Interesting discussion topics presented with this week’s slate of readings.

The Supreme Court took a different approach than it did in the 1980s with regards to injunctions and patent law jurisprudence more broadly. Indeed, in previous cases the Supreme Court “held that once a defendant has been determined to infringe a valid patent, there was a “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.” In Ebay, however, the Court reversed this long-standing precedent and held that permanent injunctions were now a equitable remedy that can only be issued if a plaintiff/patent holder could establish a four-factor test. The test “require[d] a plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” The promulgation of this test engendered a new epoch regarding patent law jurisprudence.

With regards to Ebay’s legal precedents, injunctions were first contemplated in a 1908 Supreme Court case called Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 (1908), where the 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.”

The upshot of Ebay’s ruling is that it, at least conceivably, would make it much more difficult for patent holders to get injunctions. The Court’s reasoning in Ebay was grounded in the notion that the “creation of a right is distinct from the provision of remedies for violations of that right.” And that the relevant section of the Patent Act asserts that it is “[s]ubject to the provisions of this title” other sections of the Act that state injunctive relief may only issue “in accordance with the principles of equity.” As such, it was a legal fiction that the general rule favored permanent injunctions.

One of the lasting effects of the Ebay’s ruling is that trials courts now have considerable discretion regarding an analysis into the four factor test and the weighing of each prong. Indeed, the Ebay test has made the injunction analysis a decidedly fact-intensive inquiry. Justice Thomas, who penned the majority’s opinion, did not provide lower courts with any guidance regarding the application of the four-factor test. In fact, the only guidance that the Court offers comes from Justice Kennedy’s concurrence where he suggests that courts should consider “the nature of the patent being enforced and the economic function of the patent holder.” As such, it appears that the test should be viewed from an economic perspective.

In future patent law cases where the test will be applied, it appears that considerable litigation will occur over the direct competition prong. An analysis focused on direct competition would, at first blush, appear to be an optimal guide-post in any Ebay analysis.

One thought on “Interesting discussion topics presented with this week’s slate of readings.

  1. True. And many commentators theorize that the Court was paying attention to the Blackberry case (RIM v. NTP), and that the eBay decision was intended to put the kibosh to “patent trolls” (or “NPEs” – “non-practicing entities). It’s worth asking what effect the eBay decision has had on patent litigation, which continues apace, reduced availability of injunctions notwithstanding. (Consider that one of the big SCOTUS patent cases this year is dealing with damage awards!)

    It’s also worth considering that injunctions do not just give leverage to patent trolls, who garner far less sympathy from the public. Injunctions also empowered small innovators who could be crushed by the litigation expenses that big firms can afford. The ability to shut big infringers down was a powerful weapon in entrepreneurs’ arsenal; that weapon is now pretty much neutralized, especially when one considers that the Supreme Court stated that lost profits are presumptively the best recompense for patent infringement. If a small innovator has not had the ability to sell the patented product (that he/she claims has been infringed), their losses are almost de minimus.