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    • 1. Patent Injunctions Two Years After eBay Massachusetts Continuing Legal Education 2008 Intellectual Property Conference June 18 2008 Lee Gesmer Gesmer Updegrove LLP
    • 2.
      • gesmer.com/mcleseminar
    • 3.
      • Continental Paper
      • (1908)
    • 4.
      • never used
    • 5.
      • never licensed
    • 6.
      • “non-practicing entity” (NPE)
    • 7.
      • Supreme Court :
      • no obligation to make use or vend the invention
    • 8.
      • patent grant is right to exclude others from making, using or vending
    • 9.
      • Carbice Corp (USSC 1931 ):
      • "the [patent] owner can, of course, prohibit entirely the mfg., sale, or use of [the invention]
    • 10.
      • Harford-Empire (USSC 1945):
      • set price for use by others
      • use and refuse to license
      • neither use nor license
    • 11.
      • U.S. Line (USSC 1948):
      • "a patent confers a monopoly … so this court decided in Paper Bag "
    • 12.
      • 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"
    • 13.
      • MercExchange v. eBay (E.D. Va)
    • 14.
      • Patent 5,845,265:
      • “ Consignment nodes”
      • Thomas G. Woolston
      • Filed: November 7, 1995
    • 15.
      • “ 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, …”
    • 16.  
    • 17.  
    • 18.
      • District Court :
      • Lack of commercial activity
      • willingness to license
      • business method patent
    • 19.
      • permanent injunction denied
    • 20.
      • Federal Circuit :
      • right to exclude is "essence" of patent property right
    • 21.
      • General Rule :
      • Permanent injunction issues, except in " rare instances "
    • 22.
      • case must be " exceptional to justify the denial of a permanent injunction"
    • 23.
      • "practice" = irrelevant
    • 24.
      • eBay v. MercExchange , 547 U.S. 1015 (May 15, 2006)
    • 25.
      • U.S. Const. Art. I,
      • §8,cl. 8:
    • 26.
      • "The Congress shall have power to:
    • 27.
      • "promote the progress of science and useful arts, by securing for limited times to authors and inventors
    • 28.
      • … the exclusive right to their respective writings and discoveries"
    • 29.
      • 35 U.S.C. 261 :
      • “ patents shall have the attributes of personal property ”
    • 30. *
      • 35 U.S.C. 154(a)(1) :
      • "the right to exclude others from using, offering for sale or selling throughout the United States"
    • 31.
      • but …
    • 32.
      • 35 U.S.C. 283:
      • "courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity …
    • 33.
      • . . .to prevent the violation of any right secured by patent, on such terms as the court deems reasonable ."
    • 34.
      • Justice Thomas :
      • “ right to exclude” distinct from “provision of remedies”
    • 35.
      • Four-factor test:
    • 36.
      • plaintiff must prove :
      • irreparable harm
      • remedies at law inadequate
    • 37.
      • equity warranted considering balance of hardships; and
      • public interest not disserved
    • 38.
      • no categorical rule for nonpracticing patentees, but :
    • 39.
      • university researcher
      • self-made inventors
    • 40.
      • Thomas:
      • “we hold only that”
    • 41.
      • “equitable discretion”
    • 42.
      • “traditional principles of equity”
    • 43.
      • Roberts (Scalia, Ginsburg) :
      • injunctive relief in vast majority of cases
      • Court is not “writing on a completely clean slate”
    • 44.
      • “a page of history is worth a volume of logic”
    • 45.
      • Kennedy (Stevens, Souter, Breyer) :
      • “ right to exclude does not dictate the remedy”
    • 46.
      • “ nature of the patent and the economic function of the patent holder”
    • 47.
      • "new era" of patent holding companies
      • “ vagueness and suspect” of business method patents
    • 48.
      • small component
      • leverage/bargaining tool
    • 49.
      • experience since eBay
    • 50.  
    • 51.  
    • 52.
      • (1)
    • 53.
      • z4 v. Microsoft (EDtTx 2006, Davis)
    • 54.
      • Windows XP, 2000 activation codes
      • willful infringement, enhanced damages
    • 55.
      • eBay :
      • “ plaintiff must prove:” irreparable harm …
    • 56.
      • Judge Davis :
      • after eBay, irreparable harm not presumed
    • 57.
      • permanent injunction denied
      • reasonable royalty imposed for past infringement used for ongoing royalty
    • 58.
      • factors :
      • z4 licensor, not competitor
      • small component
      • no obstacle to z4 licensing to others
    • 59.
      • MS "parade of horribles"-
      • software redesign
      • re-releases
      • product delays
    • 60.
      • piracy
      • industry wide ripple effect/OEMs
    • 61.
