Since the Supreme Court’s ruling in eBay v. MercExchange, permanent injunctions in patent infringement cases have issued in accordance with a four-factor equitable test.  One of the factors considers the presence of irreparable injury, which is harm not quantifiable or remediable as money damages.  For the factor to be satisfied – for an injunction to issue – it must be determined that damages associated with ongoing infringement are economically incalculable. This factor, unpopular as it may be among some observers, has regularly been pointed to by Courts as conclusive in their decisions to issue or deny injunctions.  Yet the factor is often analyzed only superficially, and even unpredictably.

Due to a lack of clarity about issues that render forward-looking damages quantifiable or not, Courts’ post-eBay analyses of irreparable harm have inconsistently addressed calculability.  As a result of this inconsistency, there has been significant uncertainty among litigants regarding the likelihood of injunction following a finding of infringement.  This was perhaps most visibly illustrated in the recent (and widely unexpected) denial of an injunction in the Apple v. Samsung matter.

EDITORIAL NOTE: The decision denying Apple’s permanent injunction was recently followed by the CAFC decision in Presidio that tilts the pendulum back toward the awarding of permanent injunctions when competitors are involved. Eric Guttag and I have communicated via e-mail about permanent injunctions. Guttag wrote the following article in 2006. I asked if I could republish it here and he agreed. Here is Guttag’s take on eBay v. MerchExchange.

Once upon a time, the view was that “methods of doing business” could not be patented.  That view changed forever with the 1998 case of State Street Bank & Trust Company v. Signature Financial Group Inc. [i]  In State Street, the Court of Appeals for the Federal Circuit (Federal Circuit) held there was no “business method” exception to patentability:  “Whether the [patent] claims are directed to subject matter within § 101 [ii] should not turn on whether the claimed subject matter does “business” instead of something else. [iii]

In certain quarters, the grant of patents on “business methods” has been increasingly viewed with alarm and concern.  One concern is that the holder of such patents could permanently enjoin such infringement, thus potentially increasing the bargaining position of the “business method” patent holder.  That concern is very real.  For example, in the “non-business method” patent context, the Federal Circuit held in the 1989 case of Richardson v. Suzuki Motor Company that, in view of the recognized “right to exclude” under the patent, “the general rule [is] that an injunction will issue when infringement has been adjudged, absent a sound reason for denying it.” [iv]

On Monday the United States District Court for the Northern District of California refused to issue a permanent injunction against Samsung’s continued infringement of Apple’s patents. That ruling was reached despite the fact that Apple’s patents withstood invalidity challenges from Samsung, despite the fact that Apple prevailed in the patent infringement litigation AND despite the fact that the district court found that Apple and Samsung were direct competitors. For my rant on the decision explaining why it was wrong and the damage done to the patent system by failure to grant permanent injunctions to victorious patentees who are competitors see No Permanent Injunction for Apple in Samsung Patent Battle.

On Wednesday, December 19, 2012, in a wholly unrelated case, but one that shares important factual similarity to the aforementioned Apple/Samsung matter, the United States Court of Appeals for the Federal Circuit determined that the United States Federal District Court for the Southern District of California abused its discretion when it refused to award a victorious patent plaintiff a permanent injunction where the patentee directly competes with the infringer. The case is Presidio Components v. American Technical Ceramics. The opinion was authored by Chief Judge Rader and joined by Judge Plager and Judge Wallach.

Perhaps this case will be a turning point, something of a Twisted Sister moment. You know — “we’re not gonna take it, no, we ain’t gonna take it, we’re not gonna take it anymore…” I sure hope so!

Yesterday, the Judge Koh of the United States District Court for the Northern District of California, San Jose Division, denied Apple’s request for a permanent injunction in their ongoing patent war over smartphones with Samsung. The denial of the injunction will allow Samsung to continue to sell devices found to infringe Apple’s patents.  See Order Denying Motion for Permanent Injunction.

