No permanent injunction threat leads to refusal to deal with patent owners

By Gene Quinn
June 18, 2015

fear-335Earlier this week I attended the IP Business Congress hosted by IAM Magazine at the Palace Hotel in San Francisco, California. The event was well attended by the upper echelon of business and thought leaders. The programs were what you might expect, a healthy mix of things you wholeheartedly agreed with and things that sounded ridiculous or even bizarre. Of course, what is correct and what was bizarre is always in the eye and ear of the beholder.

For example, during one panel discussion the moderator asked the panel to identify something specific that the courts have tackled in recent years that represented something positive for the industry. Judge Rader went first and, not surprisingly, said he thought the courts have brought a lot of positive certainty to the law of damages. John Whealan, Dean of IP Studies at George Washington University, echoed Rader’s belief that damages is one area where the courts have been productive, as did most of the other panelists.

When it became time for Mark Lemley to answer the question he explained that the Supreme Court’s decision in eBay v. MercExchange is the most positive decision of the Court in recent times because it gives district courts discretion with respect to issuing injunctions.

Simply stated, Lemley is wrong and his suggestion that eBay v. MercExhange is at all positive, let alone the best development, strikes me as utterly ridiculous. In fact, the single worst decision in the area of patents over the past decade has been the Supreme Court’s decision in eBay. That eBay is has been a catastrophe seems unquestionable beyond any and all reasonable doubt.

When Lemley says that district courts should be given discretion to issue an injunction in a patent case what he is saying is that it is appropriate and necessary to give district courts the right to refuse a permanent injunction in favor of a victorious patent owner who has demonstrated that the patent claims have been infringed by a defendant. The patent owner who has withstood all challenges to validity of the claims and proved infringement shouldn’t be allowed a court order that mandates that the infringer cease infringing. Absent an injunction there is nothing to prevent the infringer from infringing all over again and ignoring the express terms of the patent grant that they similarly ignored in the first place.

Prior to eBay, when a patent owner prevailed on the merits in a patent infringement lawsuit, there was a well-established rule that an injunction should issue. The Supreme Court changing this rule is exceptionally difficult to swallow when you consider that the patent grant itself is supposed to guarantee to the patent owner the right to prevent others from making, using, selling, offering for sale or importing into the United States infringing devices.  The patent by its very nature is supposed to provide the owner with an exclusionary right. But what good is an exclusionary right without an order to respect that right? Is an exclusionary right really a right to exclude at all if someone who has violated the right isn’t ordered to cease all further violation?

A permanent injunction in a patent infringement case does nothing other than conclusively tell the losing party (i.e., the INFRINGER) that they cannot make, use, sell, offer for sale or import infringing devices.  Thus, a permanent injunction issued to a victorious patent owner plaintiff does nothing more on a substantive level than reiterate the patent rights provided the patent owner as a part of the patent issued by the federal government. In essence a permanent injunction merely backs up the patent grant with the weight and authority of the jurisdiction and authority of a federal court, which seems appropriate given the infringer trampled on the exclusive right granted by the federal government in the first place.


Of course, a permanent injunction does do a lot more on a procedural level.  Of particular importance is the fact that a permanent injunction allows the district court judge to retain jurisdiction of the case and gives the patent owner the ability to return to the district court without needing to file a new patent infringement lawsuit should the infringer keep up with the old infringing ways (i.e., if they continue to ignore the exclusive rights granted by the federal government). Without the issuance of a permanent injunction the prevailing patent owner plaintiff is left to continually sue time and time again to seek redress for ongoing infringement.  A well-funded infringing defendant could just keep on infringing and force the patent owner to expend many millions of dollars pursuing the infringer.

Without a realistic threat of a permanent injunction infringement is the smart business decision. After all, how many patent owners will prevail, and even if they do prevail how many will be able to continue to afford to pursue infringement? With no threat of injunction to balance the negotiating positions of the parties, ironically the infringer who has trampled on the federally granted and valid rights is in a far superior negotiating position. This is a terribly unfortunate reality of the Supreme Court’s decision in eBay v. MercExchange.

