Seeds of demise were sown when SCOTUS removed exclusivity from the patent bargain

By Gene Quinn
September 19, 2018

https://depositphotos.com/133300380/stock-photo-u-s-supreme-court.htmlPatent rights are under attack and have been in modern times at least since the Supreme Court’s decision in eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), a decision that prevented permanent injunctions as a matter of right.

Prior to eBay, a victorious patent owner who had proved infringement would be able to routinely expect to obtain a permanent injuction. The Supreme Court found this rule distasteful because they believed it was a carve out for patent law. The Supreme Court has over recent years, perhaps even decades, strived to pound all square pegs into round holes. Every area of law is the same, so this business about victorious patent owners routinely getting injunctions when an injunction is supposed to be an extraordinary remedy just had to go.

Of course, the Supreme Court completely ignored that by its very nature and explicit terms a patent is an exclusive right. And an exclusive right must by necessary implication include the right to exclude, otherwise it is clearly erroneous to refer to it as an exclusive right.

The Supreme Court Got eBay Wrong

There is absolutely no doubt, the Supreme Court screwed up in eBay. The Supreme Court simply got it wrong. It happens, and in fact should be expected when a generalist Court dips its toe into specialized waters to decide issues once or twice a year in a rather archaic area of law that they clearly don’t understand.

It will no doubt be controversial to some to ponder the imponderable; namely that the Supreme Court could be wrong about anything. But a patent and its right to exclude actually by its specific terms grants the owner the right to prevent all others from making, using, selling, offering for sale or importing a product (for example) that would trespass on the right granted by the federal government. Ironically, a patent owner theoretically has an exclusive right up to the time that patent owner suddenly becomes a victorious plaintiff in a patent infringement litigation. Having proved infringement and withstood all validity challenges, that patent owner now no longer has an exclusive right because there is no right to a permanent injunction.

In what universe does it make any sense whatsoever for a victorious patent owner with a thoroughly litigated and confirmed valid set of patent claims to be worse off than they were before the verdict was finalized? That is, of course, why it can be said with such confidence that the Supreme Court was wrong. The Supreme Court violated the first rule of judging. They didn’t consider the ramifications of the holding they were foisting upon the industry. So, for twelve years now we’ve had to live with this remarkably illogical rendering. A patent is an exclusive right up to it has been proved to be stolen, then it no longer is an exclusive right at all.

[[Advertisement]]

The Nature of a Permanent Injunction

So why in the world wouldn’t a victorious patent owner in an infringement lawsuit be entitled to an Order from the District Court telling the defendant they can’t infringe moving forward? That is all a permanent injunction is, and it is already supposed to what the patent itself is supposed to prevent. A permanent injunction merely gives the District Court continued jurisdiction over the dispute in the event the defendant was to continue infringing. All a permanent injunction does is order the defendant to not do what they are already supposed to not be doing and at the same time make it unnecessary for the victorious patent owner to start over at ground zero and bring an entirely new enforcement action if infringement continues.

Does the Supreme Court even know what a permanent injunction is? Does the Supreme Court understand the basic bargained for exchange between government and innovator that leads to the issuance of a patent? Whether it is a property right like the statute says, or a government franchise like the Supreme Court recently ruled in Oil States Energy Services, LLC v. Greene’s Energy Group, 138 S.Ct. 1365 (2018), it is still exclusive. A permanent injunction does nothing to expand the patent right granted, whatever it may be in terms of its substance (i.e., property or government franchise). A permanent injunction only makes resolution of continued and recalcitrant infringement easier and quicker to deal with.

In other words, a permanent injunction allows the victorious patent owner who has demonstrated that the valid patent claims have been trespassed by a wrongdoer can simply return to the district court, go to the front of the line, and obtain relief. This makes all the sense in the world for what is a wasting asset. And let’s not forget that a patent, whether it is a property right or a government franchise, is a wasting asset. It is time limited and is specifically intended to give the owner a head start. But when those in the market making money using a patented technology are allowed to ignore the patent for years, even decades, and the patent owner has no right to obtain an order to get them to stop the infringement, exactly how is the patent exclusive?

That time limited asset, in many cases lasts for just 4 years, while many others last only 8 years. If the innovation is particularly valuable will last for 20 years from the original filing date. But even 20 years is a brief moment in time, particularly when infringement is allowed to continue unchecked and without any recourse. How is the patent owner supposed to get the benefit of the bargain if they are unable to have the full faith and enforcement power of the U.S. courts standing behind the exclusive right granted by the Executive Branch?

