

           GCC INTERNATIONAL LIMITED, GCC MANAGEMENT LIMITED,
          GATEHILL INTERNATIONAL LIMITED, Q-IMAGING (USA) INC., and
                            TALLYGENICOM LP,

                                                              Defendants-Appellants.


Appeal from the United States District Court for the Southern District of New York in
case no. 06-CV-3324, Judge P. Kevin Castel.

                            __________________________

                             DECIDED: January 25, 2008
                            __________________________


Before MICHEL, Chief Judge, DYK, Circuit Judge, and GARBIS, District Judge. *

GARBIS, District Judge.

      Plaintiff Canon, Inc. ("Canon") sued GCC International Limited, GCC

Management Limited, Gatehill International Limited, Q-Imaging (USA) Inc., and

TallyGenicom LP (collectively, "Defendants") for infringement of U.S. Patent No.

6,336,018 ("the '018 Patent"), entitled "Electrophotographic Image Forming Apparatus,

Process Cartridge, and Drive Mount for Photosensitive Drum."


      *
              Honorable Marvin J. Garbis, Senior District Judge, United States District
Court for the District of Maryland, sitting by designation.
       On August 29, 2006, the district court issued its Memorandum and Order

granting Canon a Preliminary Injunction enjoining Defendants from, among other things,

"making, using, offering for sale, or selling in the United States, or importing into the

United States, any product that falls within the scope of claim 58 of U.S. Patent No.

6,336,018, including, without limitation, [certain identified] toner cartridges . . . ." Canon

Inc. v. GCC Int'l Ltd., No. 06-3324 (S.D.N.Y. Aug. 29, 2006).

       Defendants appeal from the grant of a preliminary injunction. 1 For the reasons

discussed herein, this court determines that the district court did not abuse its discretion

and, therefore, affirms.

                                  I.     BACKGROUND

       At all times relevant hereto, Canon has engaged in the business of producing

and selling, inter alia, laser printers and laser fax machines with replaceable toner

cartridges. A user purchasing a Canon printer receives the printer with a replaceable

toner cartridge.   When the toner in the cartridge is exhausted, the user can easily

remove and replace the exhausted toner cartridge.          The sale of replacement toner

cartridges is a profitable aspect of Canon's business.

       At all times relevant hereto, Defendants have engaged in the business of selling

(among many other products) toner cartridges that can be used as replacements in

Canon laser printers and laser fax machines.

       Canon is the assignee of the '018 Patent. Claim 58 of the '018 Patent claims:

       A process cartridge detachably mountable to a main assembly of an
       electrophotographic image forming apparatus, wherein said main

       1
            Defendants also seek reversal of the District Court's denial of their motion
for summary judgment. However, the denial of summary judgment was not an
appealable Order and will not be addressed herein.


2006-1615                                     2
      assembly includes a motor, a driving rotatable member for receiving
      driving force from said motor, and a hole defined by twisted surfaces, said
      hole being substantially coaxial with said driving rotatable member, said
      process cartridge comprising:

      a cartridge frame;

      an electrophotographic photosensitive drum;

      process means actable on said photosensitive drum, said process means
      including a developing roller for developing a latent image formed on said
      photosensitive drum, and a charging member for electrically charging said
      photosensitive drum;

      a projection provided at a longitudinal end of said photosensitive drum,
      wherein said projection has an engaging portion for engagement with the
      twisted surfaces and a supporting portion for supporting said engaging
      portion, wherein said end of said photosensitive drum is provided with a
      shaft for supporting said photosensitive drum on said cartridge frame, and
      said engaging portion is supported on said shaft by said supporting
      portion, and a cross section of said supporting portion in a direction
      crossing with a longitudinal direction of said photosensitive drum is smaller
      than a cross section of said engaging portion, and said supporting portion
      is capable of entering said hole, and wherein when said driving rotatable
      member rotates with said hole, and said engaging portion of said
      projection engaged with each other, rotational driving force is transmitted
      from said driving rotatable member to said photosensitive drum through
      engagement between said hole and said projection, and said projection is
      urged inwardly of said hole, wherein said engaging portion is contacted to
      said twisted surfaces at least three points, and wherein said end of said
      photosensitive drum is provided with a drum gear which is effective to
      transmit a driving force received by said engaging portion from the main
      assembly to said developing roller.

      Canon asserts that Defendants' toner cartridges ("the Accused Products"),

usable in Canon laser printers and laser fax machines, infringe Claim 58 of the '018

Patent.

