Permanent Injunctions for Patent Infringement in a Post eBay World

November 03, 2010, 06:32 PM

Prior to 2006, a patent holder who prevailed in Court was entitled to a permanent injunction almost as a matter of right. With few exceptions, the prevailing patent purveyor could effectively stop an infringer from practicing the technology claimed in the patent. This was a powerful weapon that allowed patent holders a great advantage over would be infringers. In 2006, the Supreme Court took up the issue in eBay v. MercExchange, LLC., 547 U.S. 388 (2006) after the United States Court of Appeals for the Federal Circuit confirmed this near automatic right in reversing the Honorable Jerome Friedman of the Eastern District of Virginia who had deigned to require the patent holder to prove the need for an injunction. The Supreme Court reversed the Federal Circuit vindicated Judge Friedman and heralded a new era of post infringement injunction battles. The tale of eBay is well known. Equally well known are the countless articles and predictions of impending change and doom to come that followed the decision. (eBay Heralds the End of Injunctions) But has that much really changed? Has the right to a permanent injunction really dissipated for the IP holder or have the courts simply begun treating the right to an injunction for intellectual property cases in line with well established rules of equity governing injunctions in other instances? Although the final chapter of the tale has not been written, the emerging post e-Bay law suggests that while a presumptive right to an injunction is gone, the right to a permanent injunction in such cases is still very much alive, that permanent injunctions are regularly granted in most cases involving direct competition, and that predictions of the demise of permanent injunctions amount to more of a fairy tale than an actual nightmare. In the post eBay world, there are a variety of factors that favor an injunction, including irreparable harm proven through proof of loss of market share; price erosion; difficulty in calculating damages; and harm to reputation or goodwill. Equally important, courts have more reflexively granted injunctive relief where there was clear competition between the patent holder and the infringer and where the invention was a pioneering invention rather than an incremental improvement of existing technology; likewise, where the patent holder does not make a product or compete in the marketplace, courts have been more reticent to award this extraordinary relief. Additional factors that have led the district courts to refuse an injunction are:

  • Patentee does not practice the patent and has consistently sought and touted its use of the patent to achieve royalties, not to protect market share, reputation or good will;
  • Patentees demonstrated willingness to license the patent;
  • Patentee never sought a preliminary injunction;
  • The patent in question was a business method patent which combined non-unique elements in a unique fashion;
  • There was no actual proof of loss of market share; and
  • Patentee had an adequate remedy at law.

What happens if the injunction is denied? Where an injunction is denied and use is continued despite infringement, emerging law has held that the courts task is to assess an appropriate level of damages for ongoing infringement under circumstances where an injunction is not warranted. Indeed, analogizing to antitrust law, the Federal Circuit concluded that, although not always awarded, [u]nder some circumstances an ongoing royalty for patent infringement in lieu of injunction may be appropriate. Assessing post judgment royalty rates is a matter of judicial discretion, typically after evidence, and may be awarded by the court without the aid of the jury; it should take into account additional economic factors arising out of the imposition of an on-going royalty: [p]re-suit and post-judgment acts of infringement are separate and may warrant different royalty rates given the change in the parties legal relationship and other factors. Stephen E. Noona and Kristan B. Burch published this article in The Federal Lawyer, a nationally acclaimed legal magazine published by the Federal Bar Association. Stephen Noona regularly tries patent infringement cases in all Divisions of the United States District Court for the Eastern District of Virginia as well as in other Districts across the nation. –Stephen E. Noona