The eBay Effect: A Change to Obtaining Injunctive Relief or ...


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The eBay Effect: A Change to Obtaining Injunctive Relief or ...

  1. 1. Injunctions After the Supreme Court’s Decision in the eBay case John T. Johnson, Esq. AIPLA IP Practice in Japan Committee Meeting Washington, D.C. October 17, 2006
  2. 2. Pre- eBay Injunction Standard <ul><li>Upon finding of infringement, courts will issue permanent injunctions absent exceptional circumstances warranting denial. </li></ul><ul><li>The “right to exclude recognized in a patent is but the essence of the concept of property” and by granting an injunction, such a right to exclude is given meaning and value. </li></ul><ul><li>“ From at least the early 19 th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.” (Justice Roberts’ in his concurring opinion in eBay ). </li></ul>
  3. 3. eBay Inc. v. MercExchange, LLC, 126 S.Ct. 1837 (May 15, 2006) <ul><li>United States Supreme Court concluded that injunctions are not automatic upon a finding of infringement. </li></ul><ul><li>A plaintiff in a patent infringement action seeking a permanent injunction must demonstrate: </li></ul><ul><li>(1) that it has suffered irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. </li></ul>
  4. 4. Irreparable Harm <ul><li>Party may no longer rely on presumption of irreparable harm with the right to exclude. </li></ul><ul><li>The Supreme Court in eBay cited Amoco Productions Co., 480 U.S. 531, 542 (1987), which held that such a presumption in the context of an injunction is contrary to equitable principles. </li></ul>
  5. 5. Irreparable Harm <ul><li>Was the accused infringer only selling a “component element” so that it did not inhibit the plaintiff patentee from marketing or selling its products to others? </li></ul><ul><li>Justice Kennedy’s concurring opinion: if a patented invention is but a small component, then “legal damages may well be sufficient to compensate for the infringement an injunction may not serve the public interest.” </li></ul>
  6. 6. Balance of the Hardships <ul><li>How widely disseminated is the accused product? </li></ul><ul><ul><li>Cost involved </li></ul></ul><ul><ul><li>Magnitude of task </li></ul></ul><ul><ul><li>Time involved </li></ul></ul><ul><li>The more commercially successful the accused infringer, the more likely this factor tips in the infringer’s favor as infringer is likely in a position to pay money damages. </li></ul>
  7. 7. Public Interest <ul><li>What impact will there be on collateral business if the accused infringer is shut down? </li></ul><ul><li>Impact on the consumer – price increases? </li></ul>
  8. 8. Post eBay Federal Circuit Decisions <ul><li>Abbot Labs v. Andrx Pharms. , 452 F.3d 1331 (Fed. Cir. June 22, 2006) </li></ul><ul><ul><li>Vacated a preliminary injunction, not a permanent injunction case. </li></ul></ul><ul><li>Int’l Rectifier Corp. v. IXYS Corp. </li></ul><ul><li>2006 U.S. App. LEXIS 18693 (Fed. Cir. July 14, 2006) (unpublished) </li></ul><ul><ul><li>On motion for stay of injunction pending appeal, reversed and remanded grant of permanent injunction by district court in light of eBay . </li></ul></ul><ul><ul><li>District Court’s ruling needs to be revisited in light of eBay. </li></ul></ul><ul><li>Monsanto Co. v. Scruggs , 2006 U.S. Dist. LEXIS 20914 (Fed. Cir. Aug. 16, 2006) </li></ul><ul><ul><li>Reversed and remanded grant of permanent injunction, holding the general rule that “courts will issue permanent injunctions against patent infringement absent exceptional circumstances” is no longer the law after eBay. </li></ul></ul><ul><ul><li>As a result of eBay , courts now have to consider the 4-part test for permanent injunctions in patent cases and reversed the traditional rule that the court issue permanent injunctions against infringement absent exceptional circumstances. </li></ul></ul>