      Defendants sought an early claim construction holding that Claim 58 covers the

combination of a "main assembly" consisting, according to Defendants, of the entire

printer or fax machine with a toner cartridge. Defendants contend that if Claim 58 is so




2006-1615                                  3
construed, they would not infringe Claim 58 because they sell only the cartridge, not the

combination.    Accordingly, Defendants assert that their production and sale of the

accused toner cartridges would not infringe Claim 58 by virtue of the doctrine of

permissible repair. Under the doctrine of permissible repair, the owner of patented

property has a lawful right to repair or replace his property.    See Aro Mfg. Co. v.

Convertible Top Co., 365 U.S. 336 (1961); see also Everpure, Inc. v. Cuno, Inc., 875

F.2d 300, 302 (Fed. Cir. 1989), cert. denied, 493 U.S. 853 (1989).           Defendants

alternatively advance a theory of implied license, relying upon Hewlett-Packard Co. v.

Repeat-O-Type Stencil Mfg. Corp., 123 F.3d 1445, 1455 (Fed. Cir. 1997), cert. denied,

523 U.S. 1022 (1998) ("[W]hen a patentee sells a device without condition, it parts with

the right to enforce any patent that the parties might reasonably have contemplated

would interfere with the use of the purchased device.").

       The district court held that Claim 58 claimed the cartridge alone and not as part

of a combination. Therefore, the doctrine of permissible repair was not applicable. The

district court further held that Canon's sale of a printer or fax machine with a toner

cartridge therein did not constitute an implied license to manufacture and sell the toner

cartridge. Thus, the district court concluded that Canon had a likelihood of success on

its infringement claim.    Upon further finding that a balance of the hardships and

consideration of the public interest favored Canon, the district court issued the

preliminary injunction at issue.




2006-1615                                   4
                                    II.    DISCUSSION

       In patent cases, traditional rules of equity apply to requests for injunctive relief.

eBay, Inc. v. MercExchange, L.L.C., ____ U.S. ____, ____, 126 S.Ct. 1837, 1839

(2006). As stated in Pfizer, Inc. v. Teva Pharms. USA, Inc.:

               [District courts] have the power to grant injunctions to prevent the
       violation of patent rights. See 35 U.S.C. § 283 (2000). In considering
       whether to grant a preliminary injunction, a court must consider whether
       the patent owner has shown: (1) a reasonable likelihood of success on the
       merits; (2) the prospect of irreparable harm to the patent owner in the
       absence of the injunction; (3) that this harm would exceed harm to the
       alleged infringer when subject to the injunction; and (4) that granting the
       injunction is in the public interest. Jeneric/Pentron, Inc. v. Dillon Co., 205
       F.3d 1377, 1380 (Fed. Cir. 2000); Nutrition 21 v. United States, 930 F.2d
       867, 869 (Fed. Cir. 1991).

              We review the grant of a preliminary injunction for abuse of
       discretion. Novo Nordisk of N. Am., Inc. v. Genentech, Inc., 77 F.3d 1364,
       1367 (Fed. Cir. 1996). To overturn the grant of a preliminary injunction,
       we must find that the district court made a clear error of judgment in
       weighing the relevant factors or based on its exercise of discretion on an
       error of law or on clearly erroneous factual findings. Id.

429 F.3d 1364, 1372 (Fed. Cir. 2005).

                          A.   Likelihood of Success on the Merits

       This court does not encourage interlocutory appeals from claim construction

decisions. Moreover, it is not always appropriate for trial courts to single out particular

terms in a claim for "early" construction outside of the contextual setting provided by

consideration of all disputed claim terms. Nevertheless, it can be necessary to consider

the construction of some claim terms in the process of resolving a request for a

preliminary injunction.

       In its preliminary injunction decision, the district court construed Claim 58 to

cover the toner cartridge alone and not as part of a combination. If Claim 58 is so




2006-1615                                    5
construed, the doctrine of permissible repair would be inapplicable altogether. See Fuji

Photo Film Co., LTD v. Int'l Trade Comm'n, 474 F.3d 1281, 1296 (Fed. Cir. 2007).

       On the present record, there is a reasonably debatable question of whether

Claim 58 should be construed to cover the cartridge alone or the cartridge as part of a

combination. Therefore, this court is not now reaching its final conclusion as to the

matter. However, even if Claim 58 were construed to cover the cartridge as part of a

combination, Canon would still have a substantial likelihood of success.

       If Claim 58 were construed as covering a combination, it is unlikely that the

covered combination would include the toner cartridge and the entirety of the printer or

fax machine since most of the components of such machines are not claimed. On the

contrary, as appears from the claims, the most likely combination would be one

consisting of the toner cartridge and the claimed "hole defined by twisted surfaces."

