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November 26, 2007

Injunctions Since eBay

The 2006 Supreme Court ruling in eBay v. MercExchange was the last significant SCOTUS denouement on patent injunctions since Continental Paper Bag in 1908. A balanced assessment, applying "principles of equity" of the infringement in light of the infringed party and the infringer was the theme of the eBay decision. Though the language of the court was muddy, the presumed clarion call was that non-practicing patent holders would be hard put to get an injunction; that being direct competitors would be the best bet to stop infringement in its tracks. An exception proves the rule, as a survey of 28 post-eBay district court dances by Andrew Beckerman-Rodau of Suffolk University reveals.

Beckerman-Rodau:

In Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 (19081, the Supreme Court recognized that patents are property and as a general rule a patent owner was entitled to permanent injunctive relief as a remedy for infringement. This was the rule followed by the federal circuit until it was overruled by the Supreme Court in 2006 in eBay v. MercExchange, 26 S. Ct. 1837 (2006). eBay held that permanent injunctive relief is an equitable remedy subject to the discretion of the trial court. Additionally, the grant or denial of a permanent injunction should be based on evaluation of the traditional four factor test generally used to determine whether awarded in any context. Under this test a patent owner can only obtain a permanent injunction as a remedy for infringement if he or she can demonstrate: (1) that the patent owner suffered an irreparable injury due to the infringement; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that irreparable injury; (3) that, considering the balance of hardships between the patent owner and the infringer, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

An analysis of the post-eBay decisions supports the following conclusions: (1) The district counts continue to grant permanent injunctions in most cases; (2) Typically permanent injunctions continue to issue when the patent owner and the infringer are direct marketplace competitors; (3) Typically, permanent injunctions are denied if the patent owner is a non-practicing entity; and, (4) Other factors such as willful infringement, venue, the existence of a complex invention incorporating a patented feature, the willingness of the patent owner to license the invention and the likelihood of future infringement are not overly predictive with regard to whether patent infringement will result in issuance or denial of a permanent injunction.

One notable exception of a non-practicing entity snagging an injunction was the CSIRO v. Buffalo Technology case. CSIRO is a non-profit research institute. Beckerman-Rodau draws parallels between non-profits and small entities (individuals and startups) in being constrained from practicing their inventions. Beckerman-Rodau: "Such different treatment of non-profit and for-profit commercial enterprises is hard to justify."

Continuing infringement carries weight: mentioned in ten cases, with only one not garnering an injunction.

Concurring in eBay, Justices Kennedy, Stevens, Souter, and Breyer opined: "When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest." So far, a patent being but a bit of complex product hasn't been a much of a factor: mentioned in only three cases, with one being enjoined.

Posted by Patent Hawk at November 26, 2007 6:16 PM | Injunction

Comments

An interesting and timely article. Some things I noticed:

1. In the CSIRO case, the patentee was Australian, not Austrian,

2. The article says that the different treatment of non-profits in the CSIRO case "is hard to justify." Not really. For non-profit research patentees, their business is research, so they are unlikely to manufacture without a commercial partner. Also, the opinion in eBay case specifically recognizes such an exception to the "non-practicing entity" for this reason: "[S]ome patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves. Such patent holders may be able to satisfy the traditional four-factor test, and we see no basis for categorically denying them the opportunity to do so."

Posted by: EG at November 27, 2007 4:27 AM

I concur with EG. The treatment of non-practicing non-profits is actually pretty easy to understand and justify. A non-profit research institution could potentially lose its non-profit status or have the proceeds from the manufacture and sale treated as Unrelated Business Income. I think some tech transfer office and the IRS have duked it out over this very issue.

Also, I don't really find it surprising that injunctions issue most of the time. The reason the presumption was there in the first place was really an administrative efficiency thing: most of the time, they should grant so why waste our time. I don't think that that has changed.

Posted by: mmm at November 29, 2007 8:13 AM