"Patent Trolls" and Patent Remedies

Article excerpt

One would not, therefore, of all faculties, or qualities of the mind, wish, for a friend, or a child, that he should have that of invention. For his attempts to benefit mankind in that way, however well imagined, if they do not succeed, expose him, though very unjustly, to general ridicule and contempt; and, if they do succeed, to envy, robbery, and abuse.

-Benjamin Franklin1

I. Introduction

Recently there has been much concern that the United States patent system is "out of balance."2 Although the average ratio between issued patents and real gross domestic product (GDP) is still lower than the average levels for the 1930s through the 1960s, and about the same as the average level for the 1970s,3 there is a strong perception that patents have become a substantial and growing tax on modern economic activity. Academics, policymakers, and even sitting judges4 have suggested that patent law may have overleaped its proper bounds, or at least become too likely to frustrate, rather than to fulfill, its constitutional purpose of "promoting] the Progress of Science and useful Arts."5 Strong private interests, including a number of prominent information-technology companies, have echoed such suggestions.6 A favorite villain in such accounts is the "patent troll"-apparently one of a class of patent owners who do not provide end products or services themselves, but who do demand royalties as a price for authorizing the work of others.7

In the wake of the Supreme Court's 2006 decision in eBay, Inc. v. MercExchange, L.L.C. , patent remedies have become a focal point of concerns about how the patent system operates. In eBay, the Supreme Court rejected a '"general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.'"8 In a concurring opinion, Justice Kennedy and three other justices explicitly connected rejection of such a "general rule" with concern about so-called patent trolls by suggesting that the traditional practice of issuing permanent injunctions had to be reconsidered in part because "[a]n industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees."9 The unanimous Court provided a counterbalancing admonition against denying injunctions because of "a plaintiffs willingness to license its patents and its lack of commercial activity in practicing the patents."10 Despite the unanimous Court's warning against "certain expansive principles suggesting that injunctive relief could not issue in a broad swath of cases,"11 district courts have responded in apparent lockstep to Justice Kennedy's concerns about trolls. Since the Supreme Court issued its opinion in eBay, district courts appear to have consistently denied permanent injunctions in cases where an infringer has contested the patent holder's request for such relief and the infringer and patent holder were not competitors.12 Thus, the district courts' post-eBay practice may be in some tension with the Supreme Court's warning against the "categorical denial of injunctive relief to broad classes of patent holders.13

This Commentary provides arguments against such a categorical rule. It does so in response not only to the district courts' decisions, but also to an article by Mark Lemley and Carl Shapiro suggesting that as a matter of good economic policy, permanent injunctions should commonly be denied when they are sought by "noncompeting patent holders"-who are defined, for purposes here, to be patent holders who neither compete with an infringer nor exclusively license to someone who does.14

This Commentary does not contend that interest in reforming the patent system is fundamentally misdirected. It agrees that concerns about potential patent-law "overreach" can be welcome corrections to all-too-easy assumptions that patent law is properly tuned to favor the development and dissemination of new technology. …