Ultimately, the question boils down to this: What good is it to have an exclusive right that doesn’t provide the right to exclude?

The patent owner was granted the right to exclude by the federal government. This right to exclude is supposed to mean that the patent owner can prevent infringers from engaging in infringing activities. As the result of eBay the patent owner is ironically in a better position prior to being victorious. Once the patent owner is victorious the owner no longer is entitled to an exclusive right even though they proved that the defendant infringed and that there were no legitimate challenges to validity of the patent claims. In what universe does it make sense that a patent owner has greater rights before they proved they were correct? It is as if Monty Python has taken control of U.S. patent laws.

The true mischief of the eBay decision isn’t that patent owners can’t obtain a permanent injunction, but rather that the Supreme Court has taken the threat of a permanent injunction off the table. This means that infringers have no incentive to deal. Courts have already limited damages available to patent owners over the last decade. The courts have increasingly made it easier to challenge claims as being patent ineligible or obvious over the last decade. Congress has provided additional procedural mechanisms to more easily challenge patents after they have issued. Over the last decade there has been a significant erosion of patent rights. But the single most significant erosion of rights came in eBay.

If infringers had to fear the possibility of a permanent injunction they would be forced to enter into meaningful arms length negotiations with patent owners. Instead, now infringers can merely say “sue me,” which is exactly what they do.

Infringers have no incentive to license, or even consider a license today. Why would you consider a license when the amount of damages that can be awarded is limited, when there are procedural tools available to invalidate at least 75% of claims challenged, when the law of patent eligibility has made the U.S. a far less advantageous jurisdiction than Canada, Europe, China or Australia, and when there is no realistic chance that you will ever be ordered to cease infringing? In this world infringers force patent owners to sue them knowing that there is virtually no chance that they will ever have to pay anything and that they will be able to continue infringing for free without consequences.

Everywhere else in the law we have structured rules that seek to limit transaction costs, minimize uncertainty and maximize the likelihood that an arms length negotiation will result in private citizens (or entities) trading rights and reaching negotiated resolutions outside the judicial process. In patent law we have done the exact opposite. The only alternative for patent owners is to sue because infringers simply refuse to negotiate and they have no fear that they will ever be stopped.

Is this a concerted refusal to deal, which could potentially raise an antitrust eyebrow? Perhaps not, but ask any group of patent owners and there is plenty of anecdotal evidence to suggest there is a de facto, unified refusal to deal that has had a tremendous negative impact on the market for patented innovations. Anecdotal stories told by attorneys who work for infringers suggest that they do, in fact, ignore patent owners until they are sued, which seems to lend credibility to the belief that there is some kind of a unified refusal to deal with patent owners.

Given the near universal refusal to deal with patent owners in any legitimate way, overruling of the Supreme Court’s eBay decision would be the single best way to improve the patent system. Proclaiming that eBay was a good decision, or the best thing that the courts have done for patent law over the last decade, is simply inaccurate.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 32 Comments comments.

  1. Night Writer June 18, 2015 11:39 am

    Mark Lemley is the brain behind the judicial activism and destruction of our patent system. Mark Lemley probably interpreted the question as: what ruling has most hurt the patent system (yea!).

    Mark Lemley’s functional paper is horrendous. I do even think the cites are accurate. It is a blue print for judicial activism to further damage the patent system. It lead directly to the recent en banc Williamson v. Citrix: on § 112, para. 6.

    I do not think it would be possible to express the harm that Mark Lemley has done to the patent system.

