Cisco Systems, Inc. v. Dexon Computer, Inc.

Background

The court had previously granted Cisco’s motion for a preliminary injunction barring Dexon from selling counterfeit Cisco products. Dexon appealed that order to the United States Court of Appeals for the Ninth Circuit and asked the district court to stay, or pause, the injunction while the appeal was pending.

The injunction applied only to Cisco products that could be checked with a packaging-verification tool provided by Cisco and that Dexon advertised as “new.” Dexon would not violate the injunction by selling a product that later turned out to be counterfeit if Dexon had used Cisco’s tool before the sale and the tool reported that the packaging was genuine.

Jurisdiction

Federal Rule of Civil Procedure 62(d) permits a court to suspend, modify, restore, or grant an injunction on appropriate terms while an appeal from an injunction is pending. The court discussed Ninth Circuit authority stating that a district court generally lacks jurisdiction to modify an injunction after an appeal, except to preserve the status quo—the existing legal position of the parties.

Cisco argued that staying the injunction would change the status quo because Dexon would again be free to sell counterfeit Cisco products. Dexon argued that a stay would not modify or vacate the injunction. The court recognized conflicting decisions from district courts in the circuit. Because it denied the stay on the merits, the court assumed jurisdiction for purposes of analyzing the motion and did not definitively resolve the jurisdictional question.

Standard for a Stay

A stay pending appeal is discretionary. The party seeking a stay must show that the circumstances justify one. Courts consider four factors: likely success on appeal, irreparable injury without a stay, substantial injury to other interested parties, and the public interest.

Reasons for Denying the Stay

The court rejected two of Dexon’s arguments because they repeated arguments already considered and rejected when the preliminary injunction was issued. The court had previously found that Cisco established irreparable harm and that the injunction was not a mandatory injunction requiring a heightened showing. Dexon offered no new or compelling reason to change those conclusions.

The court also rejected Dexon’s argument that the injunction violated Rule 65 because it was vague. The court concluded that an ordinary reader could understand the prohibited conduct: Dexon could not sell counterfeit Cisco products advertised as “new” when Cisco had provided a tool for verifying the authenticity of the product packaging. The court found that “counterfeit” meant products that were not genuine and that the tool was sufficiently described as a way to verify the genuine nature of the packaging.

Dexon argued that the injunction would cause lost revenue, lost future business, and reputational harm. The court ruled that Dexon had not sufficiently shown that the injunction threatened to destroy its business. It also found Dexon’s claimed reputational harm speculative.

Dexon repeated its arguments that Cisco had not shown irreparable harm and that the injunction was against the public interest because it restricted lawful secondary-market sales. The court rejected those arguments and reaffirmed its prior findings that Cisco would suffer irreparable harm and that the injunction served the public interest. It concluded that none of the stay factors favored pausing the injunction.

Clarification of the Injunction

Although the court found the injunction clear and compliant with Rule 65, it said it would issue an amended order removing the reference to Cisco’s separate proposed-injunction document and further clarifying the terms “counterfeit Cisco products” and “method to verify product packaging.” The court characterized these changes as minor clarifications that preserved the status quo and did not alter the substance of the preliminary injunction.

Disposition

The court DENIED Dexon’s motion to stay. It also stated that it would issue an amended preliminary injunction order providing the described clarifications.