Patent Injunctions

Patent injunctions are equitable remedies requiring satisfaction of traditional equity standards: TYPES OF PATENT INJUNCTIONS: (a) PERMANENT INJUNCTION: issued after final judgment of infringement; orders the defendant to stop making, using, selling, or importing the infringing product/process; may also order destruction of infringing inventory; the most powerful patent remedy; (b) PRELIMINARY INJUNCTION: issued during pendency of litigation; before final judgment; extraordinary remedy; requires higher immediate showing; (c) TEMPORARY RESTRAINING ORDER (TRO): emergency injunctive relief; very short duration; ex parte possible; EBAY v. MERCEXCHANGE (S.Ct. 2006): BEFORE EBAY: courts routinely granted permanent injunctions upon finding infringement; only extraordinary circumstances denied an injunction; EBAY HOLDING: the Court rejected the 'general rule' of automatic injunctions; patent cases must apply the traditional four-factor equity test: FOUR-FACTOR TEST: (1) IRREPARABLE HARM: the patent owner has suffered irreparable harm and would continue to suffer it absent injunction; irreparable harm is NOT PRESUMED from infringement (this reversed pre-eBay practice); (2) INADEQUACY OF LEGAL REMEDIES: remedies available at law (money damages) are inadequate to compensate for the injury; if damages adequately compensate, injunction inappropriate; (3) BALANCE OF HARDSHIPS: the balance of hardships between the parties favors an injunction; defendant's burden from injunction weighed against plaintiff's harm from continued infringement; (4) PUBLIC INTEREST: a permanent injunction would not disserve the public interest; medical devices; critical infrastructure; public health issues; STANDARD OF REVIEW: abuse of discretion for the decision to grant or deny; underlying factual findings reviewed for clear error; legal conclusions de novo.

Post-eBay, courts have developed clear patterns for when injunctions are granted: STRONG CASE FOR INJUNCTION — PRACTICING ENTITIES: direct competitors (patent owner and infringer compete in the same market); harm from continued infringement cannot be quantified (market share loss; price erosion; brand damage; customer relationship loss); the patented feature differentiates the patent owner's product; ongoing innovation requires patent protection to justify R&D investment; CASES WHERE INJUNCTIONS ARE TYPICALLY DENIED: (a) NPEs (NON-PRACTICING ENTITIES): a patent owner who does not practice the patent cannot suffer irreparable harm from continued infringement; money damages (ongoing royalty) adequately compensate; NPEs' business is licensing, not making; post-eBay, NPEs are rarely granted injunctions; (b) STANDARD-ESSENTIAL PATENTS (SEPs): the patent owner committed to license on FRAND terms; an injunction against a willing licensee would be inconsistent with the FRAND commitment; public interest weighs against injunctions on standards-related technology; (c) WHEN DAMAGES ADEQUATELY COMPENSATE: long history of licensing the patent; no competitive relationship between the parties; calculable harm; (d) MEDICAL DEVICES AND PUBLIC HEALTH: public interest weighs against injunctions when patients depend on the infringing device; FDA clearance issues; EBAY CONCURRENCES: Chief Justice Roberts: historical practice should inform equity analysis; Justice Kennedy: injunctions may be inappropriate for NPEs using patents as bargaining tools; ONGOING ROYALTY INSTEAD: when injunction is denied, courts often set an ongoing royalty for continued infringement; the ongoing royalty may be HIGHER than the pre-judgment reasonable royalty (the infringer's continued infringement after judgment is worse conduct).

