Patent Injunctions

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:

(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.

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).

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

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.

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

Scope of Exclusion

• Limited to the claims found infringed
• Products that design around the infringed claims can be imported

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.