Injunctions are better for innovation---only our evidence is comparative

The imposition of a liability rule for most non-practicing patentees may adversely affect entities that engage in innovation and utilize a business model that relies heavily on the right to exclude others, such as startups that have developed a new technology but have not yet brought a product to market.339 For many startups, the process of commercializing an invention is costly and complex, with uncertain prospects for success.340 Empirical researchers have found that many startup companies seek patents to secure rights to their inventions, particularly in the biotechnology and medical device industries,341 and the vast majority of startups that successfully secure venture capital financing have applied for patent protection.342 The effective loss of the right to exclude post-eBay may hinder these firms’ ability to subsequently commercialize their inventions.343 In addition, a liability rule may decrease the value of patents owned by PAEs and other non-practicing entities. By removing the threat of a permanent injunction, and thus the ability to potentially force infringing products off the market, eBay has “decrease[d] the incentives for potential licensees to seek a license rather than practice patents without permission.”344 The loss of the right to exclude erodes the patentee’s bargaining power and consequently may result in lower licensing rates.345 Indeed, this second-order effect is likely to have a much wider impact than injunction denials in litigation, as only a small fraction of patents are ever litigated, while many more are licensed.346