The Three Year Anniversary of Ebay V. Mercexchange
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such as monetary damages, are inadequate to compensate for that injury; (3) that, con- The Three Year Anniversary sidering the balance of hardships between the parties, a remedy in equity is warranted; of eBay v. MercExchange: and (4) that the public interest would not be disserved by a permanent injunction. While both lower courts ostensibly applied A Statistical Analysis of this test, the Court held that they applied it incorrectly. The Court explained that there is no “general rule” requiring injunctive Permanent Injunctions relief in patent infringement cases. In his concurring opinion, Justice Kennedy BY ERNEST GRUMBLES III, RACHEL C. HUGHEY AND courts have been handling permanent considered on the issue of “patent trolls,” SUSAN PERERA injunctions. It is also valuable to review relevant Federal Circuit decisions to under- suggesting that monetary damages, rather than injunctive relief, may be sufficient Ernest Grumbles III is a partner in the stand how the court reviews those deci- compensation for non-practicing entities. Minneapolis office of Merchant & Gould sions—especially when the district court decides not to grant a permanent injunc- P.C. and focuses his practice on patent METHODOLOGY and trademark litigation and related tion. Unsurprisingly, since the eBay deci- portfolio counseling. He is also the host of sion, district courts have been willing to In an attempt to understand how the the intellectual property podcast BPGRadio. deny permanent injunctions after a finding district courts have applied eBay in the com. He may be reached at egrumbles@ of patent infringement—something that was three years since the decision, the authors merchantgould.com. virtually unheard of prior to eBay. And the reviewed the patent cases available on Federal Circuit has generally affirmed the LexisNexis® that cited the eBay decision Rachel C. Hughey is an associate in the district court decisions, whether they grant and categorized the decisions that con- Minneapolis office of Merchant & Gould P.C. a permanent injunction or not. While one tained a final decision regarding permanent and focuses her practice on patent litigation important consideration is whether the par- injunctive relief into tables below. (Dates and appellate level disputes. She may be ties are competitors, that fact alone is not searched: 5/1/06 –5/1/09.) In addition, the reached at [email protected]. dispositive. Instead, each case must be authors searched for unpublished cases in reviewed using the four-factor test. the ten districts with the most patent litiga- Susan Perera is a Dec. 2008 graduate of the tion in 2008 (Eastern District of Texas (with University of Minnesota Law School Joint BACKGROUND 307 suits in 2008 pursuant to a CourtLink Degree Program. She obtained a JD/MS in In the eBay case, eBay, the online auc- search), Northern District of California Molecular, Cellular, Developmental Biology tion website, was accused of infringing (232), Central District of California (201), & Genetics and is currently looking for two patents dealing with eBay’s “Buy it District of Delaware (168), District of New employment as a patent attorney. She may Now” feature. The owner of the patents, Jersey (161), Northern District of Illinois be reached at [email protected]. MercExchange, was a non-practicing entity (152), Southern District of New York (111), that had failed to secure a license from Southern District of California (72), Eastern eBay. MercExchange won on the issue of District of Michigan (68), and Eastern INTRODUCTION patent validity and infringement before the District of Virginia (65)) and their home n May 2006, the Supreme Court dramat- district court. But, in a shocking decision, District of Minnesota (with 47 cases in ically changed the landscape of perma- the court denied permanent injunctive relief. 2008). These eleven districts underwent nent injunctions in patent cases in eBay The court applied the traditional four-factor a CourtLink word search for “permanent I 1 Inc. v. MercExchange L.L.C. For decades test that courts apply to determine whether injunction” within the recorded court prior to the eBay decision, the Federal an injunction is appropriate, but held the orders. If there was a final decision in Circuit had instructed that after a deter- case did not merit injunctive relief. On an identified case it was recorded in the mination of patent infringement there was appeal, the Federal Circuit reversed, hold- tables below. (CourtLink searched: 5/1/06 a general rule a patentee was entitled to a ing that the “general rule” entitled a patent – 5/1/09.) The authors also reviewed rel- permanent injunction. The Supreme Court holder to a permanent injunction absent evant published appellate decisions for any rejected such a rule. After the Supreme exceptional circumstances. of these cases, were such decisions avail- Court’s eBay decision, patent holders can In a unanimous decision, the Supreme able. (Dates searched: through 8/1/09.) no longer rely on a presumptive entitlement Court vacated the Federal Circuit’s