DISCOVERING EBAY'S IMPACT ON COPYRIGHT INJUNCTIONS THROUGH EMPIRICAL EVIDENCE.

• Author: Sag, Matthew

TABLE OF CONTENTS INTRODUCTION 1450 I. EBAY, WINTER, AND THE HYSTERESIS HYPOTHESIS 1452 A. eBay and Winter Revitalized Standards for Issuance of Injunctive Relief 1453 B. Hysteresis and the Delayed Effects of eBay 1459 C. Selection Effects 1463 II. METHODS AND DATA 1465 A. Our Dataset 1466 B. Timing 1467 C. Coding Cases as Grant or Deny 1468 III. RESULTS 1469 A. Citation Trends 1471 1. Citations to eBay and Other Significant Decisions in Copyright Cases 1471 2. Citations in Contested Final Injunction Decisions 1477 3. Citations in Default Judgment Injunction Decisions 1480 4. Citations in Preliminary Injunction Decisions 1483 B. Grant Rates in Copyright Injunction Cases 1485 1. Summary Data 1485 2. Regression Analysis 1489 a. The Delayed Effect of eBay on Grant Rates 1490 b. The Effect of Citing eBay on Grant Rates 1493 3. eBay's Effect on Requests for Injunctive Relief 1495 IV. OTHER EVIDENCE THAT EBAY MADE A DIFFERENCE IN COPYRIGHT INJUNCTION CASES 1499 CONCLUSION 1503 APPENDIX: COMPARING REPORTED AND UNREPORTED COPYRIGHT INJUNCTION DECISIONS 1507 INTRODUCTION

Everyone is familiar with the concept of hysteresis, even if they do not recognize it by name. Consider the long delay one experiences when waiting to drive through an intersection after a traffic light turns green when one is the sixth car in the queue. (1) Hysteresis, which generally describes a cause-effect time lag, is also an apt term to describe the delay that sometimes occurs between the issuance of certain major judicial decisions and the full acceptance by lower courts of the decisions' implications.

eBay Inc. v. MercExchange, L.L.C., a major U.S. Supreme Court decision from 2006. had a relatively immediate and transformative effect on the grant of permanent injunctions in patent infringement cases. (2) Prior to eBay, courts almost always granted injunctions upon a finding of patent infringement. (3) The Court in eBay criticized this practice, emphasizing the discretionary nature of injunctive remedy. (4) The Court's decision in eBay placed significant evidentiary burdens on plaintiffs to show their entitlement to injunctive relief. (5)

Because eBay relied on three of the Court's prior copyright decisions for the proposition that courts may withhold injunctive relief in appropriate cases, it should have been immediately obvious that eBay's holding about the burdens plaintiffs must bear to show their entitlement to injunctive relief applied equally in copyright infringement cases. (6) Yet an early empirical study on the grant of copyright injunctions by Jiarui Liu in 2012 reported that in the first four years after the eBay ruling, courts rarely cited that decision and continued to grant injunctions at a very high rate. (7) Liu's study was quickly accepted by a leading treatise and scores of commentators as the definitive account of the effect of eBay in copyright cases. (8)

One of us had the intuition that even if Liu's findings were accurate about copyright injunctions in the initial post-eBay period, courts might have become more attentive to eBay over time. This intuition was tested in a qualitative study of eighty-two post-eBay copyright infringement cases in which courts decided not to grant injunctions. (9) That study revealed, among other things, that courts began to pay much more attention to eBay after two appellate court decisions in the leading copyright jurisdictions reversed lower courts for failing to follow eBays directives. (10)

The empirical project on which we report in this Article examines whether, as the qualitative study suggested, the impact of eBay on copyright law increased over time. We find substantial evidence that it has. Overall, our data support two key intuitions: that courts have accorded eBay greater weight over time and that courts have been granting fewer injunctions in copyright infringement cases. This Article addresses some important nuances and distinctions between different types of injunction decisions. For example, we compared permanent injunction decisions in contested--by which we mean non-default judgment--cases against injunction decisions in default judgment cases. Hysteresis does seem to account for the initial slow judicial reaction to eBay, which contrasts sharply with the seriousness with which courts now routinely treat eBay and its progeny in copyright infringement cases.

