ILR-101-Seaman

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1949

Permanent Injunctions in Patent

Litigation After eBay: An Empirical Study

Christopher B. Seaman

ABSTRACT: The Supreme Court’s 2006 decision in eBay v.

MercExchange is widely regarded as one of the most important patent law

rulings of the past decade. Historically, patent holders who won on the merits

in litigation nearly always obtained a permanent injunction against

infringers. In eBay, the Court unanimously rejected the “general rule” that a

prevailing patentee is entitled to an injunction, instead holding that lower

courts must apply a four-factor test before granting such relief. Ten years later,

however, significant questions remain regarding how this four-factor test is

being applied, as there has been little rigorous empirical examination of

eBay’s actual impact in patent litigation.

This Article helps fill this gap in the literature by reporting the results of an

original empirical study of contested permanent injunction decisions in

district courts for a 7.5-year period following eBay. It finds that eBay has

effectively created a bifurcated regime for patent remedies, as operating

companies who compete against an infringer still obtain permanent

injunctions in the vast majority of cases that are successfully litigated to

judgment. In contrast, non-competitors and other non-practicing entities are

generally denied injunctive relief. These findings are robust even after

controlling for the field of patented technology and the particular court that

decided the injunction request. This Article also finds that permanent

injunction rates vary significantly based on patented technology and forum.

Finally, this Article considers some implications of these findings for both

participants in the patent system and policy makers.

Associate Professor of Law, Washington and Lee University School of Law. I thank Eric

Claeys, Ryan Holte, Doug Rendleman, Karen Sandrik, Dave Schwartz, and participants of the First

Annual Workshop on Empirical Methods in Intellectual Property at IIT Chicago-Kent College of

Law, the 2015 Works in Progress in Intellectual Property Colloquium at the United States Patent

and Trademark Office, and the Fifth Annual Patent Conference at the University of Kansas

School of Law for their valuable feedback on this project. I also thank Sarah Kathryn Atkinson,

Ross Blau, Will Hoing, Sharon Jeong, and Richard Zhang for their excellent research assistance

on this project. The financial support of the Frances Lewis Law Center at Washington and Lee

University School of Law is gratefully acknowledged. Comments welcome at [email protected].

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1950 IOWA LAW REVIEW [Vol. 101:1949

I. INTRODUCTION ........................................................................... 1950

II. PROPERTY RULES, LIABILITY RULES, AND INTELLECTUAL PROPERTY:

AN OVERVIEW ............................................................................. 1954

III. PATENTS AND THE RIGHT TO EXCLUDE ...................................... 1959

A. HISTORICAL DEVELOPMENT ................................................... 1959

1. Initial District Court Decision .................................... 1962

2. Federal Circuit Decision ............................................. 1963

3. Supreme Court Decision ............................................ 1964

4. After Remand .............................................................. 1967

B. EXISTING LITERATURE ON EBAY’S IMPACT ............................. 1968

IV. METHODOLOGY .......................................................................... 1974

A. RESEARCH QUESTIONS ........................................................... 1974

B. STUDY DESIGN AND DATA COLLECTION .................................. 1975

C. LIMITATIONS ........................................................................ 1979

V. RESULTS AND DISCUSSION .......................................................... 1982

A. DECISIONS DATASET .............................................................. 1982

1. Overall Grant Rate ...................................................... 1982

2. Grant Rate by Patented Technology .......................... 1984

3. Grant Rate by District .................................................. 1985

4. Grant Rate by PAE Status ............................................ 1987

5. Grant Rate and Competition Between Litigants ....... 1990

6. Irreparable Harm Findings ........................................ 1992

7. Other eBay Factors ....................................................... 1994

8. Regression Analysis ..................................................... 1995

B. PATENTS DATASET ................................................................ 2000

C. IMPLICATIONS ....................................................................... 2002

VI. CONCLUSION .............................................................................. 2006

APPENDIX A: LIST OF INJUNCTION DECISIONS ....................................... 2007

I. I

NTRODUCTION

The Supreme Court’s 2006 opinion in eBay v. MercExchange, which held

that prevailing patentees in litigation are not automatically entitled to a

permanent injunction,

is widely regarded as one of the most significant

1. See eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393–94 (2006) (holding that the

Federal Circuit erred in “articulat[ing] a general rule, unique to patent disputes, that a

permanent injunction will issue once infringement and validity have been adjudged”).

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patent law decisions of the past decade.

It has been extensively cited by lower

federal courts,

and is the subject of numerous law review articles.

The case

has also spawned a significant transformation in the field of remedies,

reshaping the test for permanent injunctive relief in numerous areas outside

of patent law.

Despite its perceived importance, however, there has been little rigorous

empirical examination of eBay’s actual impact in patent litigation.

This is

significant because the eBay decision—which was unanimous—contains two

2. See Colleen V. Chien & Mark A. Lemley, Patent Holdup, the ITC, and the Public Interest, 98

ORNELL L. REV. 1, 8 (2012) (“The Supreme Court’s 2006 decision in eBay represented a sea change

in patent litigation.” (footnote omitted)); Ryan Davis, Top 15 High Court Patent Rulings of the Past 15

Years, L

AW360 (July 1, 2015, 8:27 PM), http://www.law360.com/articles/674205/top-15-high-court-

patent-rulings-of-the-past-15-years (ranking eBay as the second most important patent law decision since

2000).

3. A recent search of WestlawNext finds that eBay has been cited in over 2000 federal court

opinions. See Citing References for eBay Inc. v. MercExchange L.L.C., W

ESTLAWNEXT (last visited May 10,

2016); see also Dennis Crouch, Most Cited Supreme Court Patent Decisions (2005–2015), P

ATENTLY-O (Mar.

11, 2015), http://patentlyo.com/patent/2015/03/supreme-court-cases.html (listing eBay as the

second most cited U.S. Supreme Court patent case of the past decade).

4. For examples of significant eBay-related scholarship, see generally Andrew Beckerman-

Rodau, The Aftermath of eBay v. MercExchange, 126 S. Ct. 1837 (2006): A Review of Subsequent

Judicial Decisions, 89

J. PAT. & TRADEMARK OFF. SOC’Y 631 (2007); Michael W. Carroll, Patent

Injunctions and the Problem of Uniformity Cost, 13 M

ICH. TELECOMM. & TECH. L. REV. 421 (2007);

Bernard H. Chao, After eBay, Inc. v. MercExchange: The Changing Landscape for Patent Remedies, 9

INN. J.L. SCI. & TECH. 543 (2008); Chien & Lemley, supra note 2; Eric R. Claeys, The Conceptual

Relation Between IP Rights and Infringement Remedies, 22 G

EO. MASON L. REV. 825 (2015); Vincenzo

Denicolò et al., Revisiting Injunctive Relief: Interpreting eBay in High-Tech Industries with Non-

Practicing Patent Holders, 4 J.

COMPETITION L. & ECON. 571 (2008); Douglas Ellis et al., The

Economic Implications (and Uncertainties) of Obtaining Permanent Injunctive Relief After eBay v.

MercExchange, 17 F

ED. CIR. B.J. 437 (2008); Mark P. Gergen, John M. Golden & Henry E. Smith,

The Supreme Court’s Accidental Revolution? The Test for Permanent Injunctions, 112 C

OLUM. L. REV.

203 (2012); John M. Golden, “Patent Trolls” and Patent Remedies, 85 T

EX. L. REV. 2111 (2007)

[hereinafter Golden, Patent Trolls]; John M. Golden, Principles for Patent Remedies, 88 T

EX. L. REV.

505 (2010) [hereinafter Golden, Principles]; Ryan T. Holte, The Misinterpretation of eBay v.

MercExchange and Why: An Analysis of the Case History, Precedent, and Parties, 18 C

HAP. L. REV. 677

(2015) [hereinafter Holte, Misinterpretation of eBay]; Ryan T. Holte, Trolls or Great Inventors: Case

Studies of Patent Assertion Entities, 59 S

T. LOUIS U. L.J. 1 (2014) [hereinafter Holte, Trolls or Great

Inventors]; Sarah R. Wasserman Rajec, Tailoring Remedies to Spur Innovation, 61 A

M. U. L. REV. 733

(2012); Doug Rendleman, The Trial Judge’s Equitable Discretion Following eBay v. MercExchange,

27 R

EV. LITIG. 63 (2007); and Karen E. Sandrik, Reframing Patent Remedies, 67 U. MIAMI L. REV.

95 (2012).

5. See Gergen et al., supra note 4, at 205 (“[T]he four-factor test from eBay has, in many

federal courts, become the test for whether a permanent injunction should issue, regardless of

whether the dispute in question centers on patent law, another form of intellectual property,

more conventional government regulation, constitutional law, or state tort or contract law.”); see

also Shyamkrishna Balganesh, Demystifying the Right to Exclude: Of Property, Inviolability, and

Automatic Injunctions, 31 H

ARV. J.L. & PUB. POL’Y 593, 598–99 (2008) (discussing eBay’s impact

in real and personal property law); Jiarui Liu, Copyright Injunctions After eBay: An Empirical Study,

16 L

EWIS & CLARK L. REV. 215, 218 (2012) (examining “how much the eBay decision has guided,

and should guide, copyright cases”).

6. See infra Part III.C (discussing the existing empirical work on this subject).

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concurring opinions that express seemingly divergent perspectives regarding

the availability of permanent injunctions in future patent cases.