      • (2)
    • 62.
      • Finisar v. DirectTV (EDtTx 2006, Clark)
    • 63.
      • willful infringement
      • enhanced damages
      • licensor, not competitor
      • permanent inj. denied
    • 64.
      • $1.60 per set top box
    • 65.
      • "it is anticipated that, as sophisticated entities with experience in licensing agreements, the parties may wish to agree to more comprehensive or convenient terms"
    • 66.
      • (3)
    • 67.
      • Paice v. Toyota (EDtTx 2006)
    • 68.
      • hybrid drive trains
      • Prius II, Highlander Lexus RH400
    • 69.
      • irreparable harm not presumed
      • NPE
      • small component
    • 70.
      • brand name recognition
      • market share
      • post-trial offer to license
    • 71.
      • harm to dealers and suppliers
      • harm to "burgeoning hybrid market"
    • 72.
      • Holding :
      • permanent injunction denied
      • - "ongoing royalty"
      • = $25/vehicle
    • 73.
      • (4)
    • 74.
      • Paice v. Toyota -
      • CAFC decision on appeal (Oct. 2007):
    • 75.
      • jury trial?
      • on remand: negotiate before court-ordered license
      • ongoing royalty rate
    • 76.
      • Judge Rader :
      • remand to parties, or
      • obtain parties’consent
    • 77.
      • ongoing royalty
      • = compulsory license
    • 78.
      • “ 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”
    • 79.
      • (5)
    • 80.
      • MercExchange on remand to E.D. Va. 2007
    • 81.
      • permanent injunction denied a second time
    • 82.
      • finding of willfulness not dispositive
      • willingness to license significant factor
    • 83.
      • obtained licenses through threat of litigation
      • didn’t seek preliminary injunction
      • business method patent
    • 84.
      • if money is all it seeks, money is sufficient remedy
      • PTO reexam "impacts the equitable calculus"
      • no B/M "second look" by PTO
    • 85.
      • (6,7)
    • 86.
      • Visto v. Seven Networks (EDtTX 2006, Ward)
      • Brooktrout v. Eicon (EDtTX 2007, Ward)
    • 87.  
    • 88.  
    • 89.
      • fact parties are direct competitors weighs heavily
    • 90.
      • "intellectual property enjoys its highest value when … asserted against a direct competitor in plaintiff’s market"
    • 91.
      • “right to exclude is the very essence of the intellectual property at issue”
    • 92.
      • Other factors :
      • goodwill
      • potential revenues
      • market share
      • damages,
      • reasonable/precision
    • 93.
      • (8)
    • 94.
      • Akamai Technologies v. Limelight Networks (D. Mass, Zobel)
    • 95.  
    • 96.
      • Graphic
    • 97.  
    • 98.
      • Akamai:
      • direct competitors
      • customer relations
      • goodwill
    • 99.
      • Akamai has never licensed
      • damages/reasonable certainty
      • alternatives
    • 100.
      • Limelight:
      • Akamai prospered
      • restraint on monopoly power
      • preliminary injunction
    • 101.
      • non-willful
      • cost to poorer customers
      • job loss
    • 102.
      • What questions remain?
      • What have we learned?
    • 103.
      • ?
    • 104.
      • should patent holder be comp’d at higher / different rate if continued, willful infringment?
    • 105.
      • compulsory license rewards infringer?
    • 106.
      • eBay Hearings?
    • 107.
      • indemnification?
      • audit rights?
      • choice of law?
      • new products?
      • royalty escalations?
    • 108.
      • Alternative? -
      • no forced royalties
      • new suit
      • damages; trebling for willfulness; att. fees; interest
    • 109.
      • preliminary injunctions?
    • 110.
      • Copyright, trademark?
    • 111.
      • but we know …
    • 112.
      • "automatic injunction"
    • 113.
      • presumption of irreparable harm
    • 114.
      • non-practicing patentees face steep odds
      • “ patent holding companies ” face extremely steep odds
    • 115.
      • in NPE / non-competitive cases, threat of catastrophic result is greatly minimized, if not gone
    • 116.  
    • 117.
      • easier to analyze and calculate risk
    • 118.
      • litigation strategies
    • 119.
      • Patent holder:
      • practice
      • compete
      • limited license deals
      • avoid “undue leverage”
    • 120.
      • reject settlement offers
      • name licensee in suit
      • ITC exclusion order?
    • 121.
      • accused infringer:
      • reasonable royalties
      • equities -
      • economic hardships
      • need for product
    • 122.
      • bait settlement offer (FRE 408?)
      • public interest (medical, safety, defense)
      • workaround
    • 123.
      • THANK YOU!
    • 124.
      • and remember :
      • gesmer.com/mcleseminar