“If you look at all the opportunities to challenge the validity of patents through our system now, by the time a patent reaches a judgment of validity and infringement it has gone through so much of a crucible of survival that it’s as close to bulletproof as any other kind of asset we can imagine in our economy.” – Laurie Self, Qualcomm
Last weekend, The Federalist Society hosted a panel as part of its 2023 National Lawyers Convention featuring in-house counsel from Google and Qualcomm, as well as two federal judges and an academic, to discuss whether U.S. law around IP injunctions is promoting or harming markets for innovators and creators. Predictably, Google’s and Qualcomm’s counsel had starkly different perspectives on that topic.
The panel included Hon. John W. Holcomb, United States District Court, Central District of California; Professor Kristen Jakobsen Osenga, Austin E. Owen Research Scholar & Professor of Law, The University of Richmond School of Law; Laurie Self, Senior Vice President & Counsel, Government Affairs, Qualcomm; Laura Sheridan, Head of Patent Policy, Google; and was moderated by Hon. Ryan T. Holte, U.S. Court of Federal Claims and Jurist-In-Residence Professor of Law, The University of Akron School of Law.
Property or Public Franchise?
In her opening remarks, Sheridan shared her position that patents are not a property right, but a public franchise, as articulated by Justice Clarence Thomas in the Oil States case. This view of patents “should undergird our understanding of injunctions,” Sheridan explained. According to Sheridan’s data—possibly from this article by Josh Landau of Patent Progress—grants of injunctions post-eBay fell by only 4% for non-NPE plaintiffs. “eBay is working in a balanced, flexible way,” Sheridan said. Particularly in a patent system where, according to Sheridan’s data, up to half of software patents could be at least partially invalid, about half of all patents are granted to non-U.S. entities, and patent examiners have only about 19 hours of time to spend per patent, “mistakes can be made,” she said, and thus there needs to be a check on patent owners’ power. Sheridan added:
“Overall patenting activity has substantially increased since eBay was decided…. When it comes to encouraging R&D investment, right now, we’re focused on ensuring the U.S. remains a leader in critical areas like AI innovation…and a balanced approach to patent injunctions as we have today is one of the many ways our patent policy can support this leadership and growth.”
Qualcomm’s Laurie Self began her opening comments by noting that about the only thing she and Sheridan are agreed on is “where the intellectual property clause resides within the Constitution.” The “strong division of opinions” on these issues has to do with the difference among various companies’ business models and how they use patents, Self explained. From Qualcomm’s perspective, patents are a property right, and when you’re a company competing with countries like China, where the government subsidizes R&D, the reliance on private sector investment is crucial. “We fund our R&D exclusively through patent licenses,” Self said, noting that Qualcomm has 140,000 pending and issued patents that it licenses globally:
“That licensing ecosystem is very much dependent on the remedies that underlie our patent system. We view an injunction as an incentive that brings large companies to the negotiating table…. The only way you can encourage those companies to come voluntarily to the negotiating table to secure a license on patents…is if you have rules and remedies that encourage companies to voluntarily license, as opposed to essentially stealing, patented technology.”
Self also took issue with Sheridan’s data, saying the statistics she has seen show a dramatic impact on the ability to obtain injunctive relief. Judge Holte reiterated this later in the panel, asking Sheridan to respond to the numbers he has read, which show that district courts were granting injunctions 94% to 100% of the time before eBay, and in the ten-year period post-eBay, that number fell to about 72.5% across all plaintiffs and to 16% for NPEs. “That shows significant impact,” Holte commented. Sheridan acknowledged that “there is some variation depending on how the data is sliced and diced.”
But Sheridan disputed Self’s comment that the inability to obtain an injunction keeps parties from coming to the table. “It just makes bad business sense not to come to the table. We will pay more if there’s a litigation,” Sheridan said. She cited another study that she said shows the ongoing royalty rate a company will pay if they have an infringement finding is 70% more than what they could have reached before litigation, and in the Eastern District of Texas, it’s 76%. “You have every incentive to avoid that situation if at all possible because that doesn’t even include $5 million in lawyers’ fees,” she added.
A Judge’s Perspective
Judge Holcomb weighed in with a partial defense of the district court judge in the eBay case, Judge Jerome Friedman, who expressed in his ruling the concern that his court would be inundated with post-judgment proceedings if he entered a permanent injunction. While Holcomb said he did not agree with that as a valid reason to deny an injunction, and while he generally expressed support for granting injunctions, the limited resources district court judges have is a real concern that may impact judges’ decisions. Holcomb also noted that he has heard some fellow judges express reservations about having to enforce a permanent injunction with the full force of law. Repeating what he’d heard, Holcomb explained, “You need to be willing to find a violator of the injunction in contempt, and you need to be willing if necessary to put them in jail…. I think that informs the view of many district judges when they approach permanent injunctions.”
Professor Osenga for her part advocated for using different language to understand the practices that have evolved post-eBay. For example, the commonly-used term, “efficient infringement,” should be called “predatory infringement,” because eBay has essentially encouraged companies to adopt a predatory mindset. “If an injunction is on the table, you will probably think twice about infringing. If you aren’t afraid of an injunction, you might have an entirely different mindset, which is, ‘if I just infringe now, I can pay later.’” And there are two areas in particular where injunctions are not being granted, she added—patent licensing firms don’t get injunctions and patents that are standard essential don’t either. “So, if you fall into one of those two buckets, it then sets up this mental mindset that it might be better to for you to not negotiate, not take a license, and just go ahead and infringe now and pay later.”
During the Q&A, Sheridan said in response to a question from Professor F. Scott Kieff of the George Washington University Law School that, if we want to analogize patents to traditional property, like land, “we need to get them moving more in that direction. We can’t have a 50% error rate then.”
But Self again disagreed:
“I think this age-old criticism of patents that, because there’s the possibility of human error they’re not entitled to treatment as a property right, is a fundamental misunderstanding of how property rights were envisioned by our founders…. If you look at all the opportunities to challenge the validity of patents through our system now, by the time a patent reaches a judgment of validity and infringement it has gone through so much of a crucible of survival that it’s as close to bulletproof as any other kind of asset we can imagine in our economy.”