'018 Patent cl.58.

       In respect to such a combination, it is likely that the replacement of the toner

cartridge part of the combination would not constitute a permissible repair. We have

divided permissible repair into two categories—replacement of readily replaceable parts

and refurbishment. In each instance the concept of proportionality is pertinent, though

less so in the case of readily replaceable parts. A part is not readily replaceable if the

part in question constitutes the bulk of the value of the patented item.               And

refurbishment is not a permissible repair if, for example, "the extent of the refurbishment

. . . [would be] disproportionate to the overall value of the parts that were not replaced."

Fuji Photo Film, 474 F.3d at 1296; see also Husky Injection Molding Sys., Ltd. v. R & D

Tool & Eng'g Co., 291 F.3d 780, 786-87 (Fed. Cir. 2002) (noting that replacing the




2006-1615                                    6
entirety of a patented car except for its spark plugs would be impermissible

reconstruction). Thus, it appears that under the facts of this case, the replacement of

the toner cartridge would constitute impermissible reconstruction because it would

essentially be a "second creation of the patented entity." Aro Mfg. Co., 365 U.S. at 346

(citations omitted).

         In sum, Canon has established a substantial likelihood—albeit not a certainty—of

success on its claim that Defendants have infringed Claim 58 of the '018 Patent.

                              B.     Irreparable Harm Balance

         At the preliminary injunction stage, irreparable harm consists of harm that could

not be sufficiently compensated by money damages or avoided by a later decision on

the merits.    DAN B. DOBBS, LAW     OF   REMEDIES 193-94 (2d ed. 1993).      To reach an

irreparable harm balance, a trial court compares the irreparable harm that would be

sustained by the movant if a preliminary injunction were erroneously denied with the

irreparable harm that would be sustained by the non-movant if a preliminary injunction

were granted in error. Id. at 187.

         As the trial court found, competition from Defendants will likely result in

substantial price erosion of Canon's patented product as well as loss of Canon's market

share.     Due to the difficulty (if not impossibility) of determining the damages resulting

from price erosion and loss of market share, an award of money damages would not be

sufficient. Moreover, Defendants' business operations are geographically "far-flung,"

making the enforcement of a money judgment "exceedingly difficult."          Canon Inc. v.

GCC Int'l, Ltd., 450 F. Supp. 2d 243, 255 (S.D.N.Y. 2006). Thus, to the extent that

money damages against Defendants were awarded, there appears to be a reasonable




2006-1615                                     7
basis for the district court's finding that there would be little probability that Canon could

effect the collection of a money judgment.

       On the other hand, as the district court found, there is little, if any, harm that

would be suffered by Defendants by virtue of an erroneous grant of a preliminary

injunction that could not be fully compensated by a money damage award against

Canon under Fed. R. Civ. P. 65(c).

       In light of Canon's demonstration of the potential of substantial irreparable harm,

and Defendants' failure to make any such demonstration, this court agrees with the

district court's conclusion that the irreparable harm balance favors Canon.

                                     C.      Public Interest

       As the district court noted, the public benefits from lower prices resulting from

free market competition. However, the public also has an interest in the enforcement of

patents. Hence, consideration of the public interest favors neither side.

                                D.        The Ultimate Balance

       The ultimate decision in a preliminary injunction context requires a flexible

balancing of the parties' respective showings of potential irreparable harm and the

movant's likelihood of success on the merits. "If, after balancing [the irreparable harm

to plaintiff against that of the defendant], the balance tips decidedly in favor of the

plaintiff, a preliminary injunction will be granted if the plaintiff has raised questions going

to the merits so serious, substantial, difficult and doubtful, as to make them fair ground

for litigation and thus for more deliberate investigation."            Direx Israel, Ltd. v.

Breakthrough Med. Corp., 952 F.2d 802, 813 (4th Cir. 1991) (internal quotation marks

omitted).   "A request for a preliminary injunction is evaluated in accordance with a




2006-1615                                       8
'sliding scale' approach:   the more the balance of irreparable harm inclines in the

plaintiff's favor, the smaller the likelihood of prevailing on the merits he need show in

order to get the injunction." Kowalski v. Chicago Tribune Co., 854 F.2d 168, 170 (7th

Cir. 1988).

       In the instant case, the district court reasonably evaluated Canon's likely success

on the merits and the irreparable harm balance and did not abuse its discretion in

granting the preliminary injunction.

                                          CONCLUSION

       For the foregoing reasons, the district court's grant of the preliminary injunction is

affirmed.

                                             COSTS

       No costs.




2006-1615                                    9