This outcome is becoming all too commonplace ever since the United States Supreme Court issued its terribly damaging, misguided decision in eBay v. MercExchange. See Happy 5th Birthday eBay v. MerchExchange. Up until that decision a permanent injunction was nearly always granted to a victorious patent owner. That, of course, made perfect sense since the rights that are allegedly granted in a U.S. patent include THE RIGHT TO EXCLUDE!  I know it is bad form to yell like that, but it is mind boggling to me still to this day. How can the Justices of the Supreme Court who profess to know everything about everything simply not comprehend something as simple and straight forward as the EXPLICIT TERMS OF THE PATENT GRANT! There I go again. Yelling at those who are so poorly informed as the Supreme Court likely isn’t going to help. It is, however, rather cathartic!

In eBay the Supreme Court determined that the familiar principles of equity as applied to permanent injunctions should apply to disputes arising under the Patent Act, even though the patent right is itself a right to exclude.  The translation: the previously applied bright-line rule that resulted in permanent injunctions being issued as a matter of course was erased.  That makes sense to no one who has thoughtfully considered the issue. Anyone who disagrees with that comment is either (1) not being honest; (2) hasn’t really considered the issues and equities; or (3) has a vested interest that requires them to engage in intellectually dishonest reasoning. The only reason to get a patent is to exclude others.  That is why you pay so much money and why you spend so many years waiting for a patent — to exclude others. And what is an injunction? An injunction is only an order from a district court demanding that the loser (i.e., infringer) cease from ever doing the very thing that the patent says they cannot do.

Last week at the 6th Annual Patent Law Institute presented by the Practising Law Institute last week in New York City I found myself a little star struck; or maybe “surprised” is the right way to characterize it.  The term “All Star Panel” is thrown around too liberally in the CLE world and relative to programming at various annual meetings.  Having said that, the panel titled “Dialogue Between the Bench and Bar” was comprised of some of the biggest names in the industry, and they didn’t seem interested in pulling punches.  Nothing seemed sacred, at least in terms of topics, which lead to a lively and entertaining discussion that lasted 90 minutes without a single question from either the live audience or the webcast audience.

The panel that ended the first day of the program was moderated by Don Dunner of Finnegan, Henderson, who is the unofficial “Dean of Federal Circuit Advocates.”  I had the pleasure of interviewing Dunner nearly a year ago and always enjoy listening to his thoughts and soaking in his wisdom.  To his left was Chief Judge Randall Rader of the United States Court of Appeals for the Federal Circuit, and to Rader’s left was Seth Waxman former Solicitor General of the United States and now of Wilmer Hale.  To Dunner’s right was Judge William Young of the United States Federal District Court for the District of Massachusetts, and to Young’s right was John Whealan, currently of George Washington Law School and former USPTO Solicitor.

The discussion was lively, perhaps even explosive.  You could nearly see sparks fly when Chief Judge Rader continued to pepper Waxman with question after question about his opinion on the propriety of parties lobbying the White House in order to obtain a favorable amici brief from the Department of Justice.  Rader zeroed in on the slippery slope and obviously is not pleased with the mixing of law and politics, saying: “this is a cause for concern… Politics and law have a divide.”

Many will recall that back in March 2006, the much anticipated patent settlement between Research In Motion, Ltd. (RIM) and NTP, Inc. was finalized for $612.5 million.  In the five plus years since that settlement there has been a lot of talk about patent trolls, who are now more frequently referred to by the rather sanitized term “non-practicing entities.”  Numerous articles have been written about the plague of patent trolls and many attempts have been undertaken to whittle away at patent rights in an attempt to make it more difficult for non-practicing entities to monetize their patent rights. Meanwhile, practically every independent inventor now believes that they have an invention that some Mega-Giant company is infringing and which entitles them to tens of millions of dollars.  After all NTP was successful.

Indeed, over the years since that great NTP-RIM settlement there has been enormous focus on the $600+ million amount, and little on what lead to that settlement and the aftermath of that settlement, which has changed the patent law landscape.  In some corners when listening to inventors one might almost start to think that any small company with a patent could easily stand up and take on industry giants. This, after all, was the David and Goliath — NTP v. RIM, right? Not so fast.  First, the case was not as simple as it may have seemed. Second, for every David with a patent portfolio, there are numerous Goliaths defending their market shares vigorously. Third, thanks to judicial dislike of patent trolls all non-practicing entities have suffered.  In fact, it is now extremely difficult to obtain an injunction as a non-practicing entity.

