Restoring the Right to Permanent Injunctions: A Patent Reform Agenda

By Gene Quinn
November 2, 2017

Capitol BuildingAt some point during 2018 Congress will likely become interested in patent reform. All eyes will be on the Supreme Court as oral arguments in Oil States and SAS Institute, which will take place on Monday, November 27, 2017. There may be some trepidation with respect to moving forward on a patent reform bill pending a decision on the constitutionality of post grant patent challenges at the Patent Trial and Appeal Board (PTAB), but those who think patent reform efforts are over need to come to terms with the new normal. The U.S. patent system is under constant assault. As Congressman Thomas Massie (R-KY) told me in June 2017, every day there are lobbyists and large corporations walking the halls of the Capitol seeking to further weaken the U.S. patent system.

Sadly, good ideas seem to die an unceremonious death on Capitol Hill, which almost certainly means the STRONGER Patent Act introduced by Senator Chris Coons (D-DE) is dead on arrival. Still, the STRONGER Patent Act represents thoughtful patent reforms, which if enacted would immediately end to the downward spiral of the U.S. patent system. Indeed, it would address virtually all of the top line, immediate problems facing the U.S. patent system and with one signature bring a fundamental and fair balance to the patent system that has been lacking for the last decade. For more on the STRONGER Patent Act see Section by Section Analysis and Coons introduces STRONGER Patent Act

The House of Representatives may at some point introduce a companion bill to the STONGER Patent Act, but at the moment those who may be considering introducing a House version have been somewhat non-committal. Another bill in the House that would to at least some extent do away with the PTAB is also widely anticipated, but no timetable for introduction currently exists. The political feasibility of these sensible bills seems about as bleak as the STRONGER Patent Act itself. Of course, meaningful patent reform typically takes 5 to 10 years to accomplish, so the introduction of these bills is not a useless endeavor. Perhaps over time these legislative ideas will become more mainstream.

Realistically, it is unlikely that Congress will bother themselves with patent reform efforts that are sensible from the perspective of innovators and patent owners who require strong patent rights. After all, Congress and the Courts have spent most of the last 12 years working to disadvantage innovators and patent owners while propping up infringers who take from innovators.

Notwithstanding, I offer the following suggestion: Overrule eBay v. MercExchange and grant permanent injunctions to victorious patent owners as a matter of right. This singular change to U.S. patent laws – which is also found within the STRONGER Patent Act at Section 106 – would rectify much of the mischief caused by Congress and the Courts over the last 12 years.

No single decision has so singularly tilted the balance between patent owners and technology implementers. Indeed, if you ask knowledgeable innovators and patent owners about the one decision or event they would undue if they could in order to bring the system back to some acceptable level of equilibrium and the answer will either be to overrule eBay v. MercExchange or to do away with post grant challenges at the PTAB. There is no doubt that overruling eBay v. MercExchange would go a very long way to normalize an industry in freefall.

Without fear that a patent owner can obtain a permanent injunction, and with the Federal Circuit having dramatically decreased available patent damages, the only thing an infringer has to fear is paying a reasonable royalty that rather closely approximates what they would have paid at an arms length negotiation prior to litigation, and that is if the patent owner can afford to pursue the infringer, actually wins and can ever actually collect.

Permanent Injunctions

Permanent injunctions are those that are awarded after a patent owner has gone through an entire trial, all validity arguments and other defenses have failed, the claims have been adjudicated to not be invalid (awkward way to say it, but legally how it is said because claims are presumed valid) and one or more claims have been infringed. In 2006 the United States Supreme Court decided that ordinary equity principles should apply and patent cases are not any different than any other case.  Factually and legally the Supreme Court is wrong.

Patents are a property right – the statute says so – and as such a patent must provide to the owner the right to exclude – as the United States Constitution mandates. Absent the right to exclude a patent is not a property right and the promise of an exclusive right in the express grant by the federal government is nothing more than an illusory promise. The promise of an exclusive right in the Constitution is unfulfilled. Therefore, it is not accurate to say, imply or pretend that patent cases are or should be lumped together with all other cases in terms of equity. Patents are different because the rights are exclusive in nature by explicit design.