Patents are not self-enforcing, and there are no criminal remedies or enforcement of patents. Individual patent owners must enforce the exclusive rights granted, but without the right to an injunction the exclusive part of the promise is illusory at best. Without the federal courts standing behind the exclusive right the patent granted by the Executive Branch is simply not exclusive, regardless of whatever you want to call it — property or a franchise.

Conclusion

With the next Supreme Court term beginning in a few weeks we all need to come to terms with the fact that the U.S. has a compulsory licensing system, which is truly ironic. Trade missions, trade representatives, and governmental organizations travel the world preaching about the importance of a strong intellectual property system and how that starts with strong patent rights that are not subject to the whims and fancy of compulsory licensing. America should practice what it preaches.

For some time, the United States hasn’t had a property rights-based patent system. That was merely confirmed in Oil States with the Supreme Court calling patents a government franchise, but the seeds were sown over 12 years ago when the Court decided eBay and removed exclusivity from the patent bargain.

 

Image Source: Deposit Photos.

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 28 Comments comments. Join the discussion.

  1. David Stein September 19, 2018 10:16 am

    > a generalist Court dips its toe into specialized waters to decide issues once or twice a year in a rather archaic area of law that they clearly don’t understand…

    This is a serious problem. According to their pre-Court resumes, the current and recently-departed/retired justices, collectively, have a ton of experience with constitutional law issues, political issues, and criminal law and process; they dabble in sociology and economics. (At least, if you look at their backgrounds and their publishing, those are their collective skills.)

    And, collectively, they have zero technical degrees and credentials, zero experience with the technology industry, and zero minutes of practice experience with patent law and licensing. They’re being asked to resolve disputes that involve licensing of patents for technical inventions that form the backbone of the technology industry.

    It’s like asking an ER doctor to fix an airplane. ER docs are talented people in a selected domain, maybe a pretty wide domain – but the knowledge and skills aren’t transmutable.

  2. B September 19, 2018 10:40 am

    The eBay decision makes some of the language in 35 U.S.C. s271(e)(3)superfluous, and appears to write out most of 35 U.S.C. s271(e)(4).

  3. Josh Malone September 19, 2018 11:04 am

    The problem is the USPTO and patent attorneys are lying to inventors. Congress as well. This error appears prominently on the face of every patent. We have petitioned the PTO to correct this error. If the American people are told the truth, they will demand action by Congress. https://bit.ly/2QJAgYr

  4. American Cowboy September 19, 2018 11:10 am

    Gene, of course you are right that eBay was a mistake. But, jeeper it has been 12 years since they dropped that one. Why hasn’t the bar lobbied for a legislative fix. Scotus got away with their ruling because it said “To the contrary, the Patent Act expressly provides that injunctions “may” issue “in accordance with the principles of equity. 35 U. S. C. §283.”

    Why not amend the statute to say something like “injunctions will issue except in extraordinary cases where the public interest strongly indicates that it should not.”?

  5. B September 19, 2018 12:34 pm

    @ Cowboy “Why not amend the statute to say something like “injunctions will issue except in extraordinary cases where the public interest strongly indicates that it should not.”?

    How about “injunctions will issue except in extraordinary cases where the public interest strongly indicates that it should not, and dammit, we mean it!!!!!.”?

    Respectfully, “may” means may.” “May” doesn’t mean “never.”

    I get your drift, but we can’t have the SCOTUS rewriting the patent laws because they think they know better

  6. valuationguy September 19, 2018 2:42 pm

    Cowboy….the patent bar has a very material BENEFIT from Ebay in that it ensures continued litigation over patents and damages rather than effectively FORCING a settlement on the infringing party.

    Similarly….the legislation which prevented patent owners from suing GROUPS of infringers in one suit passed because it help the patent bar suck down more fees from patent owners.

    Even the AIA helped to perpetuate disputes by increasing the dual track of IPRs and district court invalidations…and with the AIA rules written so nebulous (with alot of blanks for the PTO to fill in)…it guaranteed ALOT of litigation going forward.

    All of this is mixed in with the rise of contingency fee lawyering in the patent litigation area…which DOES increase access to the courts for the little guys….but generally serves to grow the litigation industry overall as it increases the # of patent lawyers needed (allowing the “best” lawyer to set ridiculously high hourly fees for their non-contingency corporate clients….which then set the hourly fee bar for all those beneath them.)

    While the subset of lawyers who are still somewhat idealistic (or whose entire practice support only one side of the field…i.e. patent owners) will complain….those who know the score will never piss in their own pig trough by lobbying for rules which hurt their wallets.

    Follow the money…..always.