    Also, Mr. Lemley please tell us how you protect IP at your start-up? (My guess is that he is forcing his employees into draconian non-compete and non-disclosure agreements—exactly what patents killed off in the 1980’s. And, if you are a tech worker like I was in the 1980’s you don’t want to have to sign a non-compete/non-disclosure agreement. Basically, they say you can’t work for another company doing what you and you can’t tell anyone what you are doing or how you are doing it.)

    So, Mr. Lemley is that what you are doing?

  2. Lewis Carol June 18, 2015 1:27 pm

    What’s wrong with damages for the infringed party. It’s the American way.

    Injunctions on the other hand always upset the status quo.

  3. Brent June 18, 2015 2:00 pm

    The ebay case threw out an important remedy, and the very essence of patent rights, due to the very real problem with patent owner holdup.

    There is another way to deal with this issue, though. Instead of a permanent injunction issued as of the date infringement is found by the courts, some grace period to allow the infringer to design around the patent before the injunction went into force could very well be an effective remedy, and avoid the situation where the owner of an unimportant patent is trying to extract value from the remainder of a complex product due to the timing of a potential injunction.

  4. Paul Morinville June 18, 2015 4:35 pm

    A patent that can earn an injunction can be valued by figuring out the size of the market. Then if you do some math, you can come to a fairly accurate valuation of the patent. You may not be exactly right, but you could at least attribute a reasonable number.

    A patent that can only earn a forced license with a damages value set subjectively by some as yet unknown court cannot be valued. You could say this one is big or this one isn’t big, but you could not project any sort of number.

    This harms the investment value of patents.

  5. Anon June 18, 2015 6:10 pm

    I was not at the event to see if Mr. Lemley provided any context to his statement (or defense – as the case may be). Was there any context Gene?

    The issue that I have always had from the “just award damages” crowd is that such simply ignores what a patent is. Throwing money denigrates the right and makes it a mere tool of the Kings, who can embrace efficient breach far more easily than those with disruptive and breakthrough innovations.

    The first rule of remedies is to make the transgressed whole.
    Most often (outside of patent law) this is done with money.

    The second rule of remedy is a balance of equities – since fully making whole is often difficult or incalculable.
    Most often (outside of patent law), the measure of injunction is deemed a harsh response.

    But this situation is within patent law. Perhaps uniquely, the available remedy of injunction is doubly worthwhile:

    1) not only NOT too harsh, as infringement is typically not an “oops, I did not mean to do that, therefore I can go free without consequence” offense. It very much is a strict liability offense (and in fact, maintaining this and making people pay attention to published patent applications aligns and strengthens one of the purposes of the patent system in the first place, and

    2) it is in fact the closest a remedy comes to making the transgressed whole (as Gene explains above regarding the nature of the patent right).

    Now perhaps I could live with a reading of eBay that says that the four factor test must be walked through – as long as the “traditional” views of remedy remember the type of right involved. I fear that that is the true “victim” here (and for the past decade or two) in the onslaught against patent rights.

    As I have mentioned before, the “answer” is in the opposite direction. Make the patent right stronger, and more clear, and easier to enforce. The Teddy Roosevelt doctrine should be put into play: one should be able to speak softly, and let the big stick ease the way.

  6. Gene Quinn June 18, 2015 9:33 pm

    Lewis-

    Not really sure how or why you can say that an injunction upsets the status quo. That is objectively incorrect.

    An injunction in a patent case preserves the status quo because the patent right gives the patent owner the right to exclude others. Thus, an injunction does nothing more than reiterate what the patent right grants the patent owner.

    The status quo is that the infringer never should have engaged in the activity. It is the infringer that upset the status quo.

    -Gene

  7. Gene Quinn June 18, 2015 9:47 pm

    Anon-

    In terms of context, there wasn’t much context really. This came up near the end of the panel discussion. The panel was hopeful, perhaps even optimistic, that the courts will fill in blanks and provide meaningful insight to provide answers in what is really more of a sea of questions. This lead the moderator to ask each panelist if they could point to something positive that the courts have done in this space. It was at that point that Judge Rader mentioned damages as being one area the courts have been helpful. Lemley said that the Supreme Court’s decision in eBay is proper because it is right to give district courts discretion.