Even copyrights, which themselves offer exclusivity, are not nearly the right conferred by patents. Copyright exclusivity suffers from fair use and independent creation, which means that a copyright offers a very different level of exclusivity. Patents offer a near absolute exclusivity, at least once the patent claims are determined to be valid and the claims infringed. Thus, an injunction should ordinarily be issued as a matter of right. That is what is demanded by the grant itself, which promises exclusivity. Exactly what situation would there be a better argument for a permanent injunction when the full force of the United States federal government has conferred onto the owner “the right to exclude others” and another has been adjudicated to have engaged in previous wrongdoing?

Curiously, a permanent injunction, which would order the wrongdoer who has already been adjudicated to be an infringer to cease future infringement, would say nothing different than the patent grant itself. The patent grant itself already promises the inventor the exclusive right – as explicitly authorized by the Constitution – to the patented invention, and access to Article III United States Federal Courts in order to enforce that exclusivity. A permanent injunction would simply order the adjudicated wrongdoer to not engage in infringing activity moving forward, something that they are already not supposed to do.

The only thing permanent injunctions give patent owners is quicker access to the federal courts should a wrongdoer continue to ignore the exclusivity of the patent grant. Absent a permanent injunction the patent owner would have to file a new patent infringement lawsuit against the recalcitrant wrongdoer who engages in serial infringement. It can take at least several years, perhaps four or five years in some courts, to get to trial. All the while the recalcitrant infringer continues to infringe, competing against the patent owner or simply refusing to pay the patent owner licensing royalties. But recalcitrant infringers are most often, if not nearly exclusively, large entities that have the capacity to engage in massive infringement and push the patent owner out of business by the time a patent litigation can resolve the matter. That is why a permanent injunction is so critically important to a successful patent owner.

If there is not appetite for all of the sensible reforms in the STRONGER Patent Act, Congress should at a minimum overrule eBay v. MercExchange. Without the right to enforce exclusivity with a permanent injunction a victorious patent owner now has an asset that no longer possesses the key right that is fundamentally associated with property – the right to exclude.

 

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 10 Comments comments. Join the discussion.

  1. American Cowboy November 2, 2017 10:31 am

    Gene, two points:
    Scotus saw the language about “Ordinary equity principles should apply” and used it to come up with its “injunctions are not automatic” rule, so the fix is to change that language in the statute. Maybe something like: “an injunction will issue unless the infringer demonstrates by clear and convincing evidence that the public interest will be harmed by the requested injunction”

    Second, in the meantime, once the infringer has lost the lawsuit, if an injunction does not issue and the court sets a royalty for the “continued infringement,” that royalty should be commensurate to pay the patentee for what is INDISPUTABLY willful infringement — I. e. treble damages and liability for the patentees attorneys fees for any need to resort to continued legal process to collect the payments.

  2. Judge Rich's Ghost November 2, 2017 10:33 am

    Two excellent articles regarding eBay — one by former Chief Judge Michel.

    https://www.criterioninnovation.com/articles/understanding-the-errors-of-ebay.pdf

    Christopher B. Seaman, Ongoing Royalties in Patent Cases A er eBay: An Empirical Assessment and Proposed Framework, 23 Tex. Intell. Prop. L.J. 203, 205 (2015)

  3. Judge Rich's Ghost November 2, 2017 11:34 am

    Citation to the Michel article, since I realized my post my be unclear:

    Paul R. Michel & Matthew J. Dowd, Understanding the Errors of eBay, 2 Criterion J. on Innovation 21 (2017).

    And while I agree with the thrust of this article, it’s important not to make inaccurate overstatements that undermine your credibility. For example, contrary to the post, the statute doesn’t say that patents “are personal property.” The statute — 35 U.S.C. 261 — says that, “[s]ubject to the provisions of this title, patents shall have the attributes of personal property.” Thus, although patents may not be personal property, they are to be treated like personal property. Acknowledging this doesn’t take away from the argument of restoring the proper place of injunctions in patent law.

