Before eBay: the automatic injunction presumption
Before 2006, the Federal Circuit had established a near-automatic rule: once a plaintiff proved patent infringement, a permanent injunction would ordinarily issue unless exceptional circumstances applied. This created a powerful litigation tool, especially for non-practicing entities (NPEs) — the mere threat of an injunction, which could force an infringer to redesign or discontinue a product, gave patent holders enormous settlement leverage. The practical effect was that defendants often settled at inflated amounts to avoid the catastrophic risk of an injunction. The Federal Circuit's rule was justified as reflecting the patent holder's 'right to exclude' — the core statutory right conveyed by a patent under 35 U.S.C. § 154(a)(1). Courts viewed money damages as an insufficient substitute for the exclusivity a patent is supposed to provide.
eBay v. MercExchange: the Supreme Court's correction
In eBay Inc. v. MercExchange, LLC (S.Ct. 2006), the Supreme Court unanimously reversed the Federal Circuit's near-automatic injunction rule. MercExchange held patents related to online auction technology and sought an injunction against eBay's 'Buy It Now' feature after a jury found infringement. The district court denied the injunction; the Federal Circuit reversed, applying the presumption. The Supreme Court reversed again, holding that courts must apply the traditional four-factor equitable test — the same test used for injunctions in other areas of law — and cannot presume that any factor is automatically satisfied merely because infringement has been found. Justice Thomas wrote that 'the decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion.' Notably, Justice Kennedy's concurrence specifically noted that the threat of an injunction can be used to extract settlements exceeding the patent's actual value, suggesting courts should be cautious about granting injunctions where the patent holder does not practice the invention.
Post-eBay outcomes: who gets injunctions?
Since eBay, the pattern is clear: practicing entities (companies that compete with the infringer in the same market) generally obtain injunctions; non-practicing entities generally do not. Research on post-eBay injunction rates shows: among cases where the plaintiff and defendant were direct competitors, injunctions were granted in approximately 70–80% of cases; among cases involving NPEs, injunctions were granted in approximately 15–25% of cases. The competitive relationship between the parties has become the most reliable predictor of whether an injunction will issue. Direct competitors can show irreparable harm (lost sales, price erosion, damaged customer relationships) and inadequacy of money damages (difficulty calculating lost profits; ongoing harm continuing during the litigation). NPEs, by contrast, have no products to lose — their only loss is licensing revenue, which a damages award can fully compensate.
The ongoing royalty alternative
When a court denies a permanent injunction, it typically awards an ongoing royalty — effectively a compulsory license at a judicially-determined rate. The ongoing royalty converts what was an infringing use into a licensed use going forward. Courts generally set the ongoing royalty at a higher rate than the jury's backward-looking reasonable royalty damages, reflecting the changed negotiating position post-judgment (the infringer's valuation of the patent has been proven, the parties are no longer at arm's length, and the infringer's willingness to pay has been established). The ongoing royalty concept emerged from Paice LLC v. Toyota Motor Corp. (Fed. Cir. 2007). It provides some compensation to NPEs who cannot obtain injunctions, but at a royalty rate set by the court rather than negotiated in the market, which may be lower than what a well-negotiated license would command.
Preliminary injunctions in patent cases
Separate from permanent injunctions (issued after trial), patent holders can seek a preliminary injunction early in litigation to immediately stop the infringement during the pendency of the case. The standard for a preliminary injunction is even higher: the plaintiff must show a likelihood of success on the merits, likelihood of irreparable harm in the absence of preliminary relief, that the balance of equities favors relief, and that the public interest is not disserved (Winter v. NRDC, S.Ct. 2008). Preliminary injunctions are rarely granted in patent cases because showing a likelihood of success on validity and infringement before discovery is difficult. When they are granted — typically where the infringement is clear and the harm is immediate — they are powerful: an infringer must immediately stop the accused conduct, which can be commercially devastating before the merits are fully litigated.
ITC exclusion orders vs. district court injunctions
Because US district courts can only issue injunctions covering US conduct (making, using, selling, offering for sale, and importing), many patent holders — especially those facing foreign manufacturers — pursue International Trade Commission (ITC) proceedings under 19 U.S.C. § 1337 in parallel with district court litigation. An ITC exclusion order can bar the importation of infringing goods into the United States, effectively achieving the same result as an injunction. Importantly, the ITC's public interest analysis is similar to eBay's fourth factor, but the ITC also considers domestic industry requirements. ITC proceedings are faster than district court (typically 12–18 months) and the threat of a ban on all imports of a product category can create significant settlement pressure. Technology companies frequently use combined ITC + district court litigation as a comprehensive enforcement strategy.