In particular,

it remains hotly contested whether so-called patent assertion entities

(“PAEs”)

—firms who principally exploit their patents through litigation

and/or licensing rather than directly practicing them and who are sometimes

pejoratively referred to as “patent trolls”

—should be able to obtain injunctive

relief.

This Article helps fill this significant gap in the literature by reporting the

results of an original empirical study of contested permanent injunction

decisions in the federal district courts for a 7.5 year period following eBay,

representing the most in-depth effort to date to assess the post-eBay landscape.

The data in this study reveal that, while the vast majority of patentees still

obtain injunctive relief following eBay, PAEs rarely do.

This finding remains

robust even after controlling for the field of technology of the infringed

patents and the district court that decided the case.

Furthermore, PAEs

7. See infra Part III.B.3.

8. See F

ED. TRADE COMM’N, THE EVOLVING IP MARKETPLACE: ALIGNING PATENT NOTICE

AND

REMEDIES WITH COMPETITION 220 n.21 (2011) (“This report uses the term ‘patent assertion

entity’ [or PAE] . . . to refer to firms whose business model focuses on purchasing and asserting

patents.”); Colleen V. Chien, From Arms Race to Marketplace: The Complex Patent Ecosystem and Its

Implications for the Patent System, 62

HASTINGS L.J. 297, 328 (2010) (explaining that PAEs “are

focused on the enforcement, rather than the active development or commercialization of their

patents,” and noting that PAEs “can be further divided into several types—large-portfolio

companies, small-portfolio companies, and individuals”); see also James Bessen & Michael J.

Meurer, The Direct Costs from NPE Disputes, 99 C

ORNELL L. REV. 387, 390 (2014) (defining a related

concept, non-practicing entities (“NPEs”), as “individuals and firms who own patents but do not

directly use their patented technology to produce goods or services, instead asserting their

patents against companies that do produce goods and services”).

9. See In re Packard, 751 F.3d 1307, 1325 (Fed. Cir. 2014) (Plager, J., concurring) (“Patent

trolls are also known by a variety of other names: ‘patent assertion entities’ (PAEs), [and] ‘non-

practicing entities’ (NPEs).”). For an informative history of the term “patent troll” and its

malleability, see Kristen Osenga, Formerly Manufacturing Entities: Piercing the “Patent Troll” Rhetoric,

47 C

ONN. L. REV. 435, 442–45 (2014). See also Edward Lee, Patent Trolls: Moral Panics, Motions in

Limine, and Patent Reform, 19 S

TAN. TECH. L. REV. 113, 117 (2015) (conducting “the first empirical

study of the use of the term ‘patent troll’ by U.S. media” and finding that “starting in 2006, the

U.S. media surveyed used ‘patent troll’ far more than any other term, despite the efforts of

scholars to devise alternative, more neutral-sounding terms”).

10. Compare F

ED. TRADE COMM’N, supra note 8, at 229 (explaining that when a PAE “seeks

to license broadly, denial of an injunction” may be appropriate), and Mark A. Lemley & Carl

Shapiro, Patent Holdup and Royalty Stacking, 85 T

EX. L. REV. 1991, 2035–36 (2007) (contending

that a “presumptive right to injunctive relief” should apply for patent holders who compete or

exclusively license to a party that does, with other patentees being subject to a less favorable rule),

with Golden, Patent Trolls, supra note 4, at 2148 (contending that “a categorically discriminatory

rule” against non-practicing patentees “is not needed”), and Richard A. Epstein, The Property Rights

Movement and Intellectual Property, R

EG. 58, 62 (2008) (criticizing eBay as creating a risk of

“systematic under-compensation during the limited life of a patent[, which] is likely to reduce

the level of innovation while increasing the administrative costs of running the entire system”).

11. See infra Part V.A.4.

12. See infra Part V.A.8.

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often cannot establish the type of injury deemed “irreparable” following eBay,

which is a prerequisite to obtaining a permanent injunction.

In sum, district

courts appear to have adopted a de facto rule against injunctive relief for PAEs

and other patent owners who do not directly compete in a product market

against an infringer—a rule which, ironically, is in tension with the Supreme

Court’s conclusion in eBay that “the District Court erred in its categorical

denial of injunctive relief” to a non-practicing patentee.

This Article also evaluates the impact of other considerations on

permanent injunction decisions after eBay. It finds that grant rates vary

significantly by field of technology, with injunctions nearly always granted in

cases involving patented drugs and biotechnology, but much less often for

disputes involving computer software.

The study also finds that grant rates

differ by district, even after controlling for the propensity of PAE litigants to

file lawsuits in particular courts.

Furthermore, it assesses whether several

other factors mentioned in the concurring opinions in eBay and the district

court’s decision after remand—such as the patentee’s willingness to license

the patented technology, whether the patented technology covers only a small

component of an infringing product, and a finding that the defendant

willfully infringed the patent—are correlated with injunction decisions.

Finally, this Article reports the results of a second, related dataset that

explores whether traditionally accepted indicators of patent value are

correlated with injunction decisions.

Somewhat surprisingly, it finds that

these indicators are not predictive of whether a patentee is likely to receive an

injunction.

The balance of this Article is organized as follows. Part II provides an

overview of the theoretical distinction between property rules and liability

rules for enforcing legal rights, focusing on their application to intellectual

property (“IP”) rights. Part III traces the historical development of the right

to exclude in patent law. It then analyzes the eBay litigation and concludes

with an overview of the existing literature on eBay’s impact in patent litigation.

Part IV describes the research questions considered in this empirical study

and the methodology used to address them. Part V reports the study’s findings

and assesses their implications for patentees, users of patented technology,

13. See infra Part V.A.6.

14. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 394 (2006); see also MercExchange

L.L.C. v. eBay, Inc. (MercExchange I), 275 F. Supp. 2d 695, 712 (E.D. Va. 2003) (“In the case at

bar, the evidence of the plaintiff’s willingness to license its patents, its lack of commercial activity

in practicing the patents, and its comments to the media as to its intent with respect to

enforcement of its patent rights, are sufficient to rebut the presumption that it will suffer

irreparable harm if an injunction does not issue.”).

15. See infra Part V.A.2.

16. See infra Parts V.A.3, V.A.8.

17. See infra Part V.A.8.

18. See infra notes 202, 316–19 and accompanying text.

19. See infra Part V.B.

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1954 IOWA LAW REVIEW [Vol. 101:1949

and the patent system and innovation policy more generally. In particular, it

considers the impact of widespread denial of injunctive relief on non-

practicing patentees. Part VI concludes.

II. P

ROPERTY RULES, LIABILITY RULES, AND INTELLECTUAL PROPERTY:

N OVERVIEW

In their landmark article, Property Rules, Liability Rules, and Inalienability:

One View of the Cathedral, now-Judge Guido Calabresi and A. Douglas Melamed

developed an analytic framework for protecting “entitlements”—the right to

do something, or the right to prevent others from doing something.

entitlement is not self-executing. Rather, the legal system must establish some

mechanism to enforce entitlements.

Calabresi and Melamed distinguished

between two primary forms

of protection for an entitlement: property rules

and liability rules.

Under a property rule, an entitlement can only be taken or transferred

with a property owner’s consent.

As explained by Calabresi and Melamed,

20. See Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and

Inalienability: One View of the Cathedral, 85 H

ARV. L. REV. 1089, 1090 (1972) (“The first issue which

must be faced by any legal system is one we call the problem of ‘entitlement.’ Whenever a state is

presented with the conflicting interests of two or more people . . . it must decide which side to

favor. . . . Hence the fundamental thing that law does is to decide which of the conflicting parties

will be entitled to prevail.”); see also Madeline Morris, The Structure of Entitlements, 78 C

ORNELL L.

REV. 822, 827–39 (1993) (describing in more detail the allocation and construction of legal

entitlements).

21. See Calabresi & Melamed, supra note 20, at 1090 (“Having made its . . . choice, society

must enforce that choice. Simply setting the entitlement does not avoid the problem of ‘might

makes right’; a minimum of state intervention is always necessary.”).

22. A third form of protection for entitlements, inalienable entitlements, exists when the

transfer of that entitlement “is not permitted between a willing buyer and a willing seller.” Id. at

1092. For purposes of this Article, inalienable entitlements are not at issue, as patent rights are

freely transferable to others through assignment and licensing. See 35 U.S.C. § 261 (2012)

(noting that patents and patent applications “shall be assignable in law by an instrument in

writing”); Isr. Bio-Eng’g Project v. Amgen, Inc., 475 F.3d 1256, 1264 (Fed. Cir. 2007) (“Under

long established law, a patentee or his assignee may grant and convey to another: (1) the whole

patent, (2) an undivided part or share of that exclusive right, or (3) the exclusive right under the

patent within and throughout a specified part of the United States.”).

23. Calabresi & Melamed, supra note 20, at 1092. Calabresi and Melamed correctly note

that “[t]he[se] categories are not . . . absolutely distinct.” Id. For instance, if monetary damages—

which usually embody a liability rule—are sufficiently high, they can operate more like a property

rule because potential takers of an entitlement would be deterred from doing so. See Ian Ayres &

Eric Talley, Solomonic Bargaining: Dividing a Legal Entitlement to Facilitate Coasean Trade, 104 Y

ALE

L.J. 1027, 1040–41 (1995) (explaining that with “relatively high damages, potential takers would

be deterred from nonconsensual takings, and the entitlement would be transferred only by

consensual agreement”). Some scholars have criticized the distinction between property rules

and liability rules as having little relationship to the normative judgments embedded in private

law remedies determinations. See Claeys, supra note 4, at 839–40 (contending that “‘Cathedral’-

style analysis raises normative questions more vexing than is often appreciated,” including

measures of efficiency and initial allocation of resource entitlements to parties).