  9. 9. Post eBay District Court Decisions <ul><li>Z4 Technologies Inc. v. Microsoft Corp. 434 F. Supp. 2d 437 (E.D. Tex. June 14, 2006 ) </li></ul><ul><ul><li>Denied permanent injunction after finding patent valid and willfully infringed. </li></ul></ul><ul><ul><li>Z4 failed on irreparable harm – it did not market the product – no presumption of harm found. </li></ul></ul><ul><ul><li>Z4 failed to convince court that $133 million plus additional royalties not adequate remedy. </li></ul></ul><ul><li>Finisar Corp. v. The DirecTV Group Inc. </li></ul><ul><li>1:05-cv-264 (Docket No. 333) (E.D. Tex. July 7, 2006) </li></ul><ul><ul><li>Denied permanent injunction in favor of a compulsory license fee $1.60/set-top box payable by DirecTV until patent expires in 2012. </li></ul></ul><ul><ul><li>Finisar also awarded $100 million in damages. </li></ul></ul><ul><li>Paice LLC v. Toyota Motor Corp. </li></ul><ul><li>2:04-cv-211 (Docket No. 227) (E.D. Tex. August 16, 2006) </li></ul><ul><ul><li>Denied permanent injunction of Prius automobile in favor of reasonable royalty. </li></ul></ul><ul><ul><li>Paice does not manufacture or sell any vehicles; set up for licensing. </li></ul></ul>
  10. 10. Post eBay District Court Decisions <ul><li>Christiana Industries Inc. v. Empire Electronics Inc. </li></ul><ul><li>2:06-cv-12568 (E.D. Michigan August 4, 2006) </li></ul><ul><ul><li>Denied motion to vacate preliminary injunction ruling. </li></ul></ul><ul><ul><li>eBay decision relates to permanent injunctions only and not preliminary injunctions. </li></ul></ul><ul><li>TiVo Inc. v. Echostar Communications Corp. </li></ul><ul><li>2:04-cv-1 (Docket No. 776) (E.D. Texas August 17, 2006) </li></ul><ul><ul><li>TiVo was granted an injunction against EchoStar preventing it from installing or selling infringing DVR’s and ordering EchoStar to disable DVR functionality in the majority of its installed customer equipment. </li></ul></ul><ul><ul><li>the most compelling factor appears to be that TiVo and EchoStar compete head to head in the DVR marketplace. </li></ul></ul><ul><li>Canon Inc. v. GCC Int’l Ltd. </li></ul><ul><li>2006 WL 2516568 (S.D.N.Y. August 29, 2006) </li></ul><ul><ul><li>Granted patentee’s motion for a preliminary injunction against alleged infringer. </li></ul></ul><ul><ul><li>Money damages would not be an adequate remedy. </li></ul></ul>
  11. 11. Post eBay District Court Decisions <ul><li>Sanofi-Synthelabo v. Apotex </li></ul><ul><li>2006 WL 2516486 (S.D.N.Y. August 31, 2006) </li></ul><ul><ul><li>Grant of preliminary injunction prohibiting defendant from selling generic Plavix on appeal to Federal Circuit. </li></ul></ul><ul><li>Voda v. Cordis Corp. </li></ul><ul><li>2006 WL 2570614 (W.D. Oklahoma September 5, 2006) </li></ul><ul><ul><li>Denied motion for permanent injunction. </li></ul></ul><ul><li>Smith & Nephew, Inc. v. Synthes-Stratec, Inc. </li></ul><ul><li>2:02-cv-02873 (W.D. Tennessee September 28, 2006) </li></ul><ul><ul><li>Granted plaintiff’s permanent injunction on technology that helps bone fractures heal. </li></ul></ul><ul><ul><li>“ Smith & Nephews has demonstrated that it will suffer irreparable harm in the absence of a permanent injunction, harm that cannot be remedied adequately through the recovery of monetary damages.” </li></ul></ul>
  12. 12. eBay Aftermath? <ul><li>District courts have been denying motions for permanent injunction or granting stay motions to vacate permanent injunctions: </li></ul><ul><ul><li>When patentee never used or licensed the patent in the past, or never sold a competing product </li></ul></ul><ul><ul><li>Thus no irreparable harm, or damages relief would be adequate </li></ul></ul><ul><ul><ul><li>Especially if plaintiff previously attempted to license the patent prior to the lawsuit </li></ul></ul></ul><ul><ul><li>When parties are not direct competitors </li></ul></ul><ul><ul><ul><li>No lost market share can be established </li></ul></ul></ul>
  13. 13. eBay Aftermath? <ul><li>Limit on the ability of “patent trolls” to obtain large licensing fees from companies accused of practicing their inventions through contingency fee lawsuits, even though the troll never sold any products covering the claimed invention (or any products at all)? </li></ul>
  14. 14. eBay Aftermath? <ul><li>Have the universities and independent inventors been harmed by the eBay decision: </li></ul><ul><ul><li>Supreme Court in dicta stated that “some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves…[W]e see no basis for categorically denying them the opportunity to do so.” </li></ul></ul>
  15. 15. eBay Aftermath? <ul><li>What is the role, if any, of willfulness in the injunction analysis? </li></ul><ul><li>How will the irreparable harm analysis for permanent injunction differ from the analysis during a preliminary injunction? </li></ul><ul><li>How will an injunction denial impact how damages are calculated? </li></ul>