Page 119 - Intellectual Property Disputes

traditional principles of equity, in patent disputes no less than in other cases governed by such
standards." fn 32

In eBay, the applicability of a permanent injunction when the patent holder does not practice its patent
was addressed. Justice Clarence Thomas wrote in a unanimous decision that neither the district court nor
the court of appeals had appropriately applied traditional equitable principles to determine whether
MercExchange was entitled to a permanent injunction. Justice Thomas rejected the district court’s
suggestion that injunctions should not be granted when a patent holder is willing to license the patent
and is not practicing the patent itself because, in these cases, a patent holder would not suffer irreparable
harm without an injunction. For example, according to the Supreme Court, "some patent holders, such as
university researchers or self-made inventors," might be able to satisfy the four-factor test even though
they "might reasonably prefer to license their patents, rather than undertake efforts to secure the
financing necessary to bring their works to market themselves," and they should not be categorically
denied the opportunity to seek an injunction. Justice Thomas noted that "traditional equitable principles
do not permit such broad classifications." fn 33 The Supreme Court’s list of examples of patent owners
who might be able to satisfy the four-factor test without practicing the patented invention (university
researchers or self-made inventors) did not explicitly extend to patent holding companies.

The decision takes away what is often the most effective threat of nonpracticing entities that threaten
litigation to force parties to take licenses to patents the entities have acquired but do not themselves
practice. fn 34 Justice Anthony Kennedy’s concurring opinion targets the use of the threat of injunction
for "undue leverage" in licensing negotiations, when "an injunction may not serve the public interest." fn
35

The progeny of eBay establishes that the presumption of irreparable harm for a valid and infringed
patent, previously enjoyed by patent holders, likely has not survived. In analyzing the four factors,
courts have primarily focused on the first and second factors — irreparable harm and inadequacy of
monetary damages. When parties are direct competitors, courts are more likely to find irreparable harm
and inadequacy of monetary damages and, thus, will issue an injunction. Conversely, when the parties
do not compete, and, in particular, when the patent holder has a history of licensing the patent, courts
generally find that monetary damages are sufficient and, thus, will not issue an injunction. Courts that
deny injunctive relief do craft alternative remedies. The most common is an ongoing royalty, a royalty
based on future infringing sales.

In Paice, the Court of Appeals for the Federal Circuit affirmed the denial of permanent injunction
because (a) the patent owner "does not actually manufacture any goods, the court concluded that there
was no threat that Paice would lose name recognition or market share without an injunction," and (b)
"the adequacy of monetary damages was further bolstered, in the court’s opinion, by the fact that Paice

fn 32 Id.

fn 33 Id.

fn 34 Jessica Holzer, "Supreme Court Buries Patent Trolls," Forbes, May 16, 2006, www.forbes.com/2006/05/15/ebay-scotus-patent-
ruling-cx_jh_0516scotus.html. Nonpracticing entities are sometimes disparagingly referred to as patent trolls when they have acquired
patents for the sole purpose of compelling licenses through litigation or threats of litigation.

fn 35 ebay, 547 U.S. at 388.

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