Chapter §20.02 Injunctions

• Jurisdiction: United States

§20.02 Injunctions

[A] Statutory Basis: 35 U.S.C. §283

An injunction is an order by a court commanding an infringer to cease any further infringement (direct, inducing, or contributory) in the United States during the term of the patent. The Patent Act provides for injunctive relief in §283, which states that

[t]he several courts having jurisdiction of cases under this title [35 U.S.C.] may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable. ⁶

In many patent infringement scenarios, the most important remedy for the patent owner is the award of an injunction against future infringement. The importance of injunctive relief reflects the fact that a patent's principal value lays in the right it conveys to exclude others.⁷ Without the ability to enjoin infringement, the patentee's exclusivity is abrogated. A defendant's unchecked future infringement may impact the marketplace's perception of the patentee in ways that are never fully compensable by a monetary award;⁸ continuing infringement may harm the patentee's reputation and result in loss of the patentee's goodwill if the public develops a mistaken belief that the inferior quality of an accused device is attributable to the patentee. Injunctions also are important for a very practical reason: some accused infringers may be judgment-proof and unable to pay damages. An injunction is the only meaningful remedy available in such cases.

Nevertheless, the patent property right should not be viewed as absolute. As further discussed infra, the Supreme Court clarified in its landmark 2006 decision, eBay, Inc. v. MercExchange, LLC,⁹ that injunctive relief is not automatic even though a patent is adjudged infringed and its validity sustained. As the Court explained, "the creation of a right is distinct from the provision of remedies for violations of that right."¹⁰ The use of the word "may" in 35 U.S.C. §283 makes clear that injunctions are optional, not mandatory, equitable remedies.

Section 283 of the Patent Act also provides that the district courts have broad discretion in fashioning injunctions so as to do justice. That discretion is not unfettered, however. In awarding injunctive relief, the courts must comply with the requirements of Fed. R. Civ. P. 65, which requires that injunctive orders provide clear notice and specific detail concerning the conduct being enjoined. Rule 65 provides in part:

(d) Contents and Scope of Every Injunction and Restraining Order.

(1) Contents. Every order granting an injunction and every restraining order must:

(A) state the reasons why it issued;

(B) state its terms specifically; and

(C) describe in reasonable detail—and not by referring to the complaint or other document—the act or acts restrained or required.

(2) Persons Bound. The order binds only the following who receive actual notice of it by personal service or otherwise:

(A) the parties;

(B) the parties' officers, agents, servants, employees, and attorneys; and

(C) other persons who are in active concert or participation with anyone described in Rule 65(d)(2)(A) or (B). ¹¹

Two types of injunctions are encountered in patent cases: preliminary injunctions and permanent injunctions. Because permanent injunctions are more commonly encountered, they are addressed first, although many of same the principles underlie both preliminary and permanent injunctions.

[B] Permanent Injunctions

[1] Generally

A permanent injunction is one that may be issued after a final judgment of patent infringement and no invalidity or unenforceability. Generally, it permanently enjoins the infringing party from any further infringement during the remaining term of the patent, although district courts have great discretion to fashion the terms of injunctions to fit the particular facts of the cases before them.

The most important decision on permanent injunctions in patent cases is the Supreme Court's 2006 decision in eBay, Inc. v. MercExchange, LLC.¹² Prior to eBay, the Federal Circuit embraced the view that the grant of a permanent injunction to a prevailing patentee should be virtually automatic; post-eBay that is no longer the law. Despite the Supreme Court's course correction, as of late 2015 not all Federal Circuit judges agree on what a patentee must establish to obtain injunctive relief. The appellate court's range of views is exemplified by its internal debate over a "causal nexus" requirement to establish that a patentee will be irreparably harmed absent an injunction.¹³ A review of permanent injunction law in the Federal Circuit era, before and after eBay, informs the debate.¹⁴

[2] Federal Circuit Decisions Before eBay v. MercExchange (U.S. 2006)

After the creation of the Federal Circuit in 1982 but before the Supreme Court's 2006 decision in eBay, Inc. v. MercExchange, LLC,¹⁵ the Federal Circuit (and district courts applying its decisions) almost always granted permanent injunctive relief as a standard part of the final judgment when patent owners prevailed.¹⁶ Such relief permanently enjoined the infringing party from any further infringement during the remaining term of the patent. As detailed infra, the Supreme Court's 2006 decision in eBay changed this practice—permanent injunctions are no longer granted to prevailing patentees on an essentially automatic basis.

