Academic journal article
By Fischer, James M.
Santa Clara Computer & High Technology Law Journal , Vol. 24, No. 1
Last term, in eBay Inc. v. MercExchange, L.L.C., the Court "seemingly" rejected the Federal Circuit's longstanding practice of awarding permanent injunctive relief as a matter of course on the patentee establishing actual infringement. The Court concluded that federal courts should evaluate the availability of injunctive relief to redress continuing, actual infringement based on the traditional four-part test. This paper explores the Court's approach to injunctive relief in patent litigation. I argue that eBay supports an integrative view of Patent Act remedies that merges the availability of injunctive relief to the type of damages (royalties or lost profits) the patentee can claim under the Patent Act. In a nutshell, injunctive relief should ordinarily be limited to cases when the patentee seeks lost profits. In cases when the patentee seeks statutory royalties, injunctive relief should ordinarily be denied on the ground that the remedy at law is adequate.
Litigation is serious business. Vast sums are wagered in the effort to persuade a tribunal to rule in favor of one party. In some instances, litigation is so central to the success or failure of an enterprise that the euphemism "bet the company" has arisen as a gloss on the stakes at play. (1) Patent litigation has recently become part of this "bet the company" phenomenon, (2) particularly with the emergence of the "ubermensch" of patent litigation--the "patent troll":
Meet a new breed of entrepreneurs: patent trolls. Proponents assert that patent trolls are entitled to extract value from underutilized patented technologies. Critics contend that they are the ambulance chasers of the new millennium. Patent trolls have inverted the traditional rationale for building an intellectual property ("IP") portfolio. They obtain patents, not to make, use, or sell new products and technologies, but solely to force third parties to purchase licenses. Instead of investing capital to develop inventions, patent trolls wait for the industry to utilize a patented technology and then enforce their patents on the alleged infringers. And because patent trolls have no incentive to reach business solutions, target companies are left with two options: pay up or litigate. (3)
The continued success of patent trolling was before the Court this last term in eBay Inc. v. MercExchange, L.L.C. (4) The dispute addressed what on the surface appears to be a simple issue--is a party who has prevailed on the merits and has demonstrated that its patent is being infringed entitled to an injunction? It is, or at least "used to be," pretty close to hornbook law that injunctions are appropriate remedies to remedy infringement of patent rights. (5) It is this connection between right and remedy that gives patent trolls the power to force settlements from an infringer--purchase immunity from the injunction or cease infringing and therefore see profits plummet or the business fail.
The Court's decision in eBay did not resolve the patent troll problem--if it is a problem (6)--as some had hoped. (7) The Court in a unanimous outcome, but at the same time fractured decision, (8) decided that issuing injunctive relief to redress an adjudicated infringement of a patent rests in the sound discretion of courts. (9) That itself was a significant statement given the tradition of granting injunctive relief practically as a matter of course to prevent future or continuing infringement.
This paper argues that judicial discretion should be exercised with an awareness of the statutory allowance of damages, but not restitution, in the Patent Act. The injunctive relief provided by the Patent Act should be limited to that necessary to protect the patentee's right to damages for infringement, either a reasonable royalty or lost profits, and not as leverage to exact part of the infringer's gains. …