    The patent right is an exclusive right, so discretion on a permanent injunction when dealing with what is supposed to be an exclusive right is inappropriate. The rule should be that a permanent injunction should ordinarily be issued and the infringer should have an extremely heavy burden to demonstrate that an injunction is improper.

  8. Lewis Carol June 18, 2015 10:30 pm

    “An injunction in a patent case preserves the status quo because the patent right gives the patent owner the right to exclude others.”

    This is fantasy land nonsense in the minds of people who never sold a Virginia carrot. Injunctions are placed on companies shipping real products. Those companies could just as well pay damages. Fact is, patent owners seeking injunctions are not out for damages. They are out for market monopolies. Patents don’t provide market monopolies. They provide product monopolies. Only law school students and professors rattle off maintaining the status quo though an injunction. Outside the fantasy of the classroom and bar exams, injunctions upset the status quo.

  9. Gene Quinn June 19, 2015 12:58 am

    Lewis-

    You can be ignorant if you want, but what I said was correct and what you say is stupid.

    Companies shipping real products who have stolen innovation rights should be enjoined.

    Unlike you, I live in the real world. I work with real innovators, not those who steal their innovations and pretend that a new product is equivalent to innovation. By definition an injunction awarded to a victorious patent owner who has prevailed against an infringer who has stolen rights maintains the status quo. The fact that you don’t see that speaks volumes of your own lack of intellectual honest.

    Only someone who ignorantly believes innovators don’t deserve any rights would rattle off nonsense suggesting that an injunction is inappropriate when infringement has been established. In the real world innovation doesn’t exist for infringers to copy without strong patent rights.

    -Gene

  10. Gene Quinn June 19, 2015 1:21 am

    Lewis-

    I feel compelled to comment once again. The sheer ignorance demonstrated by your comment is breathtaking.

    The only reason you could possible say that the failure to issue an injunction would be to keep the status quo is because the status quo has already been disturbed by the ongoing infringement. How asinine!

    The patent gives the owner the right to exclude. Exclusion is the status quo, period. The infringer ignoring the law and engaging in infringement does not entitle them to say that an injunction shouldn’t issue because it would just upend the status quo of infringement. Takers who ignore the law cannot seriously argue that they should be allowed to continue to misappropriate because they have been misappropriating for some time.

    I don’t suspect you to understand this concept, but I suspect if I showed up at your home and threw you out on your ear and then claimed that the new status quo is that you are homeless you would probably suddenly understand.

    -Gene

  11. Edward Heller June 19, 2015 5:49 am

    Gene, you are right. I was inside for years at “big company.” This is exactly why we settled – the real threat of an injunction.

    But one must also add that Seagate combined with the idea that any reasonable defense made in court takes willfulness off the table is another reason there is absolutely no reason to settle. The Federal Circuit needs to reconsider this “reasonable defense” to willful infringement en banc — or someone has to challenge the Federal Circuit once again at the higher court.

    Patents are presumed valid by statute. That cannot be ignored.

  12. Anon June 19, 2015 8:39 am

    Lewis Carol is obviously already through the looking glass with his idea of what a patent is and his idea of what a proper remedy for transgressing a patent would be.

    The clear fantasy is good Lewis’s. That he attempts to spin this fantasy as truth, and real truth as fantasy is something I would expect to see at Patently-O, not here (at least, not here for long).

