STRONGER Bill Part 2: Helping Patent Owners Stop Infringing Conduct

Washington DC Capitol Building

 by: Jake Mace | July 3, 2017

 

The injunction is one of the most powerful tools a court has in its arsenal, but it is not granted equally to all types of patent owners. Courts are five times more likely to grant a request for an injunction from an operating company than from a non-practicing patent owner. The STRONGER bill proposes a change that may help equalize this dichotomy by creating legal presumptions that are most often the reason courts deny injunction requests from non-practicing patent owners.

Part 1 Here         Part 3 Here          Part 4 Here

Injunction, Injunction – What’s your Function

Injunctions stop damaging behavior, which, in patent cases, is almost always infringing conduct (i.e., selling, making, using, importing, etc.). Since the 2006 Supreme Court ruling in eBay Inc. v. MercExchange LLC, a permanent injunction in a patent case has required a patent owner to demonstrate four factors:

  1. Irreparable injury;
  2. Remedies available at law are inadequate to compensate that injury;
  3. Considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
  4. That the public interest would not be disservice by a permanent injunction.

A patent owner seeking a preliminary injunction must essentially demonstrate the same four factors, but must also show that the threat is immediate and that there is a substantial likelihood of success on the merits for the case.

For non-practicing patent owners seeking an injunction, most of the trouble arises from the first two factors. It is difficult to prove that infringement causes harm that cannot be fixed with financial compensation when a patent owner doesn’t run a business that uses the patented technology. Consequently, this has led to courts granting 80% of injunctions when requested by practicing patent owners, but only granting 16% of injunctions when requested by non-practicing patent owners. In other words, courts are unwilling to stop an infringer from infringing a patent as long as they pay the non-practicing patent owner for any damage done. This is a problem when a patent owner chooses the business of licensing the patented technology rather than running an operating company.

Forced Devaluation

By refusing to grant injunctions to non-practicing patent owners, the courts force those patent owners into situations that devalue their intellectual property. For example, suppose a patent owner wants to exclusive license his patent to Company A, but Company B starts infringing the patent before the patent owner has a chance to approach Company A. The value of an exclusive license can be enormous, but if the patent owner cannot prevent Company B from infringing because the courts refuse to grant an injunction, then the value of the license to Company A is severely reduced. Even if the patent owner is awarded a royalty from Company B’s infringement, that amount certainly doesn’t capture the entire reduction in value associated with the loss of the ability to sell an exclusive license.

Consider an analogy that uses real property instead. Joe owns a piece of land that would be prime for farming, but simply doesn’t have the money to do anything with it, so he ends up hanging onto it, with the hopes to sell it one day when its value peaks. Then Green Acre Co. comes along and starts farming Joe’s land without his permission and Joe tells them to stop and leave his land, but they refuse. Consequently, Joe sues Green Acre Co. seeking an injunction to stop Green Acre from farming on his land. If the courts behaved as they do in patent law, then they would require Joe (as a non-practicing land owner) to farm his own land before they would grant an injunction.

Constitute This

Why does a patent owner have to use his property in order to be able exclude others from using it? Even the U.S. Constitution states that “Congress shall have power . . . To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

The STRONGER bill doesn’t solve this problem, but at least it’s a step in the right direction. Section 106 of the STRONGER bill titled “Restoration of Patents as Property Rights” proposes:

‘‘(b) INJUNCTION. — Upon a finding by a court of infringement of a patent not proven invalid or unenforceable, the court shall presume that (1) further infringement of the patent would cause irreparable injury; and (2) remedies available at law are inadequate to compensate for that injury.’’

This language helps address the problems associated with the first two factors required for injunctions, but it’s not a complete solution. Presumptions can be rejected if an infringer is able to rebut one of them by a preponderance (>50%) of the evidence, and thus avoid an injunction. Nevertheless, these presumptions take some of the burden off patent owners and place it squarely on the backs of infringers.

 

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