Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_13-cv-05962/USCOURTS-cand-4_13-cv-05962-33/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 28:1331 Fed. Question: Anti-trust

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United States District Court 

Northern District of California 

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

NETLIST, INC.,

Plaintiff, 

 vs. 

DIABLO TECHNOLOGIES, INC., 

Defendant. 

Case No.: 13-cv-5962 YGR 

ORDER GRANTING DIABLO’S MOTION TO 

RECOVER ON PRELIMINARY INJUNCTION 

BOND (DKT. NO. 465) 

Defendant Diablo Technologies, Inc. (“Diablo”) moves the Court for an order requiring 

Netlist, Inc. (“Netlist”) to pay Diablo the full amount of the preliminary injunction bond. (Dkt. No. 

465.) In connection with its January 12, 2015 Amended Order Granting In Part Motion for 

Preliminary Injunction, this Court ordered Diablo to post a preliminary injunction bond in the 

amount of $900,000. (Dkt. No. 277.) 

Rule 65(c) instructs an applicant seeking an injunction to make funds available “for the 

payment of such costs and damages as may be incurred or suffered by any party who is found to 

have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c). To find that a party is 

“wrongfully enjoined” the Court need not find that the injunction was “wrongfully issued,” but only 

that, upon final disposition of the issues, “the party enjoined had the right all along to do what it was 

enjoined from doing.” Nintendo of Am., Inc. v. Lewis Galoob Toys, Inc., 16 F.3d 1032, 1036 (9th 

Cir. 1994). Thus, to recover on the bond pursuant to Federal Rule of Civil Procedure 65(c), a party 

must show that it was “wrongfully enjoined” and was injured due to issuance of a preliminary 

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United States District Court 

Northern District of California 

injunction. Id. “[T]here is a rebuttable presumption that a wrongfully enjoined party is entitled to 

have the bond executed and recover provable damages up to the amount of the bond.” Id. The 

claimed damages must be proven with “reasonable certainty.” Nintendo, 16 F.3d at 1038. 

Here, Netlist obtained a preliminary injunction which barred Diablo from “manufacturing, 

using, distributing and/or selling the Rush and Bolt integrated circuits manufactured by or obtained 

from Diablo, including any such Rush and Bolt integrated circuits contained in or provided along 

with the ULLtraDIMM module, the IBM eXFlash module, or any other product.” (Dkt. No. 277 at 

20.) The Court set a bond amount of $900,000 as the “approximate amount of the net profits Diablo 

would have received for the chipset sales affected by the preliminary injunction.” (Id.) The enjoined 

products were the only products Diablo was manufacturing at the time. (McMullen Dec., Dkt. No. 

464-6, at ¶ 6.) 

Diablo appealed the Court’s preliminary injunction order and sought a stay pending that 

appeal. On February 10, 2015, the Federal Circuit ordered that Diablo’s motion to stay was denied.1

 

(See Order of the USCA for the Federal Circuit as to Amended Notice of Appeal, Dkt. No. 331, at 3.) 

After the conclusion of the trial, on March 30, 2015, the Federal Circuit issued an order staying the 

preliminary injunction temporarily pending this Court’s consideration of a motion to dissolve the 

injunction. (See Order of the USCA for the Federal Circuit, Dkt. No. 434.) On April 24, 2015, the 

Court ordered that the preliminary injunction was dissolved because the predicate claim had been 

rejected by the jury after a full presentation of the evidence at trial. (Dkt. No. 457.) 

Diablo argues that its losses far exceeded the amount of the bond, and so it should recover the 

entire amount of the bond. Diablo offers evidence that projected gross profits from sales of chipsets 

for February and January 2015 was four times greater than the amount of the bond. (McMullen Dec. 

at ¶ 8.) Diablo did not sell the projected chipsets because outstanding orders were cancelled upon 

issuance of the preliminary injunction. (McMullen Dec. ¶6.) When the Court set the bond, it did so 

based, in part, on Netlist’s expert’s opinion that Diablo’s profit margin was approximately 15 

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 The Federal Circuit granted SanDisk’s motion to stay only insofar as the preliminary 

injunction was directed at SanDisk conduct that did not constitute aiding and abetting a violation by 

Diablo. (See Order of the USCA for the Federal Circuit as to Amended Notice of Appeal, Dkt. No. 

331, at 3.) 

Case 4:13-cv-05962-YGR Document 512 Filed 09/01/15 Page 2 of 4
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United States District Court 

Northern District of California 

percent. (Dkt. No. 261-1 at 6). At trial and in connection with this motion, Diablo presented 

evidence that its expected profit margin for those sales exceeded 15 percent. (Trial Tr. 2311:11-15 

[Parziale]; McMullen Dec. at ¶ 8.) Even taking the more conservative 15 percent figure as the 

correct measure of net profits, based on the lost unit sales during the period of the injunction, the 

evidence here supports a conclusion that Diablo’s lost net profits on the chipsets alone approach or 

exceed the amount of the bond. 

In addition to lost profits, Diablo offers evidence that it was forced to lay off 20 percent of its 

workforce, and take on millions in loans to cover employee payroll costs, both of which depleted its 

capital. (McMullen Dec. at ¶¶ 14-15.) Diablo also estimates lost productivity of its remaining 

employees due to the injunction at several hundred thousand dollars. (McMullen Dec. at ¶ 13.) In 

addition, Diablo anticipates “ramp-up” costs in order to resume production of chipsets at the same 

level prior to the preliminary injunction. (McMullen Dec. at ¶ 9.) 

The Court finds that, based upon the jury’s verdict finding that Diablo did not breach of the 

Supply Agreement or Non-Disclosure Agreement, Diablo was wrongfully enjoined or restrained by 

the preliminary injunction. As a consequence it is entitled to have the bond executed in its favor. 

Diablo has offered evidence that the preliminary injunction, which halted production of its only 

product on the market to its only customer, damaged Diablo in an amount that exceeds the 

$900,000.00 bond. 

Netlist contends that Diablo has not shown that sales were lost rather than merely deferred 

and therefore has not met its burden to establish damages. However, Netlist’s theory that sales were 

deferred is just that—a theory, unsupported by evidence. Cf. Nintendo, 16 F.3d at 1038 (argument 

that injunction merely delayed sales, and therefore damages number was inflated, was too 

speculative to give credence). The theory is contrary to Diablo’s evidence of cancelled sales, and is 

contrary to Netlist’s general contention during this litigation of the importance of capturing sales 

before narrow windows of opportunity close in the rapidly changing world of semiconductor chips. 

Further, Netlist’s contention that Diablo was losing money on a net operating basis, and therefore 

lacked overall net profits, does not answer the question of lost net profits from sales cancelled due to 

the preliminary injunction. 

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United States District Court 

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II. CONCLUSION 

For the foregoing reasons, Diablo’s Motion to Recover On Preliminary Injunction Bond is 

GRANTED. Defendant Diablo Technologies, Inc. may execute on the preliminary injunction bond, in 

the total sum of $900,000, immediately. 

This Order terminates Dkt. No. 465. 

IT IS SO ORDERED. 

Date: September 1, 2015 

____________________________________ 

YVONNE GONZALEZ ROGERS

UNITED STATES DISTRICT COURT JUDGE

Case 4:13-cv-05962-YGR Document 512 Filed 09/01/15 Page 4 of 4