eBay v. MercExchange: Model or Monster? Sapna Kumar Law Foundation Professor of Law

Pre-eBay Landscape Early 2000s: Out of control Federal-Circuit CAFC created rigid, bright-line tests Form of judicial lawmaking violating the spirit of separation of powers Injunctions: CAFC test A permanent injunction will issue if patent is valid and infringed Denied only under “exceptional circumstances” and “in rare instances . . . to protect the public interest.” Curtailed district court power

eBay v. MercExchange District Court proceeding Federal Circuit (CAFC) MercExchange: NPE with business method patent that eBay violated Jury: found eBay infringed Judge: denied ME perm. injunction Federal Circuit (CAFC) Reverses, ordering injunction Reminds lower courts they are obligated to award injunctive relief

eBay (cont) Supreme Court: Traditional equitable test applies: (i) whether P would face irreparable injury if inj did not issue, (ii) whether P has an adequate remedy at law, (iii) whether granting the injunction is in the public interest, and (iv) whether the balance of the hardships tips in P’s favor. Reverses CAFC. No injunction should have issued.

Rationales for eBay Backlash against “patent exceptionalism” CAFC was overreaching its power through bright-line rules district courts have “considerable discretion” Justice Kennedy: Troll concerns Courts should be reluctant to grant NPEs injunctions

Must substantiate claims under 4-part Test Voda v. Cordis Corp. (Fed. Cir. 2008) Facts Dr. Voda invents new technology, grants exclusive license But: Voda is not practicing the patent Cordis infringes, Voda sues CAFC: affirms denial of perm. inj. Only harm is to exclusive licensee Monetary damages are enough

Willingness to license doesn’t bar injunction District courts: patent holder’s refusal to license supports inj. But reverse isn’t necessarily true Acumed LLC v. Stryker Corp. (Fed. Cir. 2008): "[a]dding a new competitor to the market may create an irreparable harm that the prior licenses did not."

Narrow injunctions okay Apple v. Samsung IV, 809 F3d 633 (Fed. Cir. 2015). Apple sought narrow injunction 30-day delay so Samsung could design around it Dct: No irreparable injury CAFC reverses Customers value patented features, Apple’s losses were hard to measure, 30-day delay minimized hardship

Must meet each factor of eBay test Nichia Corp v. Everlight America, 855 F.3d 1328 (Fed. Cir. 2017) “The movant must prove that it meets all four equitable factors.” Previously, many of us believed test was a “balancing test” CAFC converted it into a 4 element test, not clear why.

Empirical Study Gupta/ Kesan (unpublished) Drop in seeking injunctions 67% drop from practicing entities 93% drop from NPEs. Steep decline in injunction rate Preliminary: 1.79% (2000), 0.89% (2006), 0.25% (2012) Permanent: 1.96% (2000), 1.24% (2006), 0.23% (2012).

Impact on NPEs Small emp. study (C. Seaman) Average injunction grant rate of only 16% for NPEs. District courts heavily rely on Kennedy concurrence Use concurrence to justify not granting injunctions to NPEs

Have courts gone too far? Judge Reyna says yes Apple v. Samsung IV (Reyna conc.) CAFC warned courts to not "ignore the fundamental nature of patents as property rights granting the owner the right to exclude." “Yet, our recent cases have done precisely that, ignoring the right to exclude in determining whether to issue an injunction.”

Overruling eBay? Some legislation has been proposed in prior years STRONGER Patent Act would overrule eBay Unfortunately, it would also severely limit PTAB’s powers Democrat take-over of House makes reform unlikely

Model or Monster? Both. Model Monster eBay restores power back to district court judges Forced CAFC to follow common-law principles like other courts Monster Rigidly applied, injunctions are too difficult to get Kennedy’s concurrence given too much weight

Thank you! skumar@central.uh.edu My websites: http://kumar.ms http://www.law.uh.edu/faculty/ main.asp?PID=4715