  7. Anon September 19, 2018 3:24 pm

    Thank you Gene for a well written article that both reflects the aged (and decrepit) Supreme Court intrusion into statutory law and perhaps the more important current (ongoing) misperceptions of attorneys as to some “infallibility” of the Supreme Court.

    On a recent thread, a poster with the handle of “in-house counsel” was “going to lose it” based on an improper elevation of the Supreme Court – as reflected in a “get over it already” attitude.

    I have posited that such is not only a legally improper attitude, but also (depending on one’s state attorney oath), an unethical attitude.

    With the single (and still arguable) exception of the Commonwealth of Massachusetts, I have yet to see a state attorney oath that requires an attorney to place the Constitution first, above each (and every) branch of the US government.

    This means that if the Supreme Court has screwed the pooch, we as attorneys are ethically obligated to point this out and to NOT merely accept the Court (as if the Court were itself above the Constitution).

    Thus, it is MORE (and not less) if these types of articles that are called for – regardless of if the Supreme Court’s mangling of patent law was yesterday, a dozen years ago, or even back to their subtle twisting after the Act of 1952.

    I have also put forth an even more forceful answer (jurisdiction stripping) to the apparent disregard by the Court of its own duty to act as limited by that document (instead of some sense that they may deign to change the document “by changing their interpretation.”

    Several of our founding fathers were extremely leery of a “too-powerful” Court — and with excellent reason. Their trepidation is reflected BOTH in the actions of the Court, and in the over-indulgence of those actions by the bar.

  8. Anon September 19, 2018 3:31 pm

    Fourth patagraph should read:

    that does NOT require an attorney to place the Constitution first

  9. Judge Rich's Ghost September 19, 2018 4:57 pm

    Here’s a good article by Michel and Dowd that analyzes the “errors of eBay.” https://www.criterioninnovation.com/articles/understanding-the-errors-of-ebay.pdf

  10. BP September 19, 2018 5:27 pm

    A notice provision based on 17 USC 115(b)(1):
    Any person who wishes to obtain a compulsory license under this section shall, before or within thirty days after making, and before distributing any products or services of the patent claims, serve notice of intention to do so on the patent owner. If the registration or other public records of the Patent & Trademark Office do not identify the patent owner and include an address at which notice can be served, it shall be sufficient to file the notice of intention in the Patent & Trademark Office. The notice shall comply, in form, content, and manner of service, with requirements that the Register of Patents shall prescribe by regulation.

  11. Jason Lee September 19, 2018 5:50 pm

    @ Gene great post like always, im a fan. Its clear the SCOTUS is unqualified and have no experience ruling over patents. There is not one member out of the 9 that holds a patent. This is a great injustice to patent holders. Major changes need to happen ebay, AIA Act and the PTAB should all be scraped. I am dumbfounded that they let it get to this level. Americas global standings has fallen from 1st world wide to 12th. As it stands now there is no point getting a patent as its not worth the paper its written on.

  12. imthejediknight September 20, 2018 8:22 am

    A couple thoughts:
    1. Our judicial system should be and is designed so that non-experts can make informed, thoughtful judgments. Every area of law is specialized; that does not excuse participants in the legal system, including judges AND advocates, from the responsibility to clearly andplainly articulating the proper legal standard.
    2. The SCOTUS decision in eBay does not eliminate the possibility of permanent injunction, and the factors Gene has described above, such as the wasting of the exclusive right of a patent, would be relevant under the traditional test for permanent injunction.

  13. PatDad September 20, 2018 9:02 am

    Patents 101 teaches that a patent gives the owner the right to exclude others from practicing the claimed invention. Simple and straight forward. It is hard to understand how this can get messed up, and stay messed up for so long.
    The ability to collect damages for infringement (after the time and cost of trial and appeal) is, in effect, a non-negotiated license.

  14. Steve September 20, 2018 10:03 am

    Gene, good article, and excellent points. A few questions, What do you mean by a compulsory licensing system? If this were real estate, and someone were to continue to trespass on that, what rights could be exercised by the property owner, and can similar rights be exercised in like situations by a patent holder? Additionally, in like circumstances, how do remedies for patent holders, compare to those available for copyright holders?

  15. Anon September 20, 2018 11:24 am

    short answer, Steve: both trespass and copyright have been made to carry criminal analogs.

    Can you imagine the Efficient Infringers reaction to creating a criminal analog for patents? (quite arguably an area far more in need of one in comparison to copyrights — utility versus expression serving as a basis for more severe treatment).

