3— Settlement and patent trolls: eBay’s key to court flexibility and lack of automatic injunctions enables settlements with non-practicing patentees (NPPs) that would otherwise prevent licensing.

The market penetration of the Prius makes it an important early success in commercializing and popularizing emissions reduction technologies. In the absence of eBay, this suite of district court patent infringement lawsuits targeting Toyota would be a serious threat to the positive environmental impact of the Prius. Instead, the Supreme Court’s decision on patent injunctions provides courts with the necessary flexibility to balance the interests of the NPP with the public interest.

The Paice district court decision to deny injunctive relief illustrates this new flexible approach to patent injunctions. In crafting an appropriate remedy, the court was able to consider the parties’ concerns, such as Paice’s licensing efforts and Toyota’s research and development costs. The court also weighed in on a fundamental patent damages question regarding the proportion of the vehicle represented by the components covered by the infringing claims. Systemic concerns like the impact of an injunction on related businesses in Toyota’s network of dealers and suppliers were addressed, and even policy issues such as reducing American dependence on foreign oil entered the analysis. Implementers of clean technologies have the freedom, under eBay, to have their concerns heard by the court and to submit public interest arguments relating to climate change. With regard to these considerations, the parties’ concerns can be heard fully, and the court can weigh more information in order to reach the right result.

Furthermore, an award of an ongoing royalty, permissible after the Federal Circuit Paice decision, is an additional remedial tool that district courts have at their disposal as an alternative to an injunction. With this equitable discretion, the district court can maintain a de facto technology transfer arrangement that has allowed the deployment of beneficial clean technologies. The court can set a reasonable price term for an arrangement in which the parties may be unwilling or unable to reach an agreement.

Not only do eBay and Paice improve the results of litigation; they may reduce the number of infringement actions brought by NPPs or bring early ends to such suits by encouraging parties to reach agreements on licensing. From the perspective of the NPPs, litigation may be a less attractive option. Permanent injunctions are much less likely, and NPPs’ biggest stick has been eliminated. Nevertheless, the possibility of a court-awarded ongoing royalty may provide new incentive for both clean tech implementers and NPPs to devote appropriate time and energy to negotiating their own licensing terms. The prospect of a court determining and imposing its own royalty rate on litigants, sua sponte, could provide a powerful incentive for the parties to settle out of court