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Ebay Slidecast Seminar Ebay Slidecast Seminar Presentation Transcript

  • Patent Injunctions Two Years After eBay Massachusetts Continuing Legal Education 2008 Intellectual Property Conference June 18 2008 Lee Gesmer Gesmer Updegrove LLP
    • gesmer.com/mcleseminar
    • Continental Paper
    • (1908)
    • never used
    • never licensed
    • “non-practicing entity” (NPE)
    • Supreme Court :
    • no obligation to make use or vend the invention
    • patent grant is right to exclude others from making, using or vending
    • Carbice Corp (USSC 1931 ):
    • "the [patent] owner can, of course, prohibit entirely the mfg., sale, or use of [the invention]
    • Harford-Empire (USSC 1945):
    • set price for use by others
    • use and refuse to license
    • neither use nor license
    • U.S. Line (USSC 1948):
    • "a patent confers a monopoly … so this court decided in Paper Bag "
    • Zenith Radio (USSC 1969)
    • "The heart of [legal monopoly]…is legal monopoly is the right to invoke the State's power to prevent others from utilizing his discovery without his consent"
    • MercExchange v. eBay (E.D. Va)
    • Patent 5,845,265:
    • “ Consignment nodes”
    • Thomas G. Woolston
    • Filed: November 7, 1995
    • “ What is claimed is:
    • 1. A system for presenting a data record of a good for sale to a market for goods, said market for goods having an interface to a wide area communication network for presenting and offering goods for sale to a purchaser, …”
  •  
  •  
    • District Court :
    • Lack of commercial activity
    • willingness to license
    • business method patent
    • permanent injunction denied
    • Federal Circuit :
    • right to exclude is "essence" of patent property right
    • General Rule :
    • Permanent injunction issues, except in " rare instances "
    • case must be " exceptional to justify the denial of a permanent injunction"
    • "practice" = irrelevant
    • eBay v. MercExchange , 547 U.S. 1015 (May 15, 2006)
    • U.S. Const. Art. I,
    • §8,cl. 8:
    • "The Congress shall have power to:
    • "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"
    • 35 U.S.C. 261 :
    • “ patents shall have the attributes of personal property ”
  • *
    • 35 U.S.C. 154(a)(1) :
    • "the right to exclude others from using, offering for sale or selling throughout the United States"
    • but …
    • 35 U.S.C. 283:
    • "courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity …
    • . . .to prevent the violation of any right secured by patent, on such terms as the court deems reasonable ."
    • Justice Thomas :
    • “ right to exclude” distinct from “provision of remedies”
    • Four-factor test:
    • plaintiff must prove :
    • irreparable harm
    • remedies at law inadequate
    • equity warranted considering balance of hardships; and
    • public interest not disserved
    • no categorical rule for nonpracticing patentees, but :
    • university researcher
    • self-made inventors
    • Thomas:
    • “we hold only that”
    • “equitable discretion”
    • “traditional principles of equity”
    • Roberts (Scalia, Ginsburg) :
    • injunctive relief in vast majority of cases
    • Court is not “writing on a completely clean slate”
    • “a page of history is worth a volume of logic”
    • Kennedy (Stevens, Souter, Breyer) :
    • “ right to exclude does not dictate the remedy”
    • “ nature of the patent and the economic function of the patent holder”
    • "new era" of patent holding companies
    • “ vagueness and suspect” of business method patents
    • small component
    • leverage/bargaining tool
    • experience since eBay
  •  
  •  
    • (1)
    • z4 v. Microsoft (EDtTx 2006, Davis)
    • Windows XP, 2000 activation codes
    • willful infringement, enhanced damages
    • eBay :
    • “ plaintiff must prove:” irreparable harm …
    • Judge Davis :
    • after eBay, irreparable harm not presumed
    • permanent injunction denied
    • reasonable royalty imposed for past infringement used for ongoing royalty
    • factors :
    • z4 licensor, not competitor
    • small component
    • no obstacle to z4 licensing to others
    • MS "parade of horribles"-
    • software redesign
    • re-releases
    • product delays
    • piracy
    • industry wide ripple effect/OEMs
    • (2)
    • Finisar v. DirectTV (EDtTx 2006, Clark)
    • willful infringement
    • enhanced damages
    • licensor, not competitor
    • permanent inj. denied
    • $1.60 per set top box
    • "it is anticipated that, as sophisticated entities with experience in licensing agreements, the parties may wish to agree to more comprehensive or convenient terms"
    • (3)
    • Paice v. Toyota (EDtTx 2006)
    • hybrid drive trains
    • Prius II, Highlander Lexus RH400
    • irreparable harm not presumed
    • NPE
    • small component
    • brand name recognition
    • market share
    • post-trial offer to license
    • harm to dealers and suppliers
    • harm to "burgeoning hybrid market"
    • Holding :
    • permanent injunction denied
    • - "ongoing royalty"
    • = $25/vehicle
    • (4)
    • Paice v. Toyota -
    • CAFC decision on appeal (Oct. 2007):
    • jury trial?
