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The Most Important Patent Case?

Dennis Crouch at Patently-O calls eBay v. MercExchange “the most important patent case for the past decade.” (I think that he means that it’s the most important patent case to come along in the last 10 years.) He writes that as an introduction to a detailed summary of all of the briefs filed in the case. Oral argument comes up week after next.

Is he right? More after the jump, and maybe my co-blogger Joe Miller will jump in with a reaction.

The case raises an interesting question: What’s the default remedy for patent infringement? If a prevailing patentee is presumptively entitled to enjoin the infringing defendant, what’s the strength of that presumption? Can a district judge refuse to grant an injunction, and if so, when is denying an injunction — and remitting the parties to damages — appropriate?

From a distance, it might appear that the two sides of the case have fundamentally different views of the nature of patents, the “rights” granted by patents, and the very concept of intellectual property. eBay (the defendant, arguing for a weaker presumption or no presumption at all) supposedly lines up behind an “unfair competition” view, which balances the interests of the rights holder against the interests of the accused infringer, and the interests of the public. MercExchange (the plaintiff, arguing for a strong presumption or a conclusive presumption), supposedly lines up in favor of a “property rights” view, which arrives under the banner of metaphoric absolutism and the “right to exlude.”

As I read Dennis’s summary of the parties’ briefs, however, they seem to agree on the fundamental structure of the law: district judges have discretion to grant or deny injunctions in patent cases, using the same multi-factor test in patent cases that apply in all other civil cases. This isn’t a case about the fundamental character of patents; instead, the parties divide over the frequency with which that multi-factor test tends to favor a prevailing plaintiff. MercExchange suggests that it almost always tilts in favor of injunctive relief. eBay argues that there is a broader class of cases in which it does not. In either sense, however, it seems that both parties are arguing that this is essentially a fact-specific inquiry, not a categorical one. To my mind, that proposition makes this a relatively easy case, since — however the Supreme Court treats the Federal Circuit in its opinion — it is highly unlikely that the Court will conclude that district courts should be bound categorically in patent cases. If I’m right, then it strikes me as equally unlikely that this is, or will be, the most important patent case of the last decade — or the next one.

4 thoughts on “The Most Important Patent Case?”

  1. I agree with Dennis’ assessment, rather than Mike’s.

    First, full disclosure: I signed on to Lemley’s briefs for a large group of lawprofs, both at the cert stage and at the merits stage.

    Second, some thoughts about the case and its importance: The fact that the Supreme Court itself put its 1908 decision in Continental Paper Bag on the table (by adding a question about it to the cert grant order) tells me that the Court is prepared to rethink deeply the fundamentals. These fundamentals, moreover, will affect all patent litigation and all license negotiations that takes place in its shadow (i.e., effectively all license negotiations).

    As for the degree of agreement between the parties, they are still far apart, even with their apparent similarity. eBay maintains that the exercise of equity that the Patent Act commends can, depending on market conditions, regularly lead to the conclusion that an injunction is not the appropriate remedy because money damages will be adequate. MercExchange, not surprisingly, argues for the Federal Circuit’s (far less fact-sensitive) approach, which mandates the grant of an injunction in all but the most extreme circumstances (e.g., public health would be directly threatened). Yes, they’re both fact-sensitive tests. But for MercExchange, the most important fact – indeed, virtually the only relevant fact – is the patentee’s statement, “I own a patent, and you infringe.”

    The same disagreement, played out between the larger groups of computer and software folk on one side and big pharma folk on the other, has killed the injunction reform portion of the draft Patent Act amendments currently bottled up in Rep. Lamar Smith’s House Judiciary i.p. subcommittee. The current version of the bill has no injunction reform anymore; it got dumped.

    In short, if the Supreme Court vacates and remands on the ground that a truly equity-driven approach to patent injunctions can lead to the denial of an injunction in more than only the most extreme circumstances, it will be a dramatic shift in the law. (Okay, that wasn’t so short.)

  2. Full disclosure: I signed Mark Lemley’s amicus brief on the merits. I do think that it should be clear that district court judges have the same discretion in patent cases that they have in ordinary civil cases where injunctive relief is appropriate.

    Some further thoughts:

    A ruling for eBay — whether or not the Court decides to adhere to Continental Paper Bag — would have the effect, at most of shifting a burden. As it stands now, the infringer has the burden of demonstrating the injunctive relief should not issue. A ruling for eBay would shift the burden to the patentee to demonstrate the injunctive relief is appropriate. Let’s assume that the Court places that burden on the patentee. How difficult will it be, in the ordinary case, for the patentee to meet that burden? My sense is: not very hard. In fact, that is essentially MercExchange’s position regarding the likelihood that injunctive relief should ordinarily issue. How frequently will infringers be able to defeat the patentee in that case? Not very often. Do those results likely change if the infringer carries the burden and the patentee does not? I doubt it.

    Perhaps shifting the burden shifts some important litigation costs from the infringer to the patentee and makes it cheaper or easier or both to defend patent litigation. If that were true, then this case would have an important bearing on the number and type of patent cases filed, and on when they are settled. Does the presumption regarding relief shift ex ante assessments regarding whether a case should be filed, or once filed, whether a case should be vigorously defended? That’s obviously an empirical question. I don’t know the answer. My intuition is “no,” but my intuition isn’t worth much, and maybe it’s worth nothing.

    Finally, it’s possible, as Joe argues, that strong presumptions one way or the other will have important consequences for the economics of settlement and licensing, and eventually for the economics of certain industries that depend on patent-related incentives and returns. Joe is clearly right that the fear of these consequences has split the technology community in the context of patent reform legislation. I’d love to have pointers to research that demonstrates that the anticipated effect is as substantial as the rhetoric makes it out to be.

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