Addressing eBay is key- the Court must rule that injunctive relief is a remedy for patent assertion entities and non-competitors- it reinvigorates investment and strengthens growth and competitiveness

Chief Judge (Retired), U.S. Court of Appeals for the Federal Circuit.; † Founding Partner, Dowd PLLC.; Understanding the Errors of eBay; The Criterion Journal on Innovation; vol 2;

During the past ten years, eBay has caused significant mischief and damage to the patent system. Not surprisingly, the grant rate for injunctions has fallen significantly, with injunctions being denied in about one-third of cases.32 Patent values, as measured by public sales, plummeted during the last ten years compared to the ten-year period preceding eBay. This result decreases the value of intellectual property because it undermines the enforceability of the exclusive right and it makes it more expensive to obtain a remedy for adjudged infringement. eBay has also led to trial courts needing to address scenarios where the infringer continues its infringing activity after the finding of infringement. Absent an injunction, the infringer will generally have little incentive to cease infringing activity.33 Future law suits may need to be filed, requiring a patent owner to, again, carry the burden of proof and spend significant sums to vindicate his rights as if the earlier judgment never occurred.34 The Federal Circuit’s “general rule” also recognized the awkward, untenable position of setting royalties for the future without, of course, any expertise or data about future market forces and competitive circumstances. As one commentator observed, eBay “has placed courts in the license-drafting and license-administration businesses, a result they would probably eschew if they had foreseen the problems associated with it.”35 It is one thing to ask trial courts to ascertain past damages, but quite another to require trial courts to speculate about the future cost of infringement.36 Although some courts have issued awards for ongoing royalties for continuing infringement,37 “a comprehensive methodology for determining ongoing royalties has yet to emerge.”38 Indeed, is not every infringer who continues infringement after judgment a “willful” infringer? Importantly, eBay fails to recognize the uniqueness of patents as a property right and the role injunctions play in protecting that right. The Constitution itself defines the patent grant as a right to exclude. “Exclusivity is closely related to the fundamental nature of patents as property rights.”39 The uniqueness of the patent grant has been recognized in other contexts as well, including disputes over the ownership of patents.40 Perhaps the most ironic result of eBay is the creation of categorical rules—the very rules the Court cautioned against. The recent study by Christopher Seaman demonstrated that “district courts have applied eBay in a manner that awards permanent injunctions to operating companies who compete with the infringer in the vast majority of cases, while simultaneously denying them to most PAEs and non-competitors.”41 Indeed, according to his study, injunctions were granted in 84 percent of cases involving competitors, compared to only 21 percent of cases involving non-competitors.42 The grant rate was similarly dismal for so-called patent assertion entities: PAEs obtained in an injunction in only 16 percent of cases.43 This confirms other reports of disparate issuance of injunctions.44 This disparate result is incongruent with the patent right, however. The exclusive right granted by the patent is not conditioned on its owner practicing the patent to make a product.45 Patent law has long confirmed that a patent owner need not “practice the invention” in order to enjoy the benefits of the patent grant.46 Therefore, one’s status as a non-practicing patent owner (whether an NPE, a PAE, or a research university) should have no effect on enjoinability. eBay has had a profoundly negative effect on the enforceability of U.S. patents, including patents whose validity is beyond doubt. With the likelihood of an injunction severely diminished, patent infringers appear less willing to cease infringing activity. In contrast to U.S. practice, injunctions are routine in Germany and other European countries and becoming so in Asian nations, particularly China, for all technologies and all types of owners. Investment money is mobile and flows toward the high-value assets. eBay has crimped patent rights and thereby diminished investment incentives in the United States. The result: reduced research and development, less job creation, lower economic growth, and diminished American global competitiveness. This cannot be what the Supreme Court intended, but it is how the Kennedy concurrence is being implemented by most district courts that ignore the less forceful Roberts concurrence. The time has come for the Court, or at least the Federal Circuit, to rescue America from this folly.