  16. Gene Quinn September 20, 2018 11:32 am

    imthejediknight @ 12

    The wasting of the asset should be relevant, but it isn’t under the 4 part injunction test. At least not how the courts apply the test. The wasting of the asset is precisely why injunctions were ordinarily granted routinely prior to eBay.

    Frankly, if the judges knew what they were doing the 4 part injunction test would always favor injunctions. Even the benefit to the public is absolutely in favor of an injunction. Strong rights are how the government entices people to come forward and disclose their inventions for the benefit of society. Today, with weak patents and no right to an injunction more and more are opting for trade secrets.

  17. Josh Malone September 20, 2018 12:50 pm

    A quibble with some of the comments here about “expertise”. I think that is completely wrong. The patent lawyers are the ones who created the lucrative public franchise scheme. For way too long the field was abandoned by Constitutional lawyers and left to the technocrats. What we need are more lawyers like Allyson Ho and more judges like Justice Gorsuch.

    It is not lack of expertise that cost us Ebay and Oil States. It was failure to counter the propaganda that patents stifle innovation and failure of appellate counsel and amici to raise common law arguments for 20-30 years.

    That finally began to change in 2017 (notwithstanding the courageous petitions by MCM and Cooper in 2015).

    Do we want “patent experts” deciding whether PTAB APJ’s violate the Appointments Clause? Goodness no!

    [my own opinion in my personal capacity]

  18. Gene Quinn September 20, 2018 1:17 pm

    Steve @14-

    I call it a compulsory licensing system because if the patent owner cannot get an injunction to order the infringer to stop infringing that means the patent owner is forced to license the infringer. Without a permanent injunction the infringer can continue doing what they are doing despite what the patent owner may want. That means the victorious patent owner no longer has the right to exclude the defendent adjudicated to have infringed a valid patent when no permanent injunction issues. That is akin to a compulsory license (i.e., forcing the patent owner to license rather than enjoying the right to exclude that the patent says it grants).

    Patent and copyright have very different rules. Copyrights last upwards of 100 years (sometimes much longer). There are fair use rights and the right to exclude is very different. On the other hand patents last for a small fraction of the time copyrights last. Given the short duration of a patent, particularly short in comparison to copyrights, the patent has historically enjoyed a very strong exclusive right without fair use.

    Without the right to exclude, and as patents move closer to being weak like copyrights, patent term should be extended in order to properly reward the innovator.

    A big problem with the way patent laws are moving is the net effect is to cause more innovators to keep inventions secret. Society does not win when that happens.

  19. Mike September 20, 2018 3:00 pm

    Jason Lee: “As it stands now there is no point getting a patent as its not worth the paper its written on.”

    What is ironic is that the very paper on a granted patent states:

    “[T]his U.S. Patent Grants to the person(s) having title to this patent
    THE RIGHT TO EXCLUDE OTHERS from making, using, offering for sale, or selling
    the invention throughout the [U.S.] or importing …,
    and if the invention is a process, of THE RIGHT TO EXCLUDE OTHERS from using, offering for sale, or selling throughout the [U.S.], or importing ….”

    Did the USPTO leave out an asterisk? Because, per SCOTUS’ law in Ebay, Congress, didn’t really mean “the right to exclude others” when they said “right to exclude others”.

    Either that, or SCOTUS is stepping beyond their authority. To my knowledge, the Constitution states that IT IS CONGRESS — NOT SCOTUS and NOT the Exexutive Branch / USPTO — who has the power to
    1) create law and
    2) “promote the progress of science and useful arts, by securing for limited times to authors and inventors THE EXCLUSIVE RIGHT to their respective writings and discoveries.” Article I, Section 8.

    Do these words no longer have meaning?
    – grant
    – right
    – exclude others
    – personal property

    There seems to be a disconnect between the branches of government here. Or perhaps Congress should begin expressing definitions of common words in the English language in the statute.

  20. Tim September 21, 2018 9:01 am

    I hope most of you on this site watched Tucker Carlson on Fox last night. The program was about GOOGLE taking over everything and becoming a monopoly and delving into the US election process and turn voters towards the Dems causes. Little was really mention of how Obama put Googlites into as many positions in our government as possible. I’m also sorry that he didn’t mention how a unanimous verdict of a Norfolk Court was overturned at the Appeals Court by Judges Mayer and Wallach “Vringo VS IP Internet”. And how Vringo went all the way to SCOTUS to fight them and how the case wasn’t even looked at!

  21. American Cowboy September 21, 2018 2:49 pm

    On the compulsory license issue, I will reiterate a point I made before: The “licensee” is a willful infringer: every defense he/she raised was a loser and yet he/she still wants to infringe.

