“With bipartisan support and presidential backing, the authority of district court judges to exercise their traditional equitable functions to protect inventors from predatory infringement should be restored—this year.”
On April 18, 2023, Senator Chris Coons (D-Del), Chairman of the Senate Subcommittee on Intellectual Property, and Senator Thom Tillis (R-NC), Ranking Member of the Subcommittee, convened a substantive bipartisan hearing to discuss how to address “Foreign Competitive Threats to American Innovation and Economic Leadership.” Significantly, Chairman Coons asked Mark Cohen, Director and Distinguished Senior Fellow at the Berkeley Center for Law & Technology, the about the impact of the Supreme Court’s decision in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), which Chairman Coons observed, “made it difficult to get injunction relief in terms of strengthening the fundamental rights of patent holders.” Director Cohen, who previously worked for over 15 years both at the U.S. Patent and Trademark Office (USPTO) and State Department in China on IP issues, responded that Chinese courts “automatically” grant injunctions at an astounding 95% rate, which puts U.S. companies at a “comparative disadvantage” in the global marketplace, since injunctions are “extremely valuable “to global resolution” of patent infringement disputes. Chairman Coons pressed Director Cohen further: “Would having a restored right to an injunction or an assumption to injunctive relief in the United States help balance that out?” Director Cohen replied with enthusiasm: “The availability of a preliminary injunction could certainly help in that regard.” We agree!
Preliminary Injunctions Enabled U.S. Inventors to Protect Their Inventions Until the 2006 eBay Decision
Intel was founded in 1968, Microsoft in 1975, Apple in 1976, Oracle in 1977, Cisco and Dell in 1984, Qualcomm in 1985, and Google in 1998. Each is now a world class technology company that benefited from the critical “growing space” essential to develop its products and build a customer base. They did so with the benefit of their rivals knowing that if they dared engage in patent infringement, federal courts could be relied on to enter preliminary injunctions to protect the status quo. As former Chief Judge of the U.S. Court of Appeals for the Federal Circuit, Paul Michel, has commented at numerous IPWatchdog conferences and elsewhere, prior to the eBay decision, after a preliminary injunction was entered by a district court, the underlying dispute almost always was settled by a commercial license agreement, avoiding the significant financial cost and business disruption of years of litigation. As a result of this predictable and reliable legal environment, innovative companies had the opportunity to scale, build, network from mutually beneficial business relationships, and eventually access public markets to obtain the vast amount of capital needed to expand internationally and weather inevitable economic downturns.
The eBay Decision Has Harmed U.S. Innovators and Innovation
Notably, the majority opinion in eBay holds that a federal court considering whether to issue an injunction in a patent infringement case must apply the four-factor test “traditionally employed by courts of equity.” Id at 390. Subsequently, however, the lower courts have bypassed balancing these factors and instead have concluded that the “public interest factor” cannot be satisfied, citing Justice Kennedy’s concurring view that “legal damages may well be sufficient to compensate for infringement.” Id. at 396-97. This self-described “observation,” without any record evidence, unfortunately has become the raison d’etre for denying independent inventors speedy justice and the public the benefits of innovation. Moreover, many of the multi-billion-dollar technology firms that argued as amici in eBay about the evils of “sophisticated professional patent litigants” ironically have assumed that role themselves. As a result, after eBay, independent inventors have not been able to depend on the federal courts to issue preliminary injunctions to stop what economists have identified as “efficient infringement” i.e., where a dominant firm deliberately elects to infringe a patent knowing the owner cannot afford to litigate. See Aaron Tilley, “When Apple Comes Calling, ‘It’s the Kiss of Death.’” Wall Street Journal (April 20, 2023). A March 31, 2023, report, prepared at the request of the Senate Judiciary Committee by the Administrative Conference of the United States (ACUS), characterized the cost of patent litigation today as “bracing.” In support, the ACUS cited the most recent American Intellectual Property Law Association Report of the Economic Survey 79 (2021), showing that, from 2012 to 2020, litigants spent a median of $300,000 to $400,000 per side to litigate a patent case just to claim construction, before significant discovery, expert reports, and trial—even when less than $1 million was at risk. When $25 million or more was at stake, litigation costs for each side for the same period ran $2.125-$3 million or approximately 8.5%-12% of the amount at risk. The ACUS Report also cited a 2019 academic study concluding that of the mere 4.25% of patent cases litigated through trial during 2005-2010, it was “noteworthy that 55% of (those) cases resulted in damage awards of less than $1 million and 75% of such cases involved awards of less than $10 million.” Another academic study reported that from 2019 to 2021, damage awards did not exceed $15 million. Therefore, it is easy to see why “efficient infringement” is a rational and potentially lucrative business strategy for a company with deep pockets; but it is indeed ironic that such unjust conduct has been fueled by the Supreme Court’s failure in eBay to appreciate the reality that obtaining damages is a very remote, if not illusory, remedy for patent infringement.
President Biden and Key Republican Congressional Leaders Have Touted the Importance of Incumbent Innovators
A January 11, 2023, Wall Street Journal op-ed titled “Republicans and Democrats, Unite Against Big Tech Abuses” observed: “The next generation of great American companies shouldn’t be smothered by the dominant incumbents before they have a chance to get off the ground.” The author of this article is the President of the United States, Joe Biden. Many prominent Republicans, including Senators Charles Grassley (R-IA), John Cornyn (R-TX), Tom Cotton (R-AR) and Marsha Blackburn (R-TN), have spoken with passion about the importance of small business innovation in the continued success of our economy and competitiveness. Congressman Jim Jordan (R-OH), the new Chair of the House Judiciary Committee, is certainly no fan of “Big Tech” and several of his Committee members have small business backgrounds, including Congressman Tom Massie (R-KY), an independent inventor and owner of numerous patents.
A Simple, Bipartisan Fix is at Hand
Therefore, a bipartisan, one-sentence bill should be introduced in the House and Senate Judiciary Committees that states: “Where any person or entity induces infringement of a U.S. patent, irreparable harm will be presumed to support issuance of a preliminary injunction where the plaintiff can establish: (1) it will suffer irreparable harm, in the absence of such relief; (2) the balance of hardships favors such relief; and (3) the public interest will be harmed if injunctive relief is not granted.” The title would be: “The Innovation Restoration Act of 2023.”
This statute would simply be a restatement of the “traditional “equitable factor test and retains the burden of proof on the patent owner seeking a preliminary injunction. But what about so-called “trolls” or opportunistic foreign litigants? A federal district court has ample authority to ascertain whether a plaintiff satisfies that “public interest” requirement, among which relevant factors may be whether the patent holder is a U.S. citizen or entity and the likelihood the patent is or can be readily reduced to practice and benefit the public.
With bipartisan support and presidential backing, the authority of district court judges to exercise their traditional equitable functions to protect inventors from predatory infringement should be restored—this year. As recent testimony before the Senate IP Subcommittee, building on a March 8, 2023, hearing before the House Subcommittee on Courts, Intellectual Property, and the Internet, evidenced, time is of the essence.
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