## Facts

- Medtronic owned U.S. Patent Nos. 3,902,501 and 3,939,843 and licensed Cordis to make and sell products allegedly covered by the patents in exchange for royalties.
- Cordis sued in federal district court for a declaratory judgment that the patents were invalid and that the license agreement was void from inception.
- While the case was pending, Cordis sought interim relief permitting it to deposit future royalties into an interest-bearing escrow account and preventing Medtronic from terminating the license for nonpayment.
- Cordis supported its request with limited evidence of invalidity (including an affidavit from a competitor asserting pre-invention public disclosure or development) and argued it would suffer irreparable harm without protection from infringement litigation and license termination.
- The district court granted the escrow arrangement and enjoined Medtronic from terminating the license during the litigation, citing regional-circuit authority.
- Medtronic appealed the interlocutory order.

## Issues

1. Whether the district court properly exercised discretion in allowing royalties to be paid into escrow and enjoining license termination pending adjudication of patent validity and contract enforceability.
2. Whether Cordis made the required evidentiary showing for a preliminary injunction, including likelihood of success, irreparable harm, balance of hardships, and public interest.

## Decision

- The Federal Circuit vacated the district court’s order and remanded for reconsideration.
- The court held the interim relief was not supported by adequate findings and record evidence under the traditional four-factor preliminary-injunction test.
- The court rejected treating escrow plus an anti-termination injunction as routine in licensee validity challenges, particularly where the relief effectively insulated the licensee from infringement or contract counterclaims while it continued selling licensed products.

## Legal Principles

- Preliminary injunctive relief requires proof of: (1) likelihood of success on the merits, (2) irreparable harm absent relief, (3) balance of hardships favoring the movant, and (4) consistency with the public interest.
- A court must base extraordinary interim relief on an adequate evidentiary record and explicit or supportable findings on the four factors, especially when the order alters contractual payment and enforcement rights.
- Alleged economic loss, the prospect of future litigation, or the possibility of having paid royalties later deemed not owed does not, without more, establish irreparable harm.
- Regional-circuit decisions permitting escrow in some patent-license disputes do not eliminate the need to apply the four-factor test and do not justify broad protection absent a strong, case-specific showing.

## Conclusion

The Federal Circuit vacated an order that let a licensee escrow royalties and barred license termination during a validity challenge because the record and findings did not justify such relief under the preliminary-injunction factors, and it remanded for renewed consideration under the correct equitable framework.


Cordis Corp. v. Medtronic, Inc., 780 F.2d 991 (Fed. Cir. 1985)