    Clearly, the tea that good Lewis has drunken prevents any perspective to be had by Lewis on what a patent is. To think that a patent means “exclusive” to be “fantasy land nonsense” is to exhibit the plain fact that good Lewis is operating in some other world where patent law does not say what it does here in the United States in this reality. The seeming excuse of “but I sold real product” is no excuse at all, as it has always been a factor in patent law that the limited times of the patent was good enough measure so that eventually (and NOT during the patent term) the free and unfettered use may be had by all. Prior to the term ending, and no matter how valuable the invention**, the patent holder’s right meant that he could legitimately prevent any and all use. It has always been legitimate under law and fully up to the patent holder to see to it that NO ONE used his invention for the term of the patent right. That was the quid pro quo. The quid pro quo has never been a positive right to manufacture or do something.

    ** there are extremely limited circumstances in various aspects where the US Government has step in rights, as well as other limited aspects such as “shop rights” that are exceptions to the rule.

  13. Anon June 19, 2015 8:42 am

    Let me add that the “any and all use” also has its caveats: certain uses of a non-commercial nature have always been allowed. For example, the so-called “idle speculation” use and the use to verify are two such allowed uses. On the other hand, investigatory use as part of a commercial enterprise geared to supplanting the invention is not a consequence-free use.

  14. Night Writer June 19, 2015 9:29 am

    >>Gene, you are right. I was inside for years at “big company.”

    I was on the inside of one of the biggest international corporations too. This whole myth that trolls are some very bad actors and that international corporations are civil is ridiculous. The fact is that at international corp you are in a profit center and need to make money. The people are cut-throat and have enormous resources to back them up.

    The biggest thing we could do is just ignore you. And what we thought over a beer? We would say, what are they going do? Just tell the assistants not to put them through and ignore their emails. That is what we did. And we were one of the nicer big international corporations.

  15. Paul Morinville June 19, 2015 9:39 am

    Lewis, You say “Injunctions are placed on companies shipping real products. Those companies could just as well pay damages.” A patent is constructed in the Constitution as an exclusive right. It is nothing else. There is no requirement to make it or sell it.

    What part of exclusive right means a company could just as well pay damages?

  16. Paul F. Morgan June 19, 2015 10:55 am

    ? Injunctions are still awarded to patent owners who have actual products being infringed! I.e.., traditional competitive infringement, not NPEs.

  17. Dan Wood June 19, 2015 11:05 am

    Lewis, there’s the risk of sticking your head out of the rabbit hole. I’ll skip the well-trod ‘exclusive-right’ terrain and simply ask: if your status-quo-post companies can pay damages, why do they so scrupulously avoid reasonable settlement discussions? They will only do what they are fully and finally ordered to do. (Beware the coming of willful inducement with enhanced damages!)

  18. Paul Morinville June 19, 2015 11:31 am

    Paul f. Morgan, That means a patent is worth less to a second owner than it is to an inventor. That disrupts the secondary market that drives capital to startup companies by devaluing the patent asset.

    We have the problem of patent trolls in part due to this.

  19. Bob R June 19, 2015 12:13 pm

    You are correct Gene. I remember sitting at an AIPPI conference a few years back and a colleague from India made the poignant remark that ebay created the very same compulsory license that the US government was trying to prevent from occurring in India, Brazil, etc. regarding their compulsory licensing laws related to pharmaceuticals.

    My guess is Lemelson is focusing on the development of software/hardware patents. Obviously, as technology has changed and many electronic devices have hundreds of patents covering them, the granting of an automatic injunction can have a devastating impact on an industry. The problem, however, is not the injunction, it is the granting of the questionable patents and their scope. It appears that Alice, however, is solving some of that problem, but creating others at the same time.

  20. Lewis Carol June 19, 2015 5:57 pm

    The reason injunctions are not appropriate and damages are appropriate is because patents have empirically failed to achieve the intended notice requirement. Therefore no one would ship a product if they were afraid of infringing the one kernel of wheat amongst the mountains of chaff. And it is the impostor clowns in self-congratulatory side shows like this who are responsible for all that chaff.

  21. Edward Heller June 19, 2015 6:15 pm

    Lewis, notice? Notice!!!!!!

    What the frack are you talking about?