Preliminary injunctions are extraordinary remedies requiring immediate demonstration of multiple factors: FOUR-FACTOR TEST (same framework as permanent injunction): courts apply the same four-factor eBay test for preliminary injunctions; BUT the standard for preliminary relief is applied MORE STRINGENTLY because the court has not yet heard the full case; PRELIMINARY INJUNCTION ADDITIONAL REQUIREMENTS: LIKELIHOOD OF SUCCESS ON THE MERITS: the patent owner must show it is likely to succeed at trial; includes both likelihood of infringement AND likelihood the patent will survive validity challenge; IMMEDIATE IRREPARABLE HARM: harm must be imminent, not speculative; the harm must be occurring NOW or about to occur; delay in seeking a preliminary injunction can defeat the showing of immediacy; EXPEDITED DISCOVERY: preliminary injunction motions are decided quickly; expedited discovery may be ordered; BOND REQUIREMENT: the court may require the patent owner to post a security bond to compensate the defendant if the injunction is wrongfully granted; HIGH THRESHOLD: preliminary injunctions in patent cases are rarely granted; courts are wary of granting relief before fully understanding the patent and accused product; WHEN PRELIMINARY INJUNCTIONS ARE MORE LIKELY: clear and direct infringement; the infringement is destroying the market before trial (irreversible market position loss); the patent's validity is beyond reasonable question; the defendant just entered the market (no established relationships to disrupt); CASE EXAMPLES: Apple v. Samsung (preliminary injunction for design patents; not for utility patents); Sanofi-Aventis v. Apotex (ANDA case); TRO DISTINCTIONS: a TRO may be obtained without notice to the defendant if giving notice would frustrate the purpose of the relief; very short duration (14 days typically); quickly converted to a preliminary injunction motion.

The ITC issues exclusion orders that function like injunctions but through a different mechanism: ITC § 337 EXCLUSION ORDERS: the International Trade Commission may issue exclusion orders prohibiting the importation of infringing goods into the United States; the order is enforced by US Customs and Border Protection; TYPES OF EXCLUSION ORDERS: (a) LIMITED EXCLUSION ORDER: excludes specific respondents' infringing products; (b) GENERAL EXCLUSION ORDER: excludes ALL imported articles covered by the patent regardless of source; requires showing of widespread infringement by multiple foreign entities or that a specific respondent cannot be identified; ITC EXCLUSION vs. DISTRICT COURT INJUNCTION: ITC can issue exclusion orders even for NPEs (eBay does not apply to ITC); ITC exclusion orders cover goods from ANY source (including non-respondents if general exclusion); ITC cannot award money damages (only exclusion orders and cease-and-desist orders); ITC is faster (12-18 months for a full investigation); district courts can award damages; ITC and district courts are often used in parallel; DOMESTIC INDUSTRY REQUIREMENT: ITC § 337 requires the complainant to have a domestic industry: (a) significant US investment in production, capital, labor; OR (b) significant licensing activities in the US; NPEs can satisfy domestic industry through licensing revenues; PRESIDENTIAL REVIEW: ITC exclusion orders are subject to a 60-day Presidential review period (for policy reasons); rarely disapproved in practice; 60-MONTH DURATION: exclusion orders are permanent unless challenged; SCOPE OF EXCLUSION: limited to the claims found infringed; products that design around the infringed claims can be imported; BOND DURING PRESIDENTIAL REVIEW: respondent must post a bond to import during the presidential review period.

When permanent injunctions are denied, courts may set ongoing royalties for continued infringement: WHAT IS AN ONGOING ROYALTY: a court-set royalty rate applicable to future infringement occurring after the judgment; compensates the patent owner for the infringer's continued use of the patent; replaces the injunction as a remedy for ongoing infringement; LEGAL BASIS: Paice LLC v. Toyota Motor Corp. (Fed. Cir. 2007): when an injunction is denied, the court may set an ongoing royalty; the court acts as a quasi-licensor; ONGOING ROYALTY vs. PRE-JUDGMENT REASONABLE ROYALTY: the ongoing royalty rate may be different from (typically HIGHER than) the pre-judgment reasonable royalty; the infringer is now a 'convicted infringer' — it knows the patent is valid and infringed; a willing licensor would demand higher royalty from a known infringer; knowledge of infringement tilts the hypothetical negotiation; SETTING THE ONGOING ROYALTY: courts use a modified Georgia-Pacific analysis; account for the changed circumstances: the infringer is adjudicated infringer (not uncertain status); both parties know the patent is valid; any further infringement is willful (can be enhanced); NEGOTIATION OPTION: courts sometimes order the parties to negotiate an ongoing royalty and submit the result for approval; if no agreement, the court sets the rate; DURATION: ongoing royalties continue for the remaining patent term; the infringer may design around the patent to avoid ongoing royalties; DESIGN AROUND OPTION: the defendant may accelerate design-around efforts to avoid the ongoing royalty; a design-around that avoids the adjudicated claims ends the royalty obligation; INJUNCTION AS LEVERAGE: even if ultimately denied, the threat of a permanent injunction motivates defendants to design around or negotiate a license; the ongoing royalty framework creates an ongoing cost that may ultimately be more expensive than a license negotiated pre-suit.