Frequently Asked Questions
What is the eBay test for patent injunctions?
In eBay Inc. v. MercExchange, LLC (S.Ct. 2006), the Supreme Court held that a plaintiff seeking a permanent injunction after a finding of patent infringement must satisfy the traditional four-factor equitable test: (1) the plaintiff has suffered an irreparable injury; (2) remedies available at law (money damages) are inadequate to compensate for that injury; (3) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) the public interest would not be disserved by a permanent injunction. The eBay decision abrogated the Federal Circuit's prior practice of presuming irreparable harm once infringement was established and granting injunctions automatically. The Court held that the Patent Act's permissive language ('courts may grant injunctions') did not mandate automatic injunctive relief. After eBay, courts must independently assess each factor — no single factor is determinative, though the factors often overlap and inform each other.
Do non-practicing entities (NPEs) get patent injunctions?
After eBay, non-practicing entities (NPEs or 'patent trolls' — companies that hold patents but do not practice the invention by making or selling products) face significant difficulty obtaining permanent injunctions. The key reason: irreparable harm and inadequacy of money damages are hard to show for NPEs. If the patent holder does not make or sell products competing with the infringer, there is typically no competitive harm from the infringement — the harm is purely monetary, and money damages can fully compensate a patent holder that only licenses patents. Courts after eBay have consistently denied injunctions to NPEs in the vast majority of cases, instead awarding ongoing royalties. This has been significant for the NPE litigation model: without the threat of an injunction (which forces defendants to settle quickly at high prices), defendants can litigate more aggressively. Practicing entities — companies that make and sell products that compete with the infringer — fare much better under the eBay test, as they can typically show irreparable competitive harm.
What is an ongoing royalty as an alternative to an injunction?
When a court denies a permanent injunction, it may instead award an ongoing royalty — a compulsory license requiring the infringer to pay a royalty rate for future infringement. The ongoing royalty is set by the court and may be higher than the damages rate awarded for past infringement, because the infringer's knowledge of the patent and continued infringement after judgment suggests a willingness to pay more than what was previously paid. The ongoing royalty converts what would be an injunction (stop making the product) into a compulsory license (keep making the product, but pay). This outcome is common for NPEs. For practicing entities that obtain injunctions, there is no need for an ongoing royalty — the injunction requires the infringer to stop. The ongoing royalty concept comes from Paice LLC v. Toyota Motor Corp. (Fed. Cir. 2007), which established that courts have discretion to award ongoing royalties when injunctions are denied.
How does the balance of hardships factor apply in patent cases?
The balance of hardships factor compares the harm to the patent owner from denying the injunction against the harm to the infringer from granting it. Courts ask: how significant is the infringer's investment in the accused product? Would an injunction require the infringer to redesign or discontinue an entire product line, or just remove a minor feature? What is the harm to the patent owner from continued infringement without an injunction? In some high-profile patent cases involving components of complex products (e.g., a semiconductor device inside a smartphone), courts have found that the balance of hardships strongly favors denying an injunction because the patented feature is a minor component of a large product — shutting down production of the entire product to enforce a patent on one component is disproportionate. This reasoning has been criticized for effectively allowing infringers to continue infringing, but it reflects the equitable nature of the injunction inquiry.
Does infringement in the US cover products sold internationally?
A US patent injunction only applies within the United States — it prohibits making, using, selling, offering to sell, and importing the patented invention within the US (35 U.S.C. § 271). The injunction cannot directly bar foreign sales. However: (1) importing into the US is itself an act of infringement; a US injunction can bar importation; (2) the International Trade Commission (ITC) can issue exclusion orders barring importation of infringing goods — ITC proceedings are frequently used alongside district court proceedings to bar infringing imports; (3) a US company may also seek injunctions in foreign jurisdictions where counterpart patents are held. The lack of a global injunction is significant for technology companies with global supply chains — an infringing product made and sold entirely outside the US (with no US import) is not subject to US patent injunction relief.