“Despite the STRONGER Act seeking to overturn eBay, Congress at large has no desire to disturb this Supreme Court decision, and any bill that contains a provision overruling eBay cannot be enacted.”
Prior to the Supreme Court’s decision in eBay v. MercExchange, 547 US 388 (2006), it was fairly routine for a victorious patent owner who prevailed on a finding of infringement in a federal district court litigation to assume that a permanent injunction would issue to prevent ongoing infringement. After all, a patent is the grant of an exclusionary right to the patent owner by the federal government, and a permanent injunction would merely operate to allow the district court to retain jurisdiction over the matter it already adjudicated in the patent owner’s favor—should the infringing activity continue. Without a permanent injunction, a patent owner is forced to start afresh and file a new infringement action to remedy ongoing, recalcitrant infringement. With a permanent injunction, however, the patent owner can request expedited consideration by the district court to determine whether the one-time defendant was continuing to infringe despite the patent grant, despite losing an infringement action, and despite being ordered to stop infringing.
Decades of Precedent Die
The Supreme Court’s decision in eBay overturned the district courts’ practice of generally granting permanent injunctions on a finding of infringement and substantively changed the final result of a successful patent litigation for many, if not most, patent owners. In eBay, the Supreme Court determined that, in order to receive a permanent injunction in a patent litigation in federal district court, the victorious plaintiff must demonstrate that: (1) it has suffered an irreparable injury; (2) remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) the public interest would not be disserved by a permanent injunction. This four-factor test should be recognized as the familiar four-part test outlining the equitable considerations that are a prerequisite to the proper issuance of an injunction.
Requiring patent owners to satisfy the four-part equitable test prior to being granted an injunction changed decades of well-established precedent, and made little sense for most patent owners given the nature of the patent right itself being exclusive in nature, which by its very terms is prohibitory. Notwithstanding, the four-part test for the issuance of an injunction in patent cases is now the law of the land, and is uniformly applied in federal district courts throughout the United States. Therefore, it is now possible for a victorious patent owner in federal district court to ostensibly have an exclusive right issued by the federal government, and no effective remedy to enforce the exclusivity promised in an Article III federal court.
Enter, the ITC
In light of eBay, the U.S. International Trade Commission (ITC), which has always played a large role in patent litigation and enforcement strategies because of its statutory authority to issue exclusion orders and cease and desist orders, emerged as an important forum for patent owners. The ITC is an independent, nonpartisan, quasi-judicial federal agency that fulfills a range of trade-related mandates. One such mandate arises under Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, which requires the ITC to determine whether there is an unfair act in the importation of products into the United States, and/or subsequent sale of products in the United States. Section 337 defines the infringement of a patent, copyright, registered trademark or mask work to be such an unlawful act.
The ITC does not follow the Supreme Court’s precedent in eBay v. MercExchange, which interpreted Section 283 of the Patent Act, 35 U.S.C. § 283, and instead operates under Section 337 of the Tariff Act of 1930. It is important to understand that the ITC is not ignoring the Supreme Court, but rather the statutory charge of the ITC is decidedly different from that of a federal district court and the Supreme Court’s decision is simply not applicable. “The difference between exclusion orders granted under Section 337 and injunctions granted under the Patent Act, 35 U.S.C. § 283, follows ‘the long-standing principle that importation is treated differently than domestic activity.’” Spansion Inc. v. International Trade Commission, 629 F.3d 1331, 1359 (Fed. Cir. 2010). An ITC exclusion order, for all intents and purposes, is effectively a form of injunctive relief.
Unlike the patent laws, Section 337 is a trade statute that does not provide monetary damages. Its effectiveness relies entirely on the power to exclude unfair imports and the subsequent sale of unfairly imported products. The eBay decision, in contrast, involved federal district courts operating under a different statute entirely, which does authorize monetary damages and also specifically authorizes federal district courts to issue injunctions.
eBay is Incompatible with the ITC
The fact that monetary damages and injunctions are obtainable in federal district court and not at the ITC is precisely why the ITC should not fall within the eBay four-factor analytical structure. For example, the first eBay factor—irreparable harm—is generally defined by the courts as harm that cannot be recompensed financially. The very purpose of Section 337 is to ensure that domestic industries have an exclusionary remedy against infringement when the infringing party is overseas and, often, beyond the reach of U.S. courts. It is irrelevant to make a determination that the complainant has suffered “irreparable harm” as a condition of relief when the ITC has no authority in the first place to order the infringer to pay damages in lieu of exclusion or cessation. Moreover, the second and third eBay factors relating to remedies at law have no applicability to Section 337, because the purpose of Section 337 is to provide exclusionary relief when there may be no remedies available at law.
Finally, regarding the fourth eBay factor—public interest—Section 337 requires careful consideration of four enumerated public interest factors before any remedial measures can issue: the effect of any order on “the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers.” In contrast to district court, the ITC’s examination of the statutory public interest factors, and the required presidential review on national economic and policy grounds, provide a safeguard greater than the public interest considerations afforded by eBay.
Like it or Not, Overturning eBay is Not on the Table
Fundamentally, the ITC and the federal courts are charged with different responsibilities, which is why the eBay decision does not apply to decisions of the Commission. Whether eBay should be overruled and no longer applicable to federal court disputes is hotly debated, and a point on which we the authors disagree (stay tuned for more).
What is indisputable, however, is that despite the STRONGER Patents Act seeking to overturn eBay, Congress at large has no desire to disturb this Supreme Court decision and any bill that contains a provision overruling eBay cannot be enacted. Thus, the ITC will remain an important forum for at least some patent owners for the foreseeable future.