Part I reviews the eBay decision and its most salient progeny that promulgated the standards that courts are supposed to apply when deciding whether to grant or withhold injunctive relief. Part II provides an overview of the methodology we used in selecting and processing data about grants and denials of copyright injunctions from the cases in our sample. Part III reports on our key findings about the increased frequency of citations to eBay and its progeny over time and the lower grant rates for injunctions in copyright infringement cases since 2010, both in preliminary and in contested permanent injunction cases. Part IV offers some insights drawn from a qualitative study about the types of post-eBay cases in which courts have withheld injunctions in copyright infringement cases.

1. EBAY, WINTER, AND THE HYSTERESIS HYPOTHESIS

   Prior to the Supreme Court's landmark 2006 decision, eBay Inc. v. MercExchange, L.L.C., (11) courts routinely issued injunctions in both patent and copyright cases upon a finding of actual or likely infringement of plaintiffs' rights. (12) Such a finding typically triggered a presumption of irreparable harm, which was rarely rebutted. (13) Actual or likely infringement, coupled with this presumption, generally sufficed to justify the grant of permanent or preliminary injunctions. (14) Some cases went so far as to say that plaintiffs were "entitled" to injunctive relief when their rights had been infringed or were likely infringed. (15) The Supreme Court's eBay decision represented a stark departure from what had become the standard practice of issuing injunctions upon a finding of actual or likely infringement. (16) Two years later, the Court's decision in Winter v. Natural Resources Defense Council, Inc. reaffirmed the discretionary and equitable nature of injunctive relief and the burdens that plaintiffs must bear to qualify for this remedy. (17)

   Although courts were initially slow to recognize the implications of eBay in copyright cases, this changed after Winter and key decisions by the Second and Ninth Circuits in 2010 and 2011, which reversed lower court grants of preliminary injunctions because those courts failed to require plaintiffs to present evidence to show their entitlement to injunctive relief, as the Court in eBay directed.

   1. eBay and Winter Revitalized Standards for Issuance of Injunctive Relief

      In 2001, MercExchange sued eBay for infringing a patent covering the "buy it now" system for facilitating electronic marketplace sales of goods between private individuals through a central authority that could secure the transactions. (18) Although a jury found the patent valid and infringed, the trial judge declined to issue an injunction on the theory that money damages would adequately compensate MercExchange, an entity whose business model consisted of licensing patents in its portfolio. (19) The Court of Appeals for the Federal Circuit reversed, citing its general rule that courts should issue injunctions upon a finding of patent infringement, absent exceptional circumstances for which eBay did not qualify. (20) Enjoining infringement of this patent would have shut down eBay's popular service. (21)

      The Supreme Court vacated the Federal Circuit's injunction ruling in eBay, holding that the grant of injunctive relief is always subject to equitable discretion. (22) The Court relied upon two of its previous non-intellectual property (IP) decisions in support of this proposition and observed that "[t]hese familiar principles apply with equal force to disputes arising under the Patent Act." (23) The eBay decision also relied upon three of the Court's prior copyright decisions recognizing that injunctions need not always issue upon a finding of infringement. (24) The Court further noted that the patent statute, like the copyright statute, provides that courts "may" issue injunctions, not that they must. (25)

      The eBay decision directed courts not to issue permanent injunctions unless the plaintiff had proven:

      (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. (26) The eBay decision thus upended the Federal Circuit's "general rule" that injunctive relief should automatically follow from a finding of patent infringement. (27)' The implications of this ruling for the high-stakes field of patent litigation were clear as soon as the decision was announced. (28) No longer would prevailing patent owners obtain injunctive relief as of right, giving them the power to leverage billion-dollar settlements from defendants who may never have even heard of their technology. (29) Empirical studies have demonstrated that in response to eBay, courts now deny permanent injunctions in just over a quarter of patent cases, whereas prior to eBay, the denial of permanent injunctive relief in patent infringement cases was almost unheard of. (30)

      Although eBay was a patent infringement case, there was every reason to expect it to have far-reaching implications for other IP laws, especially copyright. (31) The Supreme Court's instruction in eBay that patent injunctions must no longer follow reflexively from a finding of infringement had obvious relevance for copyright law for three reasons. First, the Court relied on three of its copyright precedents for the proposition that injunctions need not always...