On April 18, 2023, Senator Chris Coons (D-Del), Chairman of the Senate Intellectual Property Subcommittee and Senator Tom Tillis (R-N.C.) convened a substantive bi-partisan 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 Berkley Center for Law & Technology about the impact of the Supreme Court’s decision on eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). Chairman Coons observed that the ruling, “…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 USPTO and State Department in China on IP issues, responded that Chinese courts “automatically” grant injunction 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?” Mr. 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 upon 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 reported at numerous IP Watchdog Conferences, prior to the eBay decision, after a preliminary injunction was entered by 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, and network from mutually beneficial business relationships, eventually accessing 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
In the wake of the eBay decision, however, 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 and, even if the patent owner is successful, any damages likely will be no more than a “reasonable royalty.” As a business strategy, “efficient infringement” is rational. However, it is an unintended and unjust result of the Supreme Court’s failure to appreciate both the time and cost of patent litigation. At its core, the majority opinion 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.
President Biden And Key Republican Congressional Leaders Have Touted The Importance Of Incumbent Innovators
A January 12, 2023, Wall Street Journal op-ed titled 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 emphasized the importance of small business innovation in the continued success of our economy and its competitive nature. 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
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 owned, 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 is simply a restatement of the “traditional “equitable factor test, and retains the burden of proof on the patent owner seeking a preliminary injunction. It also implicitly recognizes the reality that obtaining damages is a very remote, if not illusory, remedy for patent infringement. But what about the so-called “trolls” or opportunistic foreign litigants? A district court has ample authority to ascertain whether the plaintiff satisfies that “public interest” requirement, relevant to which is whether the patent holder is a U.S. citizen or entity, and the likelihood that the patent is or can be readily reduced to practice.
As Chief Justice Roberts’ concurring opinion in eBay recognized, “protecting a right to exclude through monetary remedies that allow an infringer to use an invention against the patentee’s wishes” is “difficult.” Id. at 395 (emphasis in original). 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.
Matt Nuccio is Executive Board Member of United Inventors (UIA). Founded in 1969, UIA is a nonprofit organization providing educational resources and opportunities for the independent inventing community, including women and minority-owned firms. UIA is the largest inventor membership organization in the United States with over 27,000 members-in almost every congressional district. Mr. Nuccio is also the U.S. Representative to the International Federation of Inventors’ Associations, Founder and Chairman of Toy Hub, and President of Design Edge Inc.
Judge Susan G. Braden (Ret.) is the Jurist-In-Residence at the Center for Intellectual Property X Innovation Policy, Antonin Scalia Law School, George Mason University. She serves on UIA’s Board of Directors. In addition, Judge Braden is serving her third year as an appointed member of the USPTO’s Private Patent Advisory Committee. She also is a member of the Board of Directors of several private and non-profit organizations, including the Bayh-Dole Coalition, and is private arbitrator and mediator for both AAA and FEDARB.
The views of both authors reflect their personal opinions.