Practitioners, academics and members of Congress are still debating the impact of the US Supreme Court’s 2006 ruling in eBay v. MercExchange, and what can — or should — be done to restore the presumptive right to an injunction in patent infringement suits.
Despite the passage of nearly 20 years since it was issued, experts are still arguing over the impact of the US Supreme Court’s 2006 decision in eBay v. MercExchange, which did away with the presumptive right to an injunction for plaintiffs in patent infringement suits. As the Senate mulls overriding the decision entirely via legislation (see here), stakeholders have continued to argue over whether eBay is good for the intellectual property space in a debate that has led to questions about whether the online auctioneer degrades the original purpose of patents themselves.
In taking away the presumptive right to an injunction once infringement is determined, the Supreme Court established a four-factor test, making relief more difficult to obtain. That means fewer injunctions are granted, and some infringers are allowed to continue infringing, critics argue.
Supporters, on the other hand, say that the decision has led to fewer injunctions for patent-assertion entities (PAEs), companies that purchase patents for the sole purpose of monetizing them via infringement litigation instead of through manufacturing, development and licensing.
— By the numbers —
An important argument between eBay’s supporters and critics is whether the number of injunctions has really gone down. According to research by Colorado College economist Kristina Acri — herself an eBay critic — they have plummeted since 2006.
Acri’s research found that the number of plaintiffs who sought injunctive relief in patent infringement cases fell by 66 percent for operating companies and 87 percent for PAEs. For preliminary injunctions, the rate fell by 48 percent for PAEs and 53 percent for operating companies.
That decrease could be chalked up to plaintiffs less willing to bear the expense of seeking injunctions now that they are less likely to be granted, Acri said.
Her research also outlined a significant decrease in the rate at which injunctive relief was granted for plaintiffs: a 91 percent drop for PAEs and a 61 percent drop for operating companies.
But eBay supporters don’t buy Acri’s arguments. In a Senate subcommittee hearing on the issue last month, Computer and Communications Industry Association Senior Counsel Joshua Landau called Acri’s research methodology into question, focusing on how she collected data.
“I don't know how trustworthy those numbers are,” he said at the hearing.
Landau argued instead that eBay has had no tangible impact on operating companies, really only hurting PAEs, which he described as “companies which create lawsuits instead of profits.”
— On the ground —
Skadden partner Bijal Vakil leaned towards Landau’s opinion, lauding eBay as a decision that has served as a check on patent litigation quality. If it were to be overturned, more injunctions could lead to a change in litigation strategy that could hurt operating companies, he told MLex.
“Knowing that a non-practicing entity is unable to secure an injunction in a patent case levels the playing field a bit, and to eliminate that safeguard will definitely cause us to reassess our litigation strategies,” Vakil said.
Not only would overturning eBay raise litigation costs, he said, but among his clients — mostly in the tech industry — it could hurt innovation.
“In the last 20 years, we've seen significant shifts in [artificial intelligence], self-driving cars, medical devices, and obviously in social media. But if tech companies are faced with the threat of an injunction in every patent case ... then that is going to increase the cost of every single patent case exponentially,” he said. “And that's going to come at the expense of those funds that could have been diverted towards innovation. I wholeheartedly believe that.”
Even beyond costs, the increased threat of injunctions could deter companies from innovating for fear of their progress being halted by the courts, Vakil said.
— Core meaning of patent rights —
But for Acri, the impact goes far beyond just a change in the number of injunctions, she told MLex. With no presumed right to an injunction comes weaker protections for patents overall and less incentive to innovate, she said.
“The greatest impact of the eBay decision is probably what we don't see, it's been the things that do not happen, the things that we actually cannot measure,” Acri said. “I think that eBay had a chilling effect on how much investment took place, and as a result, how many inventions were never developed, how many patents were never sought, and the amount of knowledge that was never shared with the world.”
The decision sent a signal to inventors, she said, that the old way of viewing patent rights as property rights was no more.
“A patent is supposed to be an exclusive right to use my innovation. But if infringement is allowed to continue — and then at some point in the future [the infringer is] allowed to pay me something determined by the court rather than the market — that's not really the investment that I was making when I started this process and came up with my innovation,” Acri said.
Kristen Osenga, a University of Richmond law professor and fellow eBay critic, made the same argument at last month’s Senate hearing. She likened the eBay decision to a law allowing squatters on your property. Where injunctions could previously evict the squatters with ease, eBay allows them to continue living on your property — infringing a patent — while only paying a fee.
— RESTORE Act —
Delaware Democratic Senator Chris Coons’ RESTORE Patent Rights Act would simply override the eBay decision and return the judicial norm to what it was before 2006. The bill has already garnered support from some fellow Democrats, and North Carolina Republican Senator Thom Tillis told MLex that he sees a lot of potential in the bill.
Coons and Tillis are the ranking member and chair, respectively, of the Senate Judiciary Subcommittee on Intellectual Property.
The bill has yet to be re-introduced in the 119th Congress, but Coons said last month he plans to pursue the concept in 2025.
To supporters like Acri, while the RESTORE Act won’t change the patent landscape overnight, it would move things in the right direction.
“I do think that expecting that my rights will be upheld in the court when they are infringed is probably a good thing,” she said. “Encourage investment, stimulate innovation and make sure that there's a fair market system for the exchange of ideas. It may be that my innovation is something that I can't commercialize, but I want to be compensated fairly when I sell it to you, right?”
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