Irreparable benefits.

• Author: Lichtman, Douglas

ESSAY CONTENTS INTRODUCTION I. JUSTIFYING PRELIMINARY RELIEF II. THE STANDARD FOR PRELIMINARY RELIEF III. OBJECTIONS CONCLUSION INTRODUCTION

In every circuit, a motion for preliminary relief is evaluated in light of three main factors: (1) the likelihood that the requesting party will ultimately prevail on the merits; (2) the irreparable harm the requesting party will suffer if the injunction is wrongly denied; and (3) the irreparable harm the opposing party will suffer if the injunction wrongly issues. (1) The idea is to account for and minimize irreversible judicial error. When denial of the injunction would be irreversibly harmful and there is a real chance that denial will be wrongful, courts are more reluctant to deny. Conversely, if issuance poses the greater irreversible threat, courts are more reluctant to issue. The analysis is often cast in terms of a sliding scale: "[T]he more likely it is the plaintiff will succeed on the merits, the less the balance of irreparable harms need weigh towards its side." (2)

This standard approach accounts for irreparable harms but entirely neglects irreparable benefits. That is hard to understand. If the goal is to minimize deviations from what will be the ultimate ruling on the merits, (3) errant irreversible gains can be just as troubling as errant irreversible losses. Both can have significant distributional and incentive implications for the litigating parties. More broadly, both can have distributional and incentive implications for parties who are not themselves involved in the litigation but who can reasonably anticipate how irreparable consequences would play out were they the ones in court. Put another way, society cares about irreparable harm both because it affects the litigants directly and because it affects countless similarly situated parties who will act and react in the shadow of the law. Irreparable benefits matter for exactly these same distributional and incentive reasons. When an injunction wrongly issues, then, there are actually two errors to count: the irreparable harm wrongfully imposed on the nonmoving party and the irreparable benefit mistakenly conferred on the moving party. Similarly, when an injunction is wrongly denied, there are again two errors: the irreparable harm wrongfully suffered by the moving party and the irreparable benefit inadvertently accorded the nonmoving party. (4)

Consider a simple example--one designed in particular to respond to the obvious criticisms that "irreparable benefits" is mere semantics and that this approach double-counts the same underlying wrong. Suppose that the plaintiff in a given case holds a patent on a chemical process shown to significantly reduce the rate of genetic mutation in a certain type of animal cell. The process at the moment has no specific medical application in humans, but the plaintiff believes that it will ultimately mature into an important human therapy. The defendant, meanwhile, recently began work on a similar chemical process, also hoping in the end to find applications related to human ailments. The plaintiff's legal allegation is that the defendant's process infringes the patent and the defendant therefore should not be permitted to engage in further research without permission. The defendant's response is that its research is permissible, either because its process does not fall within the scope of the patent's claims or because the patent is invalid in light of the prior art.

If the patentee moves for preliminary relief, (5) the first hurdle will be to show that something irreparable is at stake. Patent harms are not literally irreparable--most patent-related injuries can be fully compensated by some ex post cash payment--but they are typically deemed irreparable because patent harms are difficult for courts to value. (6) I will say more about this argument later, (7) but for now note that many "irreparable" harms are actually irreparable only in this limited sense. Bankruptcy is widely considered to be an irreparable harm, (8) even though in most instances there is some amount of cash that would fully soothe the wound. Similarly, restraints on employment are regularly categorized as irreparable, (9) although again there surely is some amount of cash that would make whole a wrongfully restrained worker.

With irreparable harm shown, the next step in the analysis is to apply the three classic factors and therefore to consider: (1) the likelihood that the plaintiffs patent is valid and infringed; (2) the irreparable harm that would be imposed on the plaintiff were the court to wrongfully deny relief; and (3) the irreparable harm that would be imposed on the defendant by a wrongful court order to halt its research. The first factor requires little explanation. If the plaintiffs case is a slam dunk, the injunction should issue immediately, regardless of the relative irreparable implications. Conversely, if the plaintiff's allegations are preposterous, no injunction should issue, again regardless of the irreparable consequences. Both of these conclusions follow from the simple fact that preliminary relief is not meant to contradict the outcome on the merits. If the merits are clear, the court's decision with respect to preliminary relief is also clear, and irreparable consequences are simply not relevant.

Things are more interesting in cases in which the merits are murky, because in those cases a court must confront the possibility that its ruling with respect to preliminary relief might ultimately turn out to favor the wrong party. This is when the standard for preliminary relief does its heavy lifting. Start with the possibility that the court refuses to issue the injunction at the preliminary stage but then, after a full hearing on the merits, concludes that the defendant's research did in fact infringe. As the traditional analysis suggests, one cost associated with this errant denial is any irreparable harm that might be suffered by the patentee. This is a private cost suffered by the complaining patent holder, but it is also a social cost because mistakes like this will over the long run dampen the ex ante incentive to pursue patent-eligible research, discourage patent holders from litigating even valid claims, and likely drive inventors to invest more heavily in costly self-help protections. (10)

There is, however, another cost associated with this errant refusal to enjoin, and that is the irreparable benefit that accrues to the infringer. This cost is one that the traditional analysis overlooks. Yet, like the irreparable harm normally considered, it too has unintended private and social consequences. Undeserved irreversible gains skew the defendant's incentives with respect to the question of whether to litigate or settle. They also encourage the defendant to invest further in its research--a wasteful outcome when that research will ultimately turn out to be impermissible. Most importantly, undeserved irreversible gains undermine the defendant's incentive to "invent around" the patent rather than infringe it. This latter implication is of particular consequence given that the patent system is designed to encourage innovation not merely by rewarding patent holders for their accomplishments, but also by forcing rivals to discover comparable noninfringing substitutes for patented inventions. (11)

Turn now to the opposite type of judicial error, in which the court issues an injunction at the preliminary stage but then, after a full hearing on the merits, concludes that the accused research was in fact permissible. The traditional analysis focuses exclusively on the irreparable harm suffered by the defendant because of the wrongful injunction. My point, predictable at this stage, is that comparable private and social concerns arise with respect to the plaintiff's wrongful and irreversible gains. Thus, the traditional approach recognizes that it is important to avoid a wrongful injunction in this setting because a wrongful injunction might irreversibly harm the defendant in a distributional sense and might also skew long-run incentives such as the incentive to pursue borderline but ultimately permissible research. The traditional approach, however, fails to see that wrongful injunctions are also troubling because they might irreversibly benefit the plaintiff in a distributional sense and might distort important incentives relevant to patentees, such as the incentive for a patent holder to litigate a case that is questionable on the merits.

Naturally, there is much more to say on all of these topics. For instance, there are interactions among the various incentives that I have considered above, and those interactions amplify some concerns but mitigate others. Moreover, the concept of irreparability is actually significantly more complicated than I have thus far let on. Some errors, for example, turn out to be irreversible when they manifest themselves as undeserved losses but are fully reversible when they manifest themselves as unearned gains. For now, however, I want to stake out only a very basic claim: when evaluating a motion for preliminary relief, any deviation from what will be the ultimate resolution on the merits is relevant, no matter whether that deviation is perceived by the parties to be a benefit or a harm. All that matters is that the deviation is unintended, that it has distributional or incentive effects for the litigants and/or similarly situated parties, and that those effects are difficult for a court to reverse.

I proceed as follows. In Part I, I explain what it means to say that a given harm or benefit is irreparable and why irreparability is thought to justify preliminary relief. My purpose here is to show that irreparable benefits are not so different from irreparable harms, in that both threaten to lock in outcomes that are inconsistent with the outcomes that will be deemed appropriate after a full merits hearing. In Part II, I consider...