24. See Calabresi & Melamed, supra note 20, at 1105 (“In our framework, much of what is

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“[a]n entitlement is protected by a property rule to the extent that someone

who wishes to remove the entitlement from its holder must buy it from him

in a voluntary transaction in which the value of the entitlement is agreed upon

by the seller.”

For instance, a property rule would require the user of an IP

right to obtain prior permission from its owner, which the owner would be

free to withhold.

Thus, the holder of an entitlement protected by a property

rule has the exclusive power to determine its value ex ante.

Injunctive relief

is the dominant means for enforcing a property rule.

In contrast, a liability rule exists when another party may violate an

entitlement “if [it] is willing to pay an objectively determined value for it.”

Thus, under a liability-rule regime, entitlements are protected, “but their

transfer or destruction is allowed on the basis of a value determined by some

[third-party authority] rather than by the parties themselves.”

For instance,

a liability rule applies when an IP right may be infringed in exchange for a

predetermined royalty rate, as is the case for several compulsory licensing

generally called private property can be viewed as an entitlement which is protected by a property

rule. No one can take the entitlement . . . unless the holder sells it willingly and at the price at

which he subjectively values the property.”).

25. Id. at 1092.

26. See Robert P. Merges, Of Property Rules, Coase, and Intellectual Property, 94 C

OLUM. L. REV.

2655, 2655 (1994) (“[A] property rule is a legal entitlement that can only be infringed after

bargaining with the entitlement holder.”).

27. See Calabresi & Melamed, supra note 20, at 1092 (explaining that a property rule “lets

each of the parties say how much the entitlement is worth . . . and gives the seller a veto if the

buyer does not offer enough”); see also Richard A. Epstein, A Clear View of The Cathedral: The

Dominance of Property Rules, 106 Y

ALE L.J. 2091, 2091 (1997) (“Because property rules give one

person the sole and absolute power over the use and disposition of a given thing, it follows that

its owner may hold out for as much as he pleases before selling the thing in question . . . .”).

28. See Merges, supra note 26, at 2655 (calling injunctions “the classic instance of a property

rule”); Henry E. Smith, Property and Property Rules, 79 N.Y.U.

L. REV. 1719, 1720 (2004) (“Such

‘property rules’ would include injunctions . . . .”). As my colleague Professor Doug Rendleman

has explained, however, an enjoined party “can violate an injunction and convert the plaintiff’s

[property] right into a cause of action for compensatory contempt, money,” and monetary

remedies are more characteristic of a liability rule. D

OUG RENDLEMAN, COMPLEX LITIGATION:

INJUNCTIONS, STRUCTURAL REMEDIES, AND CONTEMPT 128 (2010); see also John M. Golden,

Injunctions as More (or Less) than “Off Switches”: Patent-Infringement Injunctions’ Scope, 90 T

EX. L. REV.

1399, 1412–13 (2012) (“When any threat of being found in contempt is realistically limited to a

threat of civil contempt . . . [the] risk of being found in contempt can essentially amount to no

more than a risk of being subjected to heightened but still limited monetary sanctions.”).

29. Calabresi & Melamed, supra note 20, at 1092.

30. Id. Eric Claeys has criticized the “liability rule” concept as failing to fully reflect “private

law judgments about wrongs and rights” and thus “eras[ing] some of the stigma associated with”

certain forms of tortious conduct. Claeys, supra note 4, at 845–46; see also Jules L. Coleman & Jody

Kraus, Rethinking the Theory of Legal Rights, 95 Y

ALE L.J. 1335, 1340 (1986) (asserting that because

“liability rules neither confer nor respect a domain of lawful control, liability rules cannot, in this

view, protect rights. . . . The very idea of a ‘liability rule entitlement,’ that is of a right secured by

a liability rule, is inconceivable”).

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1956 IOWA LAW REVIEW [Vol. 101:1949

provisions in the Copyright Act.

As a result, “a liability rule denies the holder

of the asset the power to exclude others.”

There is a sizable body of literature analyzing the normative question of

whether property rules or liability rules are preferable for the enforcement of

IP rights.

Traditionally, the property rule of injunctive relief “has dominated

the law of intellectual property.”

Several rationales have been offered in

support of “the strong presumption” of property rules for IP rights.

First,

unlike most other forms of property (e.g., real property), intellectual property

is non-rivalrous and non-excludable absent effective legal protection.

This

prevents owners of intellectual property from restricting access to “free riders”

who have not incurred the costs of creation from exploiting it.

The difficulty

31. See, e.g., 17 U.S.C. § 111 (2012) (compulsory licensing of secondary transmission of

television programming by cable systems); id. § 114(d)–(f) (compulsory licensing of certain

digital audio transmissions); id. § 115 (compulsory licensing of previously-released nondramatic

musical works); see also Daniel A. Crane, Intellectual Liability, 88 T

EX. L. REV. 253, 259–63 (2009)

(discussing in further detail compulsory licensing provisions in the Copyright Act); Joseph P. Liu,

Regulatory Copyright, 83 N.C.

L. REV. 87, 108–22 (2004) (detailing the compulsory licensing

provisions’ depth and scope).

32. Epstein, supra note 27, at 2091; see also Andrew W. Torrance & Bill Tomlinson, Property

Rules, Liability Rules, and Patents: One Experimental View of the Cathedral, 14 Y

ALE J.L. & TECH. 138,

144 (2011) (“Under a liability rule, the owner of an entitlement is legally powerless to keep it

exclusively for herself.”).

33. See Mark A. Lemley & Philip J. Weiser, Should Property or Liability Rules Govern

Information?, 85 T

EX. L. REV. 783, 784 (2007) (arguing that liability rules are preferable to

traditional property rights in markets where injunctive relief cannot be narrowly tailored);

Merges, supra note 26, at 2664–65 (arguing property rights are generally preferable in protecting

intellectual property); Henry E. Smith, Intellectual Property as Property: Delineating Entitlements in

Information, 116 Y

ALE L.J. 1742, 1799–1806 (2007) (explaining how information costs help

explain why copyright law relies more on liability rights and patent law relies more on property

rights); Stewart E. Sterk, Property Rules, Liability Rules, and Uncertainty About Property Rights, 106

ICH. L. REV. 1285, 1304–08 (2008) (arguing that liability rules limit incentives to conduct

searches for the scope of property rights); see also Crane, supra note 31, at 255 (reframing the

“property–liability debate” by focusing more broadly on other rights inherent in intellectual

property).

34. Ben Depoorter, Property Rules, Liability Rules and Patent Market Failure, 1 E

RASMUS L. REV.

59, 61 (2008); see also Balganesh, supra note 5, at 598 (“[T]he right to exclude in the context of

both tangible and intangible property has come to be associated with an entitlement to

exclusionary (injunctive) relief.”); Kenneth W. Dam, The Economic Underpinnings of Patent Law, 23

LEGAL STUD. 247, 255 (1994) (“Remedies for infringement of a patent are, with limited

exceptions, those appropriate for property. Injunctions, both permanent and temporary, are

available against infringers on proof of validity and infringement.”).

35. Merges, supra note 26, at 2667.

36. Smith, supra note 33, at 1744; see also R

OBERT P. MERGES, PETER S. MENELL & MARK A.

LEMLEY, INTELLECTUAL PROPERTY IN THE NEW TECHNOLOGICAL AGE 2 (6th ed. 2012) (“All

justifications for intellectual property protection . . . must contend with a fundamental difference

between ideas and tangible property. Tangible property . . . is composed of atoms, physical things

that can occupy only one place at a given time. This means that possession of a physical thing is

necessarily ‘exclusive’ . . . . Ideas, though, do not have this characteristic of excludability.”).

37. See Michael A. Carrier, Cabining Intellectual Property Through a Property Paradigm, 54 D

UKE

L.J. 1, 32–33 (2004). For the leading critique of the idea that eliminating free riding is a primary

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of valuing IP rights is another rationale advanced for a property rule.

“Because each asset covered by an [IP right] is in some sense unique,” it can

be “difficult for a court . . . to properly value the [IP] right-holder’s loss.”

However, some scholars have argued in favor of imposing liability rules

on IP rights, at least in certain circumstances.

One situation where liability

rules may be preferred is when private ordering—for instance, ex ante

licensing under a property rule—would result in an inefficient outcome. This

might occur, for example, if high transaction costs prevent the parties from

reaching an otherwise mutually beneficial agreement regarding the use of IP

rights.

High transaction costs may exist if numerous parties are involved in

the bargaining process, such as when IP rights to various aspects of a particular

technology are owned by disparate entities.

These difficulties may be

compounded by the uncertain scope of some IP rights, such as the meaning

of a patent’s claims.

Holdup is another reason advanced by some scholars for adopting

liability rules.

Holdup occurs when an IP owner uses the prospect of

goal of intellectual property law, see Mark A. Lemley, Property, Intellectual Property, and Free Riding,

83 T

EX. L. REV. 1031, 1032 (2005).

38. See T

HOMAS F. COTTER, COMPARATIVE PATENT REMEDIES: A LEGAL AND ECONOMIC

ANALYSIS 54 (2013) (“[T]he job of putting a value on patent rights is inherently difficult,

particularly in industries in which the technology itself is rapidly evolving.”); Golden, Patent Trolls,

supra note 4, at 2152 (explaining “[t]he difficulty of assessing [damages] has in fact been one of

the principal rationales for granting permanent injunctions” in patent cases).