    If the Court is going to allow that infringement to continue, they must make the royalty equal to the willful infringement damages, namely treble damages, and an award of the patentee’s attorneys fees for any fees the patentee may incur if it needs to coerce the payment in the treble damages awarded by the courts.

    Treble damages means whatever the per-infringement damages found before judgment must get promptly paid three times over for each additional one of the infringements the defendant chooses to continue to do.

  22. Josh Malone September 22, 2018 12:09 pm

    Great point by American Cowboy. How does the idea of a “running royalty” even fit in our legal system? What is the form of the order that can compel two parties to enter into such an agreement? Is it a settlement agreement? How does a the court gain jurisdiction over future transactions?

    It seems like without an injunction and without an agreement, future sales are indeed willful infringement. The patentee should not consent. He should file a new suit every year and obtain a summary judgment for treble damages and attorney fees.

  23. Josh Malone September 22, 2018 12:48 pm

    Answer to my own question. Patentee litigates until he runs out of money (settles) or the patent expires. The court never has to deal with future infringement.

    Are there examples of judgments (not settlements) that actually dictate a running royalty on future sales? I am curious to understand the jurisdictional basis for such an order.

  24. staff September 24, 2018 12:01 pm

    ‘Patent rights are under attack and have been in modern times at least since the Supreme Court’s decision in eBay, Inc. v. MercExchange, LLC‘

    For us things are far worse. In our view eBay was the beginning of the end to the American patent system. Coupled with other subsequent disasters like AIA, Alice and many others, we no longer have any chance of ever commercializing our inventions, or even benefiting materially from them. Our bill we are drafting will restore our patent system and change that.

    We welcome the participation of all our friends in Congress and others who wish to restore it as we continue the work of forming our drafting cmtes and drafting our bill.

    For our position and the changes we advocate (the rest of the truth) to restore the patent system, or to join our effort, please visit us at https://aminventorsforjustice.wordpress.com/category/our-position/
    or, contact us at aifj@mail.com

  25. LazyCubicleMonkey September 26, 2018 9:34 pm

    While I hold no position on the particular ruling in question, I do take issue with the generalist court being un-equipped/unqualified to make these rulings. If the assumption is that patent (law) specialists always know what’s best, perhaps this is a valid point. But since the laws are written by Congresscritters who aren’t patent specialists either, then it doesn’t take a patent specialist to decode what the intended meaning of the law is. A patent specialist does have incentive/bias (conscious or unconscious) to strengthen the patent system, even if a balance is what’s required.

    On the flip side, if the Supreme Court is considered the final arbiter of law, then it’s easy to see how the Federal circuit is the one that strayed – since it’s mostly staffed by patent lawyers, it makes sense that they’re always pushing for stronger patent laws, regardless if that’s the result that was originally intended by Congress or not.

    If I’m way off, perhaps someone can go into a detailed debunking of: https://arstechnica.com/tech-policy/2012/09/how-a-rogue-appeals-court-wrecked-the-patent-system/ and see where it’s gone wrong?

  26. LazyCubicleMonkey September 26, 2018 9:46 pm

    To clarify further, I think that specialists (scientists/engineers/etc) in the field of the patent can make better rulings as far as the patent itself, but from the legal perspective, if a non-patent specialist congresscritter writes the law, why it it necessary for patent-law specialist to interpret it? Especially if they’re only beholden to their own precedent (if that)?

  27. B September 27, 2018 4:02 am

    @ LazyCubicleMonkey “To clarify further, I think that specialists (scientists/engineers/etc) in the field of the patent can make better rulings as far as the patent itself.”

    Have you seen the quality of decisions from the PTAB?

    “if a non-patent specialist congresscritter writes the law, why it it necessary for patent-law specialist to interpret it? Especially if they’re only beholden to their own precedent (if that)?”

    First, congresspeople themselves don’t write the law. For example, the 1952 patent act was mainly drafted by Giles Rich and P.J. Frederico.

    Also, statute trumps precedent or statute is worthless

  28. Anon September 27, 2018 7:24 am

    LCM,

    You are continuing to try to insert your own bias with a notion that “balance” is better than “strength.”

    May I suggest that you look into the concepts of inchoate right and Quid Pro Quo.

    Please realize that patents do not “act” like copyright and there is no notion of “Fair Use” that appears to be a (silent) factor in what you feel is a proper “balance.”

    Your “want” is simply not the appropriate baseline of the discussion.

Post a Comment

Respectfully add to the discussion.

Name *
Email *
Website

Our website uses cookies to provide you with a better experience. Read our privacy policy for more information.Accept and Close