Intellectual Property Law

In a unanimous landmark opinion, the Supreme Court vacated the Federal Circuit this morning and established that the traditional four-factor test for permanent injunctive relief applies when determining the remedy for patent infringement.  eBay v. MercExchange, 547 U.S. ___ (2006), No. 05?130.  The Federal Circuit previously applied its ?general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances,? 401 F.3d 1323, 1339 (2005), but Justice Thomas, writing for the Court, squarely rejected such a general rule: 

A plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief.  A plaintiff must demonstrate:  (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, 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 disserved by a permanent injunction.

Id. at 2.  Because ?[t]hese familiar principles apply with equal force to disputes arising under the Patent Act,? id. at 3, ?the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts . . . in patent disputes no less than in other cases governed by such standards.?  Id. at 6.  In his concurring opinion, Chief Justice Roberts (joined by Justices Scalia and Ginsburg) cautioned the district courts with a nod to history, noting that ?[f]rom at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.?  Id. at 1.  According to Chief Justice Roberts, this is no surprise in light of the inherent difficulty of protecting a right to exclude through monetary damages.

Perhaps most intriguing, the concurrence of Justice Kennedy (joined by Justices Stevens, Souter, and Breyer) referenced the changing considerations created with the trend toward patent holding companies, where ?an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patents.?  Id. at 2.  Furthermore, ?[t]he potential vagueness and suspect validity of some of these [business method] patents may affect the calculus under the four-factor test.?  Id. at 2.

The case is headed back to the district court for application of the four-factor test to MercExchange?s request for a permanent injunction against eBay.  Will patent holding companies and inventors who don?t commercialize their patents have difficulty satisfying the test?  Stay tuned.