    • on remand: negotiate before court-ordered license
    • ongoing royalty rate
    • Judge Rader :
    • remand to parties, or
    • obtain parties’consent
    • ongoing royalty
    • = compulsory license
    • “ Pre-suit and post-judgment acts of infringement are distinct, and may warrant different royalty rates given the change in the parties’ legal relationship and other factors”
    • (5)
    • MercExchange on remand to E.D. Va. 2007
    • permanent injunction denied a second time
    • finding of willfulness not dispositive
    • willingness to license significant factor
    • obtained licenses through threat of litigation
    • didn’t seek preliminary injunction
    • business method patent
    • if money is all it seeks, money is sufficient remedy
    • PTO reexam "impacts the equitable calculus"
    • no B/M "second look" by PTO
    • (6,7)
    • Visto v. Seven Networks (EDtTX 2006, Ward)
    • Brooktrout v. Eicon (EDtTX 2007, Ward)
  •  
  •  
    • fact parties are direct competitors weighs heavily
    • "intellectual property enjoys its highest value when … asserted against a direct competitor in plaintiff’s market"
    • “right to exclude is the very essence of the intellectual property at issue”
    • Other factors :
    • goodwill
    • potential revenues
    • market share
    • damages,
    • reasonable/precision
    • (8)
    • Akamai Technologies v. Limelight Networks (D. Mass, Zobel)
  •  
    • Graphic
  •  
    • Akamai:
    • direct competitors
    • customer relations
    • goodwill
    • Akamai has never licensed
    • damages/reasonable certainty
    • alternatives
    • Limelight:
    • Akamai prospered
    • restraint on monopoly power
    • preliminary injunction
    • non-willful
    • cost to poorer customers
    • job loss
    • What questions remain?
    • What have we learned?
    • ?
    • should patent holder be comp’d at higher / different rate if continued, willful infringment?
    • compulsory license rewards infringer?
    • eBay Hearings?
    • indemnification?
    • audit rights?
    • choice of law?
    • new products?
    • royalty escalations?
    • Alternative? -
    • no forced royalties
    • new suit
    • damages; trebling for willfulness; att. fees; interest
    • preliminary injunctions?
    • Copyright, trademark?
    • but we know …
    • "automatic injunction"
    • presumption of irreparable harm
    • non-practicing patentees face steep odds
    • “ patent holding companies ” face extremely steep odds
    • in NPE / non-competitive cases, threat of catastrophic result is greatly minimized, if not gone
  •  
    • easier to analyze and calculate risk
    • litigation strategies
    • Patent holder:
    • practice
    • compete
    • limited license deals
    • avoid “undue leverage”
    • reject settlement offers
    • name licensee in suit
    • ITC exclusion order?
    • accused infringer:
    • reasonable royalties
    • equities -
    • economic hardships
    • need for product
    • bait settlement offer (FRE 408?)
    • public interest (medical, safety, defense)
    • workaround
    • THANK YOU!
    • and remember :
    • gesmer.com/mcleseminar