Prior to eBay, courts refused to enter permanent injunctions against adjudged infringers only in rare cases, such as those clearly impacting the public's health and welfare. For example, the Seventh Circuit in City of Milwaukee v. Activated Sludge, Inc.¹⁷ affirmed an award of damages for the city's infringement of a patent on a sewage purification process but refused to permanently enjoin the infringement. Making the injunction permanent "would close the sewage plant, leaving the entire community without any means for the disposal of raw sewage other than running it into Lake Michigan, thereby polluting its waters and endangering the health and lives of that and other adjoining communities."¹⁸

During patent reform discussions in 2005, a number of technology companies publicly urged that the availability of permanent injunctive relief for patent infringement be limited to those prevailing patent owners that had commercialized their patented inventions. Noncommercializing patentees would be limited to monetary damages.¹⁹ The technology companies, such as Apple, Intel, Microsoft, and Hewlett-Packard, were the targets of patent infringement lawsuits by patent-holding companies or individuals (not infrequently referred to pejoratively as "patent trolls") that acquired patents (sometimes through bankruptcy proceedings) and sued or threatened to sue the technology companies for infringement, but that did not otherwise participate in the marketplace.²⁰ These patent holders reportedly used the threat of then-virtually automatic injunctive relief to push their targets into settlements. The targeted technology companies contended that courts should consider whether such patent-holding firms would truly suffer irreparable harm in the absence of injunctive relief.²¹ Because the 2005 patent reform proposals were never enacted into law,²² concerns remained about the attempted enforcement of patents by holding companies, especially those with patents of questionable validity.²³

[3] The eBay v. MercExchange (U.S. 2006) Standard

A landmark U.S. Supreme Court decision in 2006 effectively mooted the perceived need for congressional reform of injunctive relief in patent cases. In eBay, Inc. v. MercExchange, LLC,²⁴ the Court announced that a permanent injunction is not to be automatically awarded in every case in which a patent is found infringed and its validity sustained. Rather, a district court's decision to impose or deny a permanent injunction in a patent case should be made after consideration of traditional equitable principles generally applicable to all types of cases. In other words, the equitable considerations for determining whether permanent injunctive relief is warranted should not be applied in a rigid fashion, nor should they be applied differently in patent cases than in non-patent cases.

Patentee MercExchange, a patent-holding company, licensed its patents but did not manufacture any products. It alleged that the "Buy It Now" feature of eBay's popular online auctions infringed MercExchange's '265 business method patent.²⁵ After eBay and its subsidiary Half.com (collectively "eBay") refused to take licenses, MercExchange sued for infringement. A jury sustained the '265 patent's validity, found that eBay infringed, and awarded damages to MercExchange. The district court thereafter denied MercExchange's motion for permanent injunctive relief against eBay, concluding that MercExchange's lack of commercial activity in practicing its patents coupled with its willingness to license them sufficiently established a lack of irreparable harm despite the denial of injunctive relief.²⁶

The Federal Circuit reversed, applying the appellate court's "general rule" that a permanent injunction should issue once infringement and validity have been adjudged.²⁷ In the Federal Circuit's view, the district court's citation of growing public concern over the issuance of business method patents was overly general and "not the type of important public need that justifies the unusual step of denying injunctive relief."²⁸

The Supreme Court in eBay vacated the Federal Circuit's judgment, concluding that "[j]ust as the District Court erred in its categorical denial of injunctive relief, the Court of Appeals erred in its categorical grant of such relief."²⁹ The Court disagreed with the Federal Circuit's assumption that a patent owner's statutory right to exclude others under 35 U.S.C. §154(a)(1) is alone sufficient to justify a general rule favoring injunctive relief against adjudged infringers. The Court observed that...