Is It Time to Rethink eBay?

• Author: Joseph A. Saltiel
• Position: Joseph A. Saltiel is a principal at Masuda, Funai, Eifert & Mitchell, Ltd., where he serves as the vice chair of the firm's litigation group and intellectual property and technology practice group.
• Pages: 37-39

Published in Landslide® magazine, Volume 9, Number 3, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2016 by the American Bar Association. Reproduced with permission. All rights reserved. This

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Is It

Time

to

Rethink

eBay?

By Joseph A. Saltiel

JosephA. Saltiel is a principal at Masuda, Funai, Eifert & Mitchell,

Ltd., where he serves as the vice chair of the rm’s litigation group

and intellectual property and technology practice group.

May 2016 marked the tenth anniversary of the Supreme

Court’s decision in eBay Inc. v. MercExchange, LLC,1

where the Supreme Court reversed the long-standing

rule that patentees were entitled to a permanent injunction as a

matter of right. Now, a patentee must demonstrate that it meets

the traditional four-part test applied by courts of equity to get a

permanent injunction. Hence, after eBay, it became more dif-

cult for patentees to get a permanent injunction, and if the

patentee is a nonpracticing entity, it is unlikely to get one.

eBay is also signicant because it was the rst in a long line

of patent cases that weakened the patent system. Since eBay,

the Supreme Court has issued decisions making it easier to

invalidate patents as obvious2 and indenite,3 to limit the abil-

ity of patentees to collect royalties on exports, and to challenge

whether the patent has eligible subject matter.4 Moreover, with

the passage of the America Invents Act (AIA) in 2011, Con-

gress gave defendants an easier and less expensive option for

challenging the validity of patents in the U.S. Patent and Trade-

mark Ofce (USPTO). Hence, in the last 10 years, it has gotten

signicantly harder for patent owners to assert their patent rights.

Before 2006, the United States was a pro-patent system. Ten

years later, the pendulum has swung the other way with the United

States more of an anti-patent system. In order to bring balance

to the patent system, does it make sense to rethink eBay and the

approach to granting permanent injunctions in patent cases?

The eBay Decision

For decades, the “general rule” in patent cases was that a success-

ful patentee would be awarded a permanent injunction. To avoid a

permanent injunction, the defendant had to show that there was an

exceptional circumstance that weighed against granting a perma-

nent injunction, such as to protect the public interest. Defendants

could not always show such exceptional circumstances. Hence,

permanent injunctions were issued routinely.

Outside of patent litigation, the long-standing rule was that

a plaintiff needed to demonstrate it met a four-part test before

obtaining a permanent injunction. The test requires a plain-

tiff to demonstrate that: (1)it has suffered an irreparable injury;

(2)remedies available at law are inadequate to compensate for

that injury; (3)considering the balance of hardships between

the plaintiff and the defendant, a remedy in equity is warranted;

and (4)the public interest would not be disserved by a perma-

nent injunction. In nonpatent cases, permanent injunctions were

not awarded as a matter of routine. Hence, the “general rule” for

patent cases was at odds with how the courts treated every other

type of matter. In that context, eBay makes a lot of sense. There

is no reason for patent cases to be treated differently. Therefore,

in a unanimous and brief decision, eBay overruled the “general

rule” for patent cases and required that all patentees meet the

four-part test in order to secure a permanent injunction.

Patents, however, are different from other types of

rights. The U.S. Constitution provides that Congress has the

power to give “authors and inventors the exclusive right to

their respective writings and discoveries.”5 It would seem

intuitive that the “exclusive right” provided for by the Con-

stitution would mean that the “general rule” for patents was

appropriate. The Supreme Court in eBay disagreed. In his

concurrence, Chief Justice Roberts acknowledged the dif-

culty of protecting the right to exclude through monetary

remedies because it would still allow the infringer to use the

discovery against the patentee’s wishes, but stated that this

difculty does not automatically entitle a patentee to a per-

manent injunction.6 In his concurrence, Justice Kennedy went

further to denounce the “general rule” for patent cases. Jus-

tice Kennedy plainly stated that “the existence of a right to

exclude does not dictate the remedy for a violation of that

right.”7 Justice Kennedy then raised the issue of nonpracticing

entities, often referred to as patent trolls, which do not make

goods but whose sole purpose is to obtain licensing fees for

patents.8 For nonpracticing entities, an injunction does not

make sense because monetary fees are adequate to compen-

sate the patent holder.9 Moreover, nonpracticing entities can

unfairly use the threat of an injunction “as a bargaining tool

to charge exorbitant fees to companies.”10 Justice Kennedy

thought this was inherently unjust in situations where the

asserted patent was not signicant.

Generally, it is reasonable that the existence of a right to