As anyone who follows the United States Supreme Court knows, the Court has historically been extremely fond of taking important cases, with cutting edge issues, only to dodge the real issues and address some insignificant procedural or hyper-technical issue.  Such disappointment is all to frequent, so Supreme Court watchers are seldom surprised when the Court passes on an opportunity to breathe clarity into otherwise unsettled waters.  But what the Supreme Court did five years ago today in the eBay v. MercExchange case was far more sinister than merely refusing to address important issues of the day.  The Supreme Court decided to throw out long standing and well established Federal Circuit jurisprudence and offered little or nothing in its place.

According to research Patstats.org, which is an ongoing patent statistics project by the University of Houston Law Center, since the Supreme Court’s decision in eBay v. MercExchange (through April 11, 2011) there have been 131 cases where a permanent injunction has issued and 43 cases where a permanent injunction has been denied.  Some have tried to pass this off as not much of a departure from the practice prior to the Supreme Court’s decision.  Such a viewpoint is, however, not correct.  Prior to the Supreme Court’s decision it was virtually unheard of for a district court to deny a victorious plaintiff a permanent injunction in  patent infringement case.  So the Supreme Court’s decision in eBay v. MercExchange has been one that has significantly altered the patent litigation landscape and, therefore, is easily one of the most important Supreme Court patent cases in recent memory.

The January 17, 2011, edition of Fortune magazine has Chief Justice John Roberts on the cover.  Roberts is the Chief Justice of the United States Supreme Court, a Court now made up predominantly of conservatives by a 5 to 4 majority.  It is the contention of the author of the article on Roberts that the Roberts Court is the most pro-business Court the United States has ever seen.  If that is the case, which I am not at all sure is the case, it would have to mean that one can be “pro-business” while being “anti-patent,” which given the state of American manufacturing and the future of the U.S. economy seems questionable.

Of course, if you are anti-patent then you are anti-innovation because those who innovate are not the behemoths of industry, but rather start-up companies that absolutely require patents in order to attract funding, expand and create jobs.  Thus, given the hostility toward patents it is entirely accurate to characterize the Roberts Court as anti-innovation.  The Roberts Court increasingly puts hurdles in the way of high-tech job growth.  You see, it is easy for anyone to characterize the Supreme Court as “pro-business” because selecting a victor in a “business case” almost necessarily means that a business has been victorious.  But what business?  One that is likely to innovate, expand, create jobs and form new industry?  Or one that once innovated and expanded, but now finds themselves stagnant and laying off employees?

The latest edition of Fortune magazine has John Roberts, Chief Justice of the United States Supreme Court, on the cover. The Fortune cover proclaims that it will be taking “an unflinching look at the man who is presiding over the most pro-business court we have ever seen.” As I read that I couldn’t help but chuckle. Really!?!? The Roberts Court is the most pro-business court we have ever seen? I knew right away that this article couldn’t be about patents, or even mention patents, and I wondered how the article would treat the failure to get involved in the Chrysler bankruptcy, which fundamentally altered investors expectations in public companies beholden to unions. So how can it be that the Roberts Court, which has shown hostility toward innovators and contempt for patents that is unusual, is considered pro-business? On top of that, the Roberts Court seems poised to strike at the very heart of the patent right granted by the United States federal government; namely the presumption of validity. That sure doesn’t sound very pro-business to me.

I frequently ask myself why it is that patents continue to come under attack by those who want to pretend they are only a burden on society and provide no benefit.  Believing patents provide no benefit to society demonstrates a failure to understand fundamental aspects of the patent system, disclosure and publication of applications, as well as the basic economic reality that to innovate requires funding.  Innovation, particularly cutting edge innovation, requires quite a bit of funding, sometimes many millions or hundreds of millions of dollars of funding.  Where will that money come if there is no reasonable expectation of recouping the investment?  Free-riders are not innovators and policies that encourage free-riders at the expense of innovators are nonsensical.

Earlier today the United States Supreme Court granted certiorari in Microsoft Corporation v. i4i Limited Partnership, with Chief Justice John Roberts taking no part in the decision or petition. The Supreme Court did not request the views of the Solicitor General, choosing rather to accept the matter with no input from the United States government.  The decision to grant cert. comes only days after the United States Patent and Trademark Office refused to grant reexamination of the patent in question.