  4. Anon November 2, 2017 12:25 pm

    It bears repeating here: the primary goal of applying equity is to make the transgressed as whole as possible.

    It is only with a Court preoccupied with its own (historical) anti-patent philosophies would such a basic element forget to be the centerpiece of the legal reasoning.

  5. Paul Morinville November 2, 2017 12:30 pm

    Gene, I agree with this post. However, it does not address the way law creates incentives and how the lack of injunctive relief creates a disincentive to investing in startups at the earliest stages.

    When an inventor has nothing but a patent (or application) and is attempting to attract investment, the patent is often the only thing of value to leverage. There are many ways to project the potential market value of a particular invention. This is the specialty of venture capitalists. A patent can be valued based in relation to the total market value if there is injunctive relief. If there is not, the patent must be valued based on a wild guess of what some judge somewhere will award as its value in a compulsory license. This is no small part of the reasons that early stage (angel) investment has dropped 62% and why we are at a 40 year low of new startups.

    So legally speaking, you are right. But the incentives created by law that help startups attract investment have been radically changed in eBay.

  6. Anon2 November 3, 2017 7:53 am

    American Cowboy @1

    ‘Maybe something like: “an injunction will issue unless the infringer demonstrates by clear and convincing evidence that the public interest will be harmed by the requested injunction”’

    You make it sound as if it were possible for your right to your property (as such) to pose a harm to someone else’s interest, which implies, they have a pre-existing interest in either your property or your not having rights.

  7. American Cowboy November 3, 2017 10:01 am

    Anon2, I leave that public interest exception in my proposal, because the courts generally recognized it even before Scotus changed things wholesale in eBay.

    The case that comes to mind was one where the infringer had built a multimillion dollar sewage treatment plant for a city, and that plant was found to infringe. The court said the public interest in having the sewage treated was so great that it would not issue the injunction. Those kinds of cases are few and far between.

  8. Greg DeLassus November 3, 2017 11:54 am

    Well said, Mr. Quinn. The whole nation would be better off if Ebay were consigned to an ignominious obsolescence.

  9. Anon2 November 3, 2017 1:49 pm

    AC @7

    Good example. Once the property right has been manifested in physical form and after various other interests (of unknowing third parties) are involved, then justice can require that damages or some other recompense for the trespass/violation be made rather than something drastic like destruction.

    Injunctions for future activity, however, against the would be trespasser/infringer, should be less troublesome to validate and justify based on principle.

  10. Anon November 6, 2017 11:38 am

    Anon2,

    Justice…

    to whom?

    Patents are published, and there is NO such thing as an individual invention defense. Also, unlike copyright violations, patent infringement does not require any “intention.” The “wrong” being addressed – and any equity under concern for such – is to make the transgressed whole. “I didn’t know and now have a warehouse full of cheap knock-offs” does not merit consideration in any view of making the patent right (the notion of exclusivity) “whole.”

    The danger in your view (a bit strong of a word, but I will use it nonetheless) is that the “traditional” view of injunction as a tool of equity is that injunction is “harsh.” The attempt to modify WHAT is being made whole with some view that the tool of equity is “harsh” misplaces WHY the tool of equity is coming into play, and further, merely denigrates the goal of equity, twisting equity from a mechanism of making the transgressed as whole as possible into the cheapening of the patent right into the very type of thing that OTHER business functions treat with the notion of efficient infringement.

    Patents have NO value short of their value of exclusivity.
    Injunction – in the patent sense – is not only NOT harsh, it is the single best and most efficient way of making the transgressed whole.

    ANY view that ameliorates this understanding (and starts down a slippery slope) is a view that must be critically examined given the nature of what a patent is.

    Unfortunately, we have a judicial branch (from the top down) that tends to be anti-patent, and certainly are anti-STRONG patent.

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