    Patent owners are entitled to a RR by statute for 6 years back unless they are selling a covered product and do not mark. If they have to go to the expense of suing to collect, why shouldn’t they be entitled to an injunction when even the constitution says that the remedy congress is authorized to afford is “exclusive rights.”

    For a very long, long time, from the found of the Republic, patent owners did not sue for damages, just an injunction. That is all they needed. Proving damages is hard. For an injunction, all they needed was exactly one product. Just one. And just one claim.

    One of the reasons that litigation has become expensive is that one has to prove damages given that injunctions are unreliable. Remove damages from a case except as a post judgment accounting procedure, while making the injunction the exclusive remedy, and the status quo ante would be restored.

  22. Lewis Carol June 19, 2015 11:11 pm

    Now it’s “status quo ante” huh. Well anyway… If it’s too hard to prove damages it’s probably because there aren’t any.

  23. Paul Morinville June 20, 2015 12:00 am

    Didn’t Lewis Carol write Alice in Wonderland?

  24. Anon June 20, 2015 11:40 am

    Paul M.,

    It should be abundantly clear that Lewis is not the person’s real name and that the position advanced by this “fake” person is every bit as “fake.”

    There is a clear lack of understanding of patent law by Lewis, and his posts are merely empty thoughtless posturing attempting to provoke some reaction of some sorts for some unknown reason. His latest adventure into “empirically failed” reflects the mindless prattle of anti-patent kool-aid. The inappropriate venom evidenced by “impostor clowns in self-congratulatory side shows” is a failing gasp of someone soon to be banned from participating on this forum – reflecting (sadly) the anti-patent “intelligence” that cannot participate in any meaningful manner.

    This latest version will not be missed because as usual this latest version has not said anything of consequence.

  25. Dan Wood June 20, 2015 11:54 am

    Lewis is right. Everyone is overlooking Section 271(x), not included in every publication of the Patent Act, which reads: A patentee shall have the exclusive right to practice the invention and to exclude others from such use, provided that, any unauthorized user SHALL acquire the authority to practice the invention upon a judicial determination of said unauthorized use. (Emphasis added)

  26. Paul Morinville June 20, 2015 12:06 pm

    Anon, I just thought it was funny that he would take that name. Wonderland is fantasy, as are his current views of the patent system.

  27. Anon June 20, 2015 12:32 pm

    Yes, Paul, methinks he was too clever by half, not realizing that the joke of the name was on his own views.

    Dan Wood – you try too hard to make a “positive right” out of something that is expressly a “negative right.” I do no think that you grasp what these concepts mean and why there is a very real difference between the two. Lewis is expressly NOT right. You as well in aligning with him are also expressly not right.

  28. Dan Wood June 20, 2015 12:59 pm

    Anon, have you read Sec. 271(x)? Methinks my sarcasm was too obscure. I’ll look, not to the stars, dear Anon, but to you for a response anon.

  29. Lewis Carol June 20, 2015 1:33 pm

    Dan. The ostrich heads are already buried. You can’t expect to bury them more.

  30. Dan Wood June 20, 2015 2:04 pm

    Wow! I guess the joke IS on me. There is NO Sec. 271(x). There is NO statutory provision for an infringer to simply “buy” his license through prohibited conduct, i.e., by infringing. Such an outcome rewards the wrongdoer, eviscerates a patentee’s right to exclude, and, thus, countenances the very behavior the Patent Act was intended to prohibit. To be C-L-E-A-R, I am NOT in support of “Loopy” Carol’s position. My post was intended as farce. But as I said, the joke was apparently on me.

  31. Anon June 20, 2015 2:39 pm

    Dan,

    In the words of Sheldon Cooper, “I did not see the sign.”

    Mea Culpa.

    Lewis, what is buried, and where, apparently is a matter of perspective, of which, you sorely lack.

  32. Dan Wood June 20, 2015 5:09 pm

    Thank you, Anon.