Microsoft had filed an ex parte reexamination request on the patent in question, US Patent No. 5,787,449. The ’449 patent exited reexamination unchanged. Microsoft then filed a second ex parte reexamination request, and it is this second request that was denied by the Patent Office on Wednesday, November 24, 2010. The denial of this second request means that the Patent Office did not believe there to be a substantial new question of patentability.

Japanese language version via WHDA Reexam Blog.

The sequence of events of In re Swanson is well known. A jury determined that the patent was valid and infringed. The trial court’s judgment based on the jury’s verdict was affirmed by the CAFC. The accused infringer then filed a reexamination request, and the PTO rejected the claims. The CAFC affirmed the rejection, despite having earlier found the claims to be valid – the CAFC reconciled these apparently contradictory results by noting that validity is a different issue at the PTO than it is in court. This surprising outcome in Swanson is one of the reasons that reexamination is so popular among accused infringers.

Judge James Cohn of the Southern District of Florida has now taken the Swanson approach one step further – in Flexiteek Americas v. PlasTEAK (Case No. 08-60996-civ-Cohn/Seltzer) he has withdrawn a permanent injunction on basis of an advisory action in a reexamination, which found the patent-in-suit to be invalid.

In news that has already spread across the Internet like a wildfire, Eastman Kodak Company has sued Apple, Inc., alleging that Apple infringes numerous Kodak patents associated with the iPhone, iPod Touch and various Mac computers. News reports also indicate that Kodak has sued Research in Motion (RIM), maker of the Blackberry. As yet I have not seen a copy of the complaint filed by Kodak against RIM, but courtesy of the Docket Report, the two complaints filed by Kodak against Apple in the United States Federal District Court for the Western District of New York appeared in my inbox this morning. As should be apparent to everyone, the Docket Report is a new advertiser on IPWatchdog.com, so you can take this with a grain of salt if you like, but the truth is the Docket Report is exceptionally detailed and shows up every morning with dozens of patent complaints and district court Orders. If you are trying to keep up with what is going on in the world of patent litigation it is an absolute must, and the best part is you can try it for free for a full month.

Returning to the matter at hand here, there is one thing that must be said immediately about Kodak suing Apple and RIM. Typically when large corporations sue other large corporations there is not all that much interest in taking the matter all the way through litigation to a court ordered disposition. Most times large companies sue each other for posturing purposes and to facilitate getting a better deal at the bargaining table. While there is some evidence to suggest that could be the case, with the presence of Kodak in any patent litigation one must stand up and take notice. Kodak was the defendant in the 15-year patent battle with Polaroid over instant camera technology. Kodak ultimately paid $925 million to Polaroid in 1991, and both Kodak and Polaroid spent several hundreds of millions of dollars in attorneys fees. So make no mistake, Kodak is no stranger to high stakes patent litigation. So pundits and observers can sit back and be thankful for a true heavyweight match of epic proportions could well be on the horizon and could well run for many years to come.

On December 21, 2009, I embarked upon identifying the top 10 patent stories of the decade, which ends as we usher in the new year.  The Top 10 Part 1 identified what I thought were in the bottom half of the top 10, and while any top 10 list is sure to be at least somewhat controversial, it seems as if the list hasn’t created too much of a stir, at least so far. Undoubtedly, once I set out the top 5 the real debating will begin as folks suggest what they would have preferred instead. Notwithstanding, I really cannot imagine any bigger stories than the top 5 below. Please also feel free (and I am sure you will) to point out things that I missed or clearly got wrong, at least in your opinion.

Without further ado, in descending order, here is Part 2 of my Top 10 Patent Related Stories of the Decade, with numbers 5 through 1. Up next, honorable mentions, which will be Part 3.

Microsoft has lived a charmed life in the “mega award” world of patent infringement litigation.  For example, Microsoft recently dodged a $357 million jury award bullet in Lucent Technologies, Inc. v. Gateway, Inc. But it now looks like Microsoft’s luck finally ran out.  In i4i Limited Partnership v. Microsoft Corp., Microsoft was tagged with:  (1) a jury award of $200 million in damages; (2) a district court award of an additional $40 million in enhanced damages for willful infringement; and (3) a permanent injunction against “selling, offering to sell, importing, or using copies of Word with the infringing custom XML editor” in the future.  All that Microsoft “won” on appeal was a very minor victory in changing the effective date of the injunction by three months to January 11, 2009.