injunc- to permanent injunctive relief after proving tion and remanded the case. The Court DISCUSSION infringement. Instead, the patentee must explained that the traditional four-factor As set-forth in eBay, an injunction does now meet the traditional four-factor test to test historically employed by courts of not necessarily follow a determination that a obtain a permanent injunction. equity continued to apply to determinations patent has been infringed; instead, whether Three years have passed since the of whether patent injunctions should issue, an injunction should issue is to be deter- Supreme Court’s decision, and it is an namely that a plaintiff must demonstrate: mined according to the well-established appropriate time to review district court (1) that it has suffered an irreparable four-part test. Prior to the Supreme Court’s decisions to understand how the district injury; (2) that remedies available at law; ruling in eBay, it was a long-standing pre- INTELLECTUAL PROPERTY TODAY NOVEMBER, 2009 25 sumption that a patent holder was entitled it will be harmed in its competition with of “extra damages” to compensate for litiga- to permanent injunctive relief after a find- other research facilities.4 In some of the tion costs. ing of infringement. Permanent injunctive cases where the courts granted permanent The Federal Circuit has also determined relief often forces the infringing party to injunctions and the parties were not direct that the district courts have abused their close down its disputed business or agree competitors, the parties were indirect com- discretion in denying permanent injunc- to a licensing fee from the patent holder. petitors, or the patentee was a licensor or a tions. Of the district court decisions denying Thus, a patent holder who establishes a research organization. permanent injunctions, one was affirmed on right to permanent injunctive relief is often In 28% of the cases reviewed, the dis- appeal and one was vacated and remanded. able to extract a high license figure from the trict court denied the request for a perma- In that case, the Federal Circuit vacated the infringing party. This enhanced bargaining nent injunction. This is a radical departure district court’s decision not to grant a per- power, especially for patentees who offer no from past rulings where injunctive relief manent injunction because, it explained, goods or services but merely license or sue, was almost never denied. As the district the district court failed to consider any of has resulted in increased attention to the courts continue to apply eBay, trends in the eBay factors and failed to make any law of permanent injunctions. The Court’s the number of injunctions granted will factual findings regarding those factors.7 decision in eBay provides district courts become visible and could result in a new with the power to require patentees to enter reason to forum shop for the most favorable CONCLUSION into compulsory licenses, arguably decreas- court. Surprisingly, the Eastern District of In view of eBay, there is no longer a ing the value of the patents, at least for Texas, which is known for its pro-patentee general rule that a permanent injunction certain patentees (such as so-called patent judgments, is following the national sta- should enter after a determination of trolls) who try to use permanent injunctions tistics closely, denying 3 of 13 permanent infringement. Instead, each case must be to hold infringers hostage. injunctions (23%) since the eBay decision. reviewed on its facts, using the traditional The Supreme Court’s decision opened However, the Central District of California four-factor test. District courts have the door for various applications of the has granted almost all requests for per- appeared to follow the Supreme Court’s four-factor test. The district courts have manent injunctions in its court (4/5 of the directions in eBay, applying the four-factor focused on a variety of different factors in cases), as has the District of Minnesota (3/4 test and denying permanent injunctions in their determinations, including: the type of the cases). about a quarter of cases. And the Federal of competition occurring between the par- Courts are not just denying injunctions Circuit has generally affirmed the district ties; if the patent holder is producing the in the case of non-practicing patent owners. court decisions. If the parties are direct invention; the amount of money the patent In the cases where the district court denied competitors, that obviously leans in favor of holder has spent on development of the a permanent injunction, the parties were granting a permanent injunction, but it is technology; the importance of the patented competitors in approximately two-thirds of just one of many factors. Permanent injunc- component to the overall product; the pat- the cases (12/19 of the cases). Going for- tions may be granted for parties who are not ent holder’s willingness to license; the ward it will be important in all infringement competitors, or denied for parties who are nature of the customers; harm to goodwill disputes to consider the factors for injunc- competitors.