39. Merges, supra note 26, at 2664. One common approach for valuing IP is to compare

“the advantages it confers . . . with the next-best available alternative.” C

OTTER, supra note 38, at

53–54; see also Christopher B. Seaman, Reconsidering the Georgia-Pacific Standard for Reasonable

Royalty Patent Damages, 2010 BYU

L. REV. 1661, 1711–15 (2010) (discussing the role of non-

infringing alternatives in determining royalty rates for patent rights).

40. See Crane, supra note 31, at 254 (“Intellectual property is incrementally moving away

from . . . . a property regime to a liability regime.”).

41. See Ian Ayres & J.M. Balkin, Legal Entitlements as Auctions: Property Rules, Liability Rules,

and Beyond, 106 Y

ALE L.J. 703, 706 n.9 (1996) (“[L]egal scholars have interpreted Calabresi and

Melamed to be saying that property rules are more efficient when transaction costs are low.”);

Merges, supra note 26, at 2655 (“Ever since Calabresi and Melamed, transaction costs have

dominated the choice of the proper entitlement rule, with a liability rule being the entitlement

of choice when transaction costs are high.”). Collective rights organizations have emerged as one

mechanism to mitigate this problem. See generally Robert P. Merges, Contracting into Liability Rules:

Intellectual Property Rights and Collective Rights Organizations, 84 CALIF. L. REV. 1293 (1996).

42. See Lemley & Weiser, supra note 33, at 793 (noting “that if a buyer must aggregate rights

from a number of different parties in order to achieve a useful end result, it will have to deal with

a number of different sellers,” thus raising transaction costs).

43. See J

AMES BESSEN & MICHAEL J. MEURER, PATENT FAILURE: HOW JUDGES, BUREAUCRATS,

AND

LAWYERS PUT INNOVATORS AT RISK 46–72 (2008) (arguing that patents fail to provide clear

notice of the scope of patent rights); Greg Reilly, Completing the Picture of Uncertain Patent Scope, 91

ASH. U. L. REV. 1353, 1353 (2014) (“Uncertain patent scope is perhaps the most significant

problem facing the patent system.”); see also Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki

Co., 535 U.S. 722, 731 (2002) (“Unfortunately, the nature of language makes it impossible to

capture the essence of a thing in a patent application.”).

44. See Mark A. Lemley, Contracting Around Liability Rules, 100 C

ALIF. L. REV. 463, 468

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injunctive relief to extract compensation significantly in excess of the IP

right’s economic value.

Proponents of a liability rule in these situations

assert that “[i]njunction threats often involve a strong element of holdup in

the common circumstance in which the defendant has already invested

heavily to design, manufacture, market, and sell [a] product” that practices

the patented technology.

At that point, the infringer “would be willing to

pay much more than he rationally would have negotiated ex ante in order not

to pull the product from the shelves.”

Critics of property rules argue that

holdup operates as a “tax” on new high-tech products, which ultimately

impedes growth rather than promoting innovation.

Other scholars,

however, have questioned whether holdup is a significant problem on both

empirical and theoretical levels.

In sum, the theoretical literature has historically favored protecting IP

rights—particularly patent rights—through property rules. But as explained

(2012) (“The biggest risk of applying property rules in IP cases is holdup.”).

45. See F

ED. TRADE COMM’N, supra note 8, at 58 (“Under some circumstances, the grant or

threat of a permanent injunction can lead an infringer to pay higher royalties than it would pay

in a competitive market for a patented invention.”); see also C

OTTER, supra note 38, at 59

(“[P]atent[ed] holdup involves the strategic use of a patent . . . to extract ex post rents that are

disproportionate to the ex ante value of the invention in comparison with the next-best available

alternative.”); Alexander Galetovic, Stephen Haber & Ross Levine, An Empirical Examination of

Patent Holdup, 11 J.

COMPETITION L. & ECON. 549, 549–50 (2015) (“[T]he patent holdup

hypothesis asserts that patent holders charge licensing royalties to manufacturing firms that

exceed the true economic contribution of the patented technology, thereby discouraging

innovation by manufacturers and hurting consumers.”); Lemley & Shapiro, supra note 10, at 1993

(“[T]he threat of an injunction can enable a patent holder to negotiate royalties far in excess of

the patent holder’s true economic contribution.”).

46. Lemley & Shapiro, supra note 10, at 1993 (emphasis omitted); see also C

OTTER, supra

note 38, at 59 (explaining that the strategy of holdup “rests upon the patent owner’s ability to

obtain an injunction against the distribution of the end product, after the costs of designing,

producing, and distributing the end product have been sunk”).

47. C

OTTER, supra note 38, at 59; see also Lemley & Shapiro, supra note 10, at 1995–2008

(modeling how a patent holder can exploit the cost of switching technologies to obtain licensing

revenue greater than would have occurred in an ex ante negotiation). The holdup problem is

asserted to be particularly acute for widely-adopted technological standards, where a single patent

owner can use the threat of an injunction to “extract unreasonably high royalties from suppliers

of standard-compliant products and services.” Microsoft Corp. v. Motorola, Inc., 696 F.3d 872,

876 (9th Cir. 2012); see also Mark A. Lemley, Ten Things to Do About Patent Holdup of Standards

(and One Not to), 48 B.C.

L. REV. 149, 153–54 (2007).

48. Lemley & Shapiro, supra note 10, at 1993; see also

FED. TRADE COMM’N, supra note 8, at

26 (explaining that “[a]n injunction’s ability to cause patent hold-up . . . can deter innovation by

increasing costs and uncertainty for manufacturers” and “raise prices to consumers by depriving

them of the benefit of competition among technologies”).

49. See generally Einer Elhauge, Do Patent Holdup and Royalty Stacking Lead to Systematically

Excessive Royalties?, 4 J.

COMPETITION L. & ECON. 535 (2008); Golden, Patent Trolls, supra note 4,

at 2148–60; J. Gregory Sidak, Holdup, Royalty Stacking, and the Presumption of Injunctive Relief for

Patent Infringement: A Reply to Lemley & Shapiro, 92 M

INN. L. REV. 714 (2008); see also Galetovic et

al., supra note 45, at 552–54, 570–72 (finding no empirical evidence to support the claim of

holdup for standard-essential patents).

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in more detail in the balance of this Article, eBay represents a significant shift

away from a property rule approach, at least for certain types of patent owners.

III. P

ATENTS AND THE RIGHT TO EXCLUDE

This Part chronicles the historic right of patentees to a property rule

excluding others from practicing patented inventions. It then analyzes the

eBay litigation and the Supreme Court’s announcement of a four-factor test

to govern the district courts’ equitable power to grant injunctive relief. Finally,

it addresses the existing literature regarding eBay’s impact on the availability

of permanent injunctions in patent litigation.

A. H

ISTORICAL DEVELOPMENT

Property rules have long predominated in patent law.

As Chief Justice

Roberts noted in his concurrence in eBay, since “at least the early 19th

century, courts have granted injunctive relief upon a finding of infringement

in the vast majority of patent cases.”

The Patent Act of 1790, passed by the First Congress, granted inventors

“the sole and exclusive right and liberty of making, constructing, using and

vending to others to be used, the . . . invention or discovery.”

The earliest

patent laws provided only for remedies at law—that is, recovery of monetary

damages for infringing conduct.

Starting in 1819, however, Congress

expressly authorized injunctive relief to preclude future infringement:

[T]he circuit courts of the United States . . . shall have authority to

grant injunctions, according to the course and principles of courts

of equity, to prevent the violation of the rights of any . . . inventors,

secured to them by any laws of the United States, on such terms and

conditions as the said courts may deem fit and reasonable . . . .

The current statutory language in § 283 of the Patent Act is remarkably

similar, providing that “courts . . . may grant injunctions in accordance with

50. See supra note 34; see also Frank H. Easterbrook, Intellectual Property is Still Property, 13

ARV. J.L. & PUB. POL’Y 108, 109 (1990) (“Patents give a right to exclude, just as the law of

trespass does with real property.”).

51. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 395 (2006) (Roberts, C.J., concurring).

52. An Act to Promote the Progress of Useful Arts, ch. 7, § 1, 1 Stat. 109, 110 (1790).

53. See 3 W

ILLIAM C. ROBINSON, THE LAW OF PATENTS FOR USEFUL INVENTIONS § 1082,

391–92 (1890) (“The acts of Congress, prior to 1819, made no provision for any suit in equity

by the owner of a patent, nor for his enjoyment of any form of equitable relief in connection with

his action for damages at common law.”); see also Elizabeth E. Millard, Note, Injunctive Relief in

Patent Infringement Cases: Should Courts Apply a Rebuttable Presumption of Irreparable Harm After eBay

Inc. v. MercExchange, L.L.C.?, 52 S

T. LOUIS U. L.J. 985, 992 (2008) (noting that “the earliest

patent statutes provided only for remedies at law”).

54. An Act to Extend the Jurisdiction of the Circuit Courts of the United States to Cases

Arising Under the Law Relating To Patents, ch. 19, 3 Stat. 481, 481–82 (1819).

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the principles of equity to prevent the violation of any right secured by patent,

on such terms as the court deems reasonable.”

Prior to eBay, courts routinely characterized patents as conferring a

property right on their owners.

In turn, the right to exclude has been widely

viewed as the “hallmark of a protected property interest”

and “one of the

most treasured strands in an owner’s bundle of property rights.”

As early as

1852, the Supreme Court declared that the rights conferred by a patent

include “the right to exclude [others] from making, using, or vending the

thing patented, without the permission of the patentee.”

The Court’s 1908 decision in Continental Paper Bag Co. v. Eastern Paper Bag

Co. confirmed that patents confer the right to exclude others, even if the

patentee itself has not practiced the patent.

In that case, the patent owner,

Eastern Paper Bag Co. (“Eastern”), had purchased a patent on an improved

machine for making paper bags, but Eastern did not use the improved

machine, nor did it license anyone else to do so, as it feared that a competitor

using the improved machine would erode its profits.

A competing

manufacturer, Continental Paper Bag Co. (“Continental”), started using a

55. 35 U.S.C. § 283 (2012).

56. See, e.g., Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 730

(2002) (explaining that the patent laws provide “a temporary monopoly . . . [which] is a property

right”); Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627, 642

(1999) (noting that patents “have long been considered a species of property”); Dawson Chem.

Co. v. Rohm & Haas Co., 448 U.S. 176, 215 (1980) (noting “the long-settled view that the essence

of a patent grant is the right to exclude”); Hartford-Empire Co. v. United States, 323 U.S. 386,

415 (1945) (stating that it “has long been settled” that “a patent is property, protected against

appropriation both by individuals and by government”); Wilson v. Rousseau, 45 U.S. (4 How.)

646, 674 (1846) (explaining that “[t]he law has thus impressed upon [a patent] all the qualities

and characteristics of property”). The Patent Act provides that “patents shall have the attributes

of personal property.” 35 U.S.C. § 261 (2012).

57. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. at 643.

58. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 435 (1982); see also

Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979) (describing “the right to exclude” as

“one of the most essential sticks in the bundle of rights that are commonly characterized as

property”); Lemley & Weiser, supra note 33, at 783 (“The foundational notion of property law is

that the ‘right to exclude’ is the essence of a true property right.”); Thomas W. Merrill, Property

and the Right to Exclude, 77 N

EB. L. REV. 730, 730 (1998) (“[T]he right to exclude others is more

than just ‘one of the most essential’ constituents of property—it is the sine qua non.”).

59. Bloomer v. McQuewan, 55 U.S. (14 How.) 539, 549 (1852); see also Herbert F. Schwartz,

Note, Injunctive Relief in Patent Infringement Suits, 112 U.

PA. L. REV. 1025, 1041–42 (1964) (“By the

middle of the nineteenth century, courts generally recognized that the plaintiff was entitled to . . . an

injunction against future infringements for the life of the patent.” (footnotes omitted)).

60. Cont’l Paper Bag Co. v. E. Paper Bag Co., 210 U.S. 405, 429 (1908).

61. Id. at 407, 427–28. According to the trial court, Eastern’s purpose in purchasing the

patent-in-suit was to “lock[ ] up” the technology and thus prevent competitors from using it for

the rest of the patent’s life. See E. Paper Bag Co. v. Cont’l Paper Bag Co., 142 F. 479, 487 (C.C.D.

Me. 1905) (“[Eastern] has never attempted to make any practical use of [the patent], either itself

or through licenses, and apparently its proposed policy has been to avoid this.”).

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machine that allegedly infringed on Eastern’s patent.

The trial court found

Eastern’s patent valid and infringed, and it granted permanent injunctive

relief.

On appeal, Continental argued the trial court erred in granting an

injunction because Eastern had unreasonably failed to use the patented

invention.

Continental’s argument was primarily based on the policy claim

that Eastern’s non-use did not promote the constitutional purpose of the

patent system “to promote the progress of science and useful arts.”

The

Court rejected this claim, holding that “patents are property” and thus are

“entitled to the same rights and sanctions as other property.”

Because a

patent is the “absolute property” of its owner, the Court reasoned, Eastern was

entitled to “insist upon all the advantages and benefits which [patent law]

promises,” including injunctive relief, despite its non-use.

It concluded by

explaining that the patent “right can only retain its attribute of exclusiveness

by a prevention of its violation. Anything but prevention takes away the

privilege which the law confers upon the patentee.”

After its creation by Congress in 1982, the U.S. Court of Appeals for the

Federal Circuit—which hears all appeals of patent infringement claims

—

continued to treat patents as conferring a strong property right to exclude.

For instance, it stated in one early decision that “the right to exclude

recognized in a patent is . . . the essence of the concept of property.”

Although recognizing that “a district court has discretion whether to enter an

injunction,”

the Federal Circuit declared “that an injunction should issue

once infringement has been established unless there is a sufficient reason for

denying it.”

In practice, this resulted in a “general rule that courts will issue

permanent injunctions against patent infringement.”

Only in rare instances,

62. Cont’l Paper Bag Co., 210 U.S. at 416.

63. Id. at 407. The court also ordered an accounting of Continental’s profits derived from

the infringement. Id.

64. Id. at 422.

65. Id. at 422–23 (citing U.S. C

ONST. art. I, § 8).

66. Id. at 425.

67. Id. at 424.

68. Id. at 430.

69. 28 U.S.C. § 1295(a)(1) (2012).

70. See In re Etter, 756 F.2d 852, 859 (Fed. Cir. 1985) (“The patent right is a right to exclude. . . .

The essence of all property is the right to exclude, and the patent property right is certainly not

inconsequential.”); Carl Schenck, A.G. v. Nortron Corp., 713 F.2d 782, 786 n.3 (Fed. Cir. 1983) (“The

patent right is but the right to exclude others, the very definition of ‘property.’”).

71. Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1548 (Fed. Cir. 1983) (citation

omitted); see also Dawson Chem. Co. v. Rohm & Hass Co., 448 U.S. 176, 215 (1980) (noting “the

long-settled view that the essence of a patent grant is the right to exclude”).

72. Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552, 1564 (Fed. Cir. 1984)

(citation omitted).

73. W.L. Gore & Assocs., Inc. v. Garlock, Inc. 842 F.2d 1275, 1281 (Fed. Cir. 1988).

74. MercExchange, L.L.C. v. eBay, Inc. (MercExchange II), 401 F.3d 1323, 1339 (Fed. Cir. 2005).

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such as to prevent harm to public health or welfare, did courts deny

permanent injunctions.

B. eBay v. MercExchange

This Subpart describes the eBay litigation, culminating with the Supreme

Court’s rejection of the “general rule” in favor of injunctive relief and its

replacement with a four-factor test. As explained in more detail below, the

application of this four-factor test represents a significant shift away from

property rules toward liability rules for the enforcement of patent rights.

1. Initial District Court Decision

MercExchange, L.L.C., a failed startup founded by the inventor of the

patent-in-suit,

asserted that eBay, Inc., infringed U.S. Patent No. 5,845,265

(“the ‘265 patent”), which claimed a method and apparatus “for an electronic

market designed to facilitate the sale of goods between private individuals by

establishing a central authority to promote trust among participants.”

After

a five-week trial, a jury found the ‘265 patent (and one other patent in the

same family as the ‘265 patent) was valid and infringed, and it awarded

MercExchange $35 million in damages.

MercExchange subsequently moved for entry of a permanent injunction,

which the district court denied.

While recognizing that “the grant of

injunctive relief against the infringer is considered the norm,” the district

court stated that it was required to consider “traditional equitable principles,”

including “(i) whether the plaintiff would face irreparable injury if the

injunction did not issue, (ii) whether the plaintiff has an adequate remedy at

75. See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1547 (Fed. Cir. 1995) (“[C]ourts have

in rare instances exercised their discretion to deny injunctive relief in order to protect the public

interest.”); City of Milwaukee v. Activated Sludge, Inc., 69 F.2d 577, 593 (7th Cir. 1934) (denying

a permanent injunction that would have required closing Milwaukee’s sewage treatment plan and

dumping untreated sewage into Lake Michigan, thus endangering “the health and the lives of

more than half a million people”). One notable example of a pre-eBay denial of a permanent

injunction occurred in Foster v. American Machine & Foundry Co., where the Second Circuit

affirmed the trial court’s denial of a permanent injunction when a patentee who did not

manufacture a product using the patented technology sought to exclude a manufacturing

infringer. Foster v. Am. Mach. & Foundry Co., 492 F.2d 1317, 1324 (2d Cir. 1974).

76. For a detailed description of MercExchange and its founder, Thomas G. Woolston, who was

also the inventor of the ‘265 patent, see Holte, Trolls or Great Inventors, supra note 4, at 23–30.

77. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 390 (2006).

78. MercExchange I, 275 F. Supp. 2d 695, 698–99 (E.D. Va. 2003). The district court struck $5.5

million from the jury’s award for eBay’s inducement of a third party to infringe the ‘265 patent,

concluding that it would result in impermissible double counting. Id. at 710. In addition, the jury’s $4.5

million verdict for infringement of another patent-in-suit (U.S. Patent No. 6,085,176) was subsequently

vacated on appeal because that patent was invalid as anticipated. MercExchange II, 401 F.3d at 1333–35

(referring to MercExchange I, 275 F. Supp. 2d at 698–99).

79. MercExchange I, 275 F. Supp. 2d at 710–15. For a summary of the parties’ briefing on

the issue of injunctive relief at the trial court level, see Holte, Misinterpretation of eBay, supra note

4, at 691–95.

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law, (iii) whether granting the injunction is in the public interest, and

(iv) whether the balance of the hardships tips in the plaintiff’s favor.”

After evaluating these factors, the district court found none of them

weighed in favor of granting an injunction. First, the district court pointed to

“evidence of the plaintiff’s willingness to license its patents, its lack of

commercial activity in practicing the patents, and its comments to the media

as to its intent with respect to enforcement of its patent rights” in concluding

that eBay had rebutted the presumption that MercExchange would suffer

irreparable harm absent an injunction.

Second, the district court relied on

MercExchange’s practice of “licens[ing] its patents to others in the past” and

“its willingness to license the patents to the defendants in this case” as

evidence that it had an adequate remedy at law.

Third, it held “the public

interest factor equally supports granting an injunction to protect

[MercExchange]’s patent rights, and denying an injunction to protect the

public’s interest in using a patented business-method that the patent holder

declines to practice.”

Finally, the district court concluded the balance of

hardships favored eBay because “[a]ny harm suffered . . . by the defendants’

infringement of the patents can be recovered by way of damages.”

2. Federal Circuit Decision

MercExchange appealed to the Federal Circuit, which affirmed the jury’s

findings that the ‘265 patent was valid and infringed by eBay in a published

decision in March 2005, but it reversed the district court’s denial of a

permanent injunction.

The Federal Circuit first recounted “the general

rule . . . that a permanent injunction will issue once infringement and validity

have been adjudged.”

It then concluded that the district court had failed to

“provide any persuasive reason to believe this case is sufficiently exceptional

to justify the denial of a permanent injunction.”

In particular, the Federal

Circuit criticized the district court’s reasoning that MercExchange’s

willingness to license its patents meant that it did not suffer irreparable harm

and that it had an adequate remedy at law, stating that offers to license

“should not . . . deprive [MercExchange] of the right to an injunction to

which it would otherwise be entitled. Injunctions are not reserved for

patentees who intend to practice their patents, as opposed to those who

80. MercExchange I, 275 F. Supp. 2d at 711.

81. Id. at 712.

82. Id. at 713.

83. Id. at 714.

84. Id.

85. MercExchange II, 401 F.3d at 1326.

86. Id. at 1338 (citing Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1246–47 (Fed. Cir.

1989)).

87. Id. at 1339.

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choose to license.”

It also held that the district court’s “general concern

regarding business-method patents” were “not a sufficient basis for denying a

permanent injunction.”

On the issue of damages, the Federal Circuit

declined to overturn the $25 million award for past infringement of the ‘265

patent.

3. Supreme Court Decision

On November 28, 2005, the Supreme Court granted eBay’s petition for

writ of certiorari on the issue of permanent injunctive relief.

In particular,

the Court explicitly directed the parties to brief and argue “[w]hether this

Court should reconsider its precedents, including Continental Paper Bag Co. v.

Eastern Paper Bag Co., on when it is appropriate to grant an injunction against

a patent infringer.”

The appeal attracted significant media attention from

the popular press,

and numerous intellectual property scholars, bar

organizations, and high-technology firms filed amicus briefs with the Court.

On May 16, 2006, the Court unanimously reversed the Federal Circuit.

The Court’s opinion, delivered by Justice Thomas, is succinct—less than five

full pages in the official United States Reports. After summarizing the parties

and procedural history of the case, the Court announced that “[a]ccording to

well-established principles of equity, a plaintiff seeking a permanent

injunction must satisfy a four-factor test.”

Specifically, it held that the

patentee must show:

88. Id.

89. Id.

90. Id. at 1326; see also supra note 78 and accompanying text (explaining how the jury’s

verdict was reduced to $25 million).

91. eBay Inc. v. MercExchange, L.L.C., 546 U.S. 1029 (2005) (granting writ of certiorari).

92. Id. (internal citation omitted).

93. See, e.g., Katie Hafner, Justices Will Hear Patent Case Against eBay, N.Y.

TIMES (Mar. 27, 2006),

http://www.nytimes.com/2006/03/27/technology/27ebay.html (noting that the eBay appeal “has

attracted an unusual amount of public attention in part because of recent attempts by large

corporations to change patent law to lessen the threat posed by so-called nonpracticing patent

holders”); see also Joan Biskupic, Supreme Court Hears eBay Patent Case, USA TODAY, (Mar. 29, 2006, 9:47

PM), http://www.usatoday30.usatoday.com/tech/news/2006-03-29-ebay-case_X.htm.

94. See, e.g., Brief Amici Curiae of 52 Intellectual Property Professors in Support of

Petitioners, eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) (No. 05-130), 2006 WL

1785363; Brief of Various Law & Economics Professors as Amici Curiae in Support of

Respondent, eBay, 547 U.S. 388 (No. 05-130), 2006 WL 639164; Brief of the American Bar Ass’n

as Amicus Curiae Supporting Respondent, eBay, 547 U.S. 388 (No. 05-130), 2006 WL 639167;

Brief of American Intellectual Property Law Ass’n & Federal Circuit Bar Ass’n as Amici Curiae in

Support of Neither Party, eBay, 547 U.S. 388 (No. 05-130), 2006 WL 148639; Brief of Amicus

Curiae Yahoo! Inc. in Support of Petitioner, eBay, 547 U.S. 388 (No. 05-130), 2006 WL 218988;

Brief of I.B.M. Corp. as Amicus Curiae in Support of Neither Party, eBay, 547 U.S. 388 (No. 05-

130), 2006 WL 235006. A summary of the amicus briefs filed in the Supreme Court is available

at Holte, Misinterpretation of eBay, supra note 4, at 691–95.

95. eBay, 547 U.S. at 390.

96. Id. at 391. Several remedies scholars have persuasively argued that the four-factor test

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(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.

The Court then declared that this four-part test “appl[ied] with equal force to

disputes arising under the Patent Act.”

The Court’s opinion acknowledged that patents confer property rights

upon their owners, including “the right to exclude others from making, using,

offering for sale, or selling the invention.”

However, it rejected the Federal

Circuit’s reasoning that this right “justifies [the] general rule in favor of

permanent injunctive relief,” asserting—without citing to any authority—that

“the creation of a right is distinct from the provision of remedies for violations

of that right.”

100

Instead, it concluded that “injunctive relief ‘may’ issue only

‘in accordance with the principles of equity.’”

101

The Court held that neither the district court nor the Federal Circuit had

“fairly applied . . . traditional equitable principles in deciding

[MercExchange]’s motion for a permanent injunction.”

102

First, it criticized

the district court for apparently “adopt[ing] certain expansive principles

suggesting that injunctive relief could not issue in a broad swath of cases,”

including when a patent owner did not commercially practice the patented

invention or when it was willing to license the patent-in-suit to others,

declaring that these “categorical rule[s] . . . cannot be squared with the

principles of equity adopted by Congress.”

103

The Court specifically cited its

decision in Continental Paper Bag to support its conclusion that the district

court could not categorically deny injunctive relief to a non-practicing patent

holder.

104

At the same time, it rebuffed the Federal Circuit’s adoption of a

“general rule, unique to patent disputes, that a permanent injunction

[should] issue” absent “exceptional circumstances,” explaining that the

articulated in eBay was in fact not “well-established.” See DOUGLAS LAYCOCK, MODERN AMERICAN

REMEDIES: CASES AND MATERIALS 339 (4th ed. 2012) (concluding that “there was no ‘traditional’

four-part test” for permanent injunctions); Gergen et al., supra note 4, at 207 (explaining how

the eBay decision’s “four-factor test differs from traditional equitable practice in at least three,

and possibly four, significant ways”); Rendleman, supra note 4, at 76 n.71 (noting that

“[r]emedies specialists had never heard of the four-point test” announced in eBay).

97. eBay, 547 U.S. at 391.

98. Id.

99. Id. at 392 (quoting 35 U.S.C. § 154(a)(1) (2006)).

100. Id.

101. Id. (quoting 35 U.S.C. § 283 (2006)).

102. Id. at 393.

103. Id.

104. Id. (citing Cont’l Paper Bag Co. v. E. Paper Bag Co., 210 U.S. 405, 422–430 (1908)).

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Federal Circuit’s departure “in the opposite direction” also was incompatible

with the four-factor test.

105

The Court then vacated and remanded the case to

the district court to apply “the traditional four-factor framework.”

106

This unanimous opinion, however, only thinly veiled an apparent deep-

seated disagreement between the Justices regarding the proper circumstances

for granting permanent injunctions in future patent cases.

107

These diverging

views burst to the forefront in two concurring opinions. In a two-paragraph

concurrence, Chief Justice Roberts, joined by Justices Scalia and Ginsburg,

suggested trial courts would be wise to consider “a page of history” and

continue to grant injunctions in the “vast majority of patent cases” after

eBay.

108

In particular, the Chief Justice noted the difficulty of protecting the

right to exclude “through monetary remedies that allow an infringer to use an

invention against the patentee’s wishes.”

109

In a separate concurrence, Justice Kennedy, joined by Justices Stevens,

Souter, and Breyer, initially expressed agreement with the Chief Justice’s

statement that “history may be instructive in applying [the four-factor] test,”

but immediately proceeded to critique the Chief Justice’s assertion regarding

the difficulty of protecting the right to exclude without an injunction.

110

Justice Kennedy’s concurrence contended that “[b]oth the terms of the

Patent Act and the traditional view of injunctive relief accept that the

existence of a right to exclude does not dictate the remedy for a violation of

that right.”

111

It then asserted that modern patent cases often differed from

historical patent litigation in several important ways, including the role of

non-practicing patentees who employ injunctive relief “as a bargaining tool to

charge exorbitant fees to companies that seek to buy licenses to practice the

patent.”

112

Justice Kennedy’s concurrence also explained that injunctions may

be inappropriate “[w]hen the patented invention is but a small component of

the product the companies seek to produce and the threat of an injunction is

105. Id. at 393–94 (quoting MercExchange II, 401 F.3d 1323, 1339 (Fed. Cir. 2005)).

106. Id. at 394.

107. See James M. Fischer, The “Right” to Injunctive Relief for Patent Infringement, 24 S

ANTA

CLARA COMPUTER & HIGH TECH. L.J. 1, 20 (2007) (“The Court’s decision in eBay, although

presented as a unanimous decision . . . is sufficiently terse, pithy, and fractured by the two

concurrences as to provide some support to practically any conclusion one wishes to draw from

the decision.”); Paul M. Mersino, Note, Patents, Trolls, and Personal Property: Will eBay Auction Away

a Patent Holder’s Right to Exclude?, 6 A

VE MARIA L. REV. 307, 326 (2007) (“The generality in the

[C]ourt’s holding [in eBay] was compounded by the fact that, although it was technically

unanimous, the two concurring opinions were highly divergent on exactly how the holding

should be applied.”).

108. eBay, 547 U.S. at 395 (Roberts, C.J., concurring) (citation omitted).

109. Id.

110. Id. at 395–96 (Kennedy, J., concurring).

111. Id. at 396.

112. Id.

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employed simply for undue leverage in negotiations.”

113

Finally, Justice

Kennedy pointed to the “burgeoning number of patents over business

methods,” some of which suffer from “potential vagueness and suspect

validity,” as another reason to potentially deny injunctive relief.

114

4. After Remand

An important part of the eBay litigation—although sometimes

overlooked in the shadow of the landmark Supreme Court decision—is the

decision of the district court after remand. Applying the four-factor test

mandated by the Court’s decisions, the district court again denied injunctive

relief to MercExchange.

115

This opinion is instructive because the district

court’s reasoning has been widely adopted by subsequent courts when

declining to grant injunctive relief to prevailing patentees.

In a detailed written decision issued on July 27, 2007, the district court

found that three of the four eBay factors weighed against an injunction.

116

First, it concluded MercExchange could not demonstrate irreparable harm.

The district court explained that the traditional presumption of irreparable

harm following a finding of infringement did not survive the Supreme Court’s

decision, which “require[d] the [patentee] to demonstrate that it has suffered

an irreparable injury.”

117

MercExchange could not demonstrate such harm,

the court reasoned, because it had “acted inconsistently with defending its

right to exclude” by “follow[ing] a consistent course of licensing its patents to

market participants.”

118

In particular, MercExchange’s “consistent course of

litigating or threatening litigation to obtain money damages . . . indicates that

MercExchange has utilized its patents as a sword to extract money rather than

as a shield to protect its right to exclude.”

119

Thus, it concluded

MercExchange’s patent licensing practice “plainly weighs against a finding of

irreparable harm.”

120

For similar reasons, the district court found

MercExchange had an adequate remedy at law because it had demonstrated

a “consistent desire to obtain royalties in exchange for a license to its

113. Id.

114. Id. at 397.

115. MercExchange L.L.C. v. eBay, Inc. (MercExchange III), 500 F. Supp. 2d 556, 559 (E.D.

Va. 2007).

116. Id. at 569–91.

117. Id. at 569 (emphasis omitted); see also id. (“[E]ven though an affirmed jury verdict

establishes that eBay is a willful infringer . . . , a permanent injunction shall only issue if plaintiff

carries its burden of establishing that, based on traditional equitable principles, the case specific

facts warrant entry of an injunction.”).

118. Id.

119. Id. at 572.

120. Id. at 573. The District Court also noted that MercExchange’s failure to seek

preliminary injunctive relief and its business method patent also weighed against a finding of

irreparable harm. Id. at 574–75.

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intellectual property” and thus could be made whole through monetary

damages.

121

Third, the court found that the “balance of the hardships” factor favored

neither party due to a variety of uncertainties, including eBay’s claimed design

around, the possibility that the ‘265 patent would be invalidated in

reexamination, and the potential of eBay to lose customers if it was forced to

remove the infringing buy-it-now option from its website.

122

Fourth, the

district court determined that the final eBay factor, the public interest,

weighed slightly against entry of an injunction because the public interest

favored damages—a liability rule—rather than an injunction because

MercExchange was “merely seeking an injunction as a bargaining chip to

increase [its] bottom line.”

123

In the court’s judgment, this outweighed “the

public . . . benefits from a strong patent system.”

124

Following denial of a permanent injunction, the district court directed

entry of final judgment that the ‘265 patent was willfully infringed and valid,

and it confirmed the damages award.

125

eBay then launched a second appeal

to the Federal Circuit,

126

but the parties resolved their dispute in February

2008 through an out-of-court settlement in which eBay agreed to purchase

the ‘265 patent (and two other patents) for an undisclosed sum.

127

B. EXISTING LITERATURE ON EBAY’S IMPACT

In the wake of the Supreme Court’s decision, scholars and others

questioned how eBay would affect the availability of injunctive relief in patent

litigation.

128

The existing literature regarding eBay’s impact suggests that

121. Id. at 583 (emphasis omitted).

122. Id. at 583–86.

123. Id. at 588.

124. Id. at 587.

125. MercExchange, L.L.C. v. eBay, Inc. (MercExchange IV), 660 F. Supp. 2d 653, 658–59

(E.D. Va. 2007).

126. Notice of Appeal, MercExchange, L.L.C. v. eBay, Inc., No. 2:01-CV-00736 (E.D. Va.

Dec. 18, 2007), ECF No. 758. eBay’s appeal was docketed as No. 2008-1139.

127. See Press Release, eBay Inc. and MercExchange, L.L.C. Reach Settlement Agreement,

EBAY

(Feb. 28, 2008), http://investor.ebayinc.com/releasedetail.cfm?releaseid=296670.

128. See, e.g., F

ED. TRADE COMM’N, supra note 8, at 217 (noting that eBay “created significant

uncertainty concerning the circumstances under which courts would deny permanent

injunctions”); F. Scott Kieff, Removing Property from Intellectual Property and (Intended?) Pernicious

Impacts on Innovation and Competition, in C

OMPETITION POLICY AND PATENT LAW UNDER

UNCERTAINTY: REGULATING INNOVATION 416, 425 (Geoffrey A. Manne & Joshua D. Wright eds.,

2011) (“In the final analysis, the full impact of the eBay case remains an open question for

debate.”); Crane, supra note 31, at 264 (“In light of eBay, injunctions no longer issue as a matter

of course in infringement cases, but it remains to be seen just how wide the impact of eBay will

be.”); The Supreme Court, 2005 Term—Leading Cases, 120 H

ARV. L. REV. 125, 337 (2006) (asserting

that “eBay raises more questions about the grant of permanent injunctions than it answers” and

that “the opinion leaves patent holders to speculate whether fewer permanent injunctions against

infringers will issue in a post-eBay world”).

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while permanent injunctions are still commonly granted, certain types of

patent disputes have largely shifted from a property rule to a liability rule.

Several previous studies have found that prevailing patentees still receive

permanent injunctions approximately three-quarters of the time following

eBay. One article published in 2008 found that district courts awarded

permanent injunctions in approximately 78% of cases.

129

Another study of

injunction decisions through May 2009 disclosed that permanent injunctions

were granted 72% of the time.

130

Similarly, in a 2012 article, Colleen Chien

and Mark Lemley reported that “courts have granted about 75% of requests

for injunctions, down from an estimated 95% pre-eBay.”

131

A recent paper by

Kirti Gupta and Professor Jay Kesan found that permanent injunction

motions between eBay and 2012 were granted 80% of the time.

132

Finally, a

database of permanent injunction decisions hosted by the University of

Houston Law Center’s Institute for Intellectual Property and Information Law

indicates permanent injunctions have been granted 75% of the time from

eBay through 2013.

133

Although patentees as a whole appear to enjoy a relatively high success

rate in obtaining injunctive relief following eBay, prior commentators have

noted that patent holders who primarily engage in licensing and litigation—

commonly referred to as PAEs

134

—are much less successful.

135

For instance,

Chien and Lemley found that through August 2011, district courts granted

injunctions to PAEs only 26% of the time—and only 7% of cases where the

129. See Ellis et al., supra note 4, at 441–42 nn.35–36 (finding permanent injunctions

awarded in 28 of 36 district court decisions).

130. Ernest Grumbles III et al., The Three Year Anniversary of eBay v. MercExchange: A

Statistical Analysis of Permanent Injunctions, INTELLECTUAL PROP. TODAY (Nov. 2009), at 25.

131. Chien & Lemley, supra note 2, at 9–10 (footnotes omitted).

132. Kirti Gupta & Jay P. Kesan, Studying the Impact of eBay on Injunctive Relief in Patent Cases

9 fig.3 (July 10, 2015) (unpublished manuscript), http://papers.ssrn.com/sol3/papers.cfm?abstract_

id=2629399.

133. Post-eBay Permanent Injunction Rulings in Patent Cases to 12-31-13, P

ATSTATS.ORG,

http://patstats.org/Patstats2.html (last visited Mar. 11, 2016) [hereinafter P

ATSTATS.ORG]. After

removing apparently duplicative entries, this database reports that permanent injunctions were

granted in 174 cases and denied in 57 cases. Id. However, a review of the listed cases in this

database indicates that a number of these decisions involved cases where the entry of a permanent

injunction was unopposed by the infringer, thus skewing the overall grant rate somewhat higher.

Id; see also infra note 175 and accompanying text.

134. See supra note 8 and accompanying text.

135. See Chien & Lemley, supra note 2, at 2 (“In the wake of . . . eBay . . . district courts rarely

grant injunctions in patent infringement cases to patent-assertion entities . . . .”); Lily Lim &

Sarah E. Craven, Injunctions Enjoined; Remedies Restructured, 25 S

ANTA CLARA COMPUTER & HIGH

TECH. L.J. 787, 798 (2009) (finding that “an NPE’s chance of getting an injunction [fell]

precipitously” after eBay compared to “a patentee who directly competes in the marketplace”);

Sandrik, supra note 4, at 111 (noting that “NPEs are hard-pressed to get an injunction” after

eBay); Yixin H. Tang, Note, The Future of Patent Enforcement After eBay v. MercExchange, 20 H

ARV.

J.L. & TECH. 235, 246 (2006) (asserting that after eBay, “patent holders who did not practice their

patents found themselves in a more difficult position”).

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injunction request was contested by the infringer.

136

Similarly, a report by the

Federal Trade Commission found that “non-practicing patentees have been

less likely than practicing patentees to receive injunctions.”

137

Many of these

decisions relied on the reasoning in Justice Kennedy’s concurrence

suggesting that patent holders who do not practice their patents generally

should not receive an injunction because it would give them “undue leverage”

in licensing negotiations.

138

Another factor discussed in the existing literature is the relationship

between the litigants.

139

When the parties-in-suit are competitors, a

permanent injunction typically issues.

140

Indeed, the Federal Circuit has gone

so far as to declare that the “essential attribute of a patent grant is that it

provides a right to exclude competitors from infringing the patent.”

141

According to one commentator, “[i]f the parties can fairly be described as

direct competitors, the first two factors” of the eBay test—irreparable injury

and absence of an adequate remedy at law—“will weigh heavily in favor of the

136. Chien & Lemley, supra note 2, at 10 fig.1; see also id. at 11 (“Of all groups, PAEs are least

likely to obtain an injunction; they tend to succeed in their requests only when the defendant

fails to object.”).

137. F

ED. TRADE COMM’N, supra note 8, at 256. This report found that patentees who

practiced the patent received injunctions at an 83% rate, while patentees who did not practice

the patent received an injunction at a 43% rate. Id. at 259.

138. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396 (2006). For examples of district

court opinions citing Justice Kennedy’s concurrence in denying an injunction to a non-practicing

patentee, see Hynix Semiconductor Inc. v. Rambus Inc., 609 F. Supp. 2d 951, 966 (N.D. Cal.

2009); i4i Ltd. P’ship v. Microsoft Corp., 670 F. Supp. 2d 568, 600 (E.D. Tex. 2009);

Commonwealth Sci. and Indus. Research Organisation v. Buffalo Tech. Inc., 492 F. Supp. 2d 600,

605 (E.D. Tex. 2007); MPT, Inc. v. Marathon Labels, Inc., 505 F. Supp. 2d 401, 419–20 (N.D.

Ohio 2007); and z4 Techs., Inc. v. Microsoft Corp., 434 F. Supp. 2d 437, 441 (E.D. Tex. 2006).

See also Ted Sichelman, Purging Patent Law of “Private Law” Remedies, 92

TEX. L. REV. 517, 520–22

& n.13 (2014) (discussing Justice Kennedy’s “influential concurrence”).

139. See Chao, supra note 4, at 549 (noting that “[o]ne category of fact patterns that has

figured prominently in cases applying the eBay factors [is] the existence, or lack of direct

competition” between the litigants).

140. See, e.g., SynQor, Inc. v. Artesyn Techs., Inc., No. 2:07-CV-497-TJW-CE, 2011 WL

238645, at *3 (E.D. Tex. Jan. 24, 2011) (“The best case for obtaining a permanent injunction

often occurs when the plaintiff and defendant are competing in the same market.”); Advanced

Cardiovascular Sys., Inc. v. Medtronic Vascular, Inc., 579 F. Supp. 2d 554, 558 (D. Del. 2008)

(“Courts awarding permanent injunctions typically do so under circumstances where plaintiff

practices its invention and is a direct market competitor.”); Beckerman-Rodau, supra note 4, at

632 (“Typically, permanent injunctions continue to issue when the patent owner and the

infringer are direct marketplace competitors.”); Chao, supra note 4, at 553 (“[T]he existence of

direct competition appears to be a good predictor of whether a permanent injunction will

issue.”); Ellis et al., supra note 4, at 442 (“To date, the relationship of the parties-in-suit has been

the single most important determinant as to whether an injunction will issue. For the most part,

when the parties-in-suit were deemed direct competitors, permanent injunctions were issued.”

(footnotes omitted)). An FTC study found that injunctions were granted 87% of the time when

the patentee and the defendant competed. F

ED. TRADE COMM’N, supra note 8, at 259.

141. Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1328 (Fed. Cir. 2008) (emphasis added).

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[patentee].”

142

For instance, the types of competition-related harms that

courts have found sufficient to demonstrate an irreparable injury include loss

of market share, loss of goodwill among customers, and price erosion.

143

contrast, “district courts appear to have consistently denied permanent

injunctions in cases where . . . the infringer and patent holder were not

competitors.”

144

A third consideration is whether the patentee has licensed or offered to

license the patented technology to others.

145

As the district court concluded

after remand in eBay, a patentee’s licensing activity may demonstrate both lack

of irreparable harm and the existence of an adequate remedy at law.

146

However, a recent report by the Federal Trade Commission found that

permanent injunctions were still granted in the majority of cases where the

patentee licensed others to practice the patent.

147

142. Stacy Streur, The eBay Effect: Tougher Standards but Courts Return to the Prior Practice of

Granting Injunctions for Patent Infringement, 8 N

W. J. TECH. & INTELL. PROP. 67, 71 (2009); see also

George M. Newcombe et al., Prospective Relief for Patent Infringement in a Post-eBay World, 4 N.Y.U.

J.L. & BUS. 549, 559–60 (2008) (finding “the infringer was a direct horizontal competitor” to the

patentee in 28 of 30 cases where a permanent injunction issued); Benjamin H. Diessel, Note,

Trolling for Trolls: The Pitfalls of the Emerging Market Competition Requirement for Permanent Injunctions

in Patent Cases Post-eBay, 106 M

ICH. L. REV. 305, 318 (2007) (“The market competition

requirement, more than merely correlating with results, appears to be dispositive in determining

whether to grant an injunction.”).

143. Newcombe et al., supra note 142, at 560–62. The Federal Circuit itself has explained

that “facts relating to the nature of the competition between the parties undoubtedly are relevant

to the irreparable harm inquiry.” Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1150

(Fed. Cir. 2011).

144. Golden, Patent Trolls, supra note 4, at 2113; see also F

ED. TRADE COMM’N, supra note 8,

at 259 (finding permanent injunctions were granted only 25% of the time when patentee and

infringer did not compete).

145. See Jay Dratler, Jr., eBay’s Practical Effect: Two Differing Visions, 2 A

KRON INTELL. PROP. J.

35, 49 (2008) (“If the patent at issue already has been licensed to multiple parties on a

nonexclusive basis, at a standard royalty rate, all four equitable factors ordinarily favor denying

an injunction.” (emphasis omitted)); Ellis et al., supra note 4, at 452 (“[C]ompanies and

individuals . . . who license to un-related entities have been less successful in their requests for an

injunction.”); see also T.J. Smith & Nephew Ltd. v. Consol. Med. Equip., Inc., 821 F.2d 646, 648

(Fed. Cir. 1987) (concluding in a pre-eBay case that licensing the patent is “incompatible with

the emphasis on the right to exclude that is the basis for the presumption” of irreparable harm).

146. See supra notes 118–21 and accompanying text (discussing the district court’s

reasoning); see also Telcordia Techs., Inc. v. Cisco Sys., Inc., 592 F. Supp. 2d 727, 748 n.10 (D.

Del. 2009) (concluding that the patentee’s “willingness to license its patents also suggests that its

injury is compensable in monetary damages, which is inconsistent with the right to exclude”);

Sundance, Inc. v. DeMonte Fabricating Ltd., No. 02–73543, 2007 WL 37742, at *2 (E.D. Mich.

Jan. 4, 2007) (concluding that the patentee’s “licens[ing] the [patent-in-suit] to others, and

offer[ing] to license it to [the defendant] prior to filing suit . . . demonstrate[es] that money

damages are adequate”); Andrei Iancu & W. Joss Nichols, Balancing the Four Factors in Permanent

Injunction Decisions: A Review of Post-eBay Case Law, 89 J.

PAT. & TRADEMARK OFF. SOC’Y 395, 398

(2007) (noting “the predilection some courts have to deny an injunction upon a showing of a

willingness to license”).

147. F

ED. TRADE COMM’N, supra note 8, at 259; see also id. at 264 (“District courts have also

granted injunctions to organizations that often seek to license their patents non-exclusively.”).

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Whether the patented invention is a “small component” of an infringing

product also may be relevant. Justice Kennedy’s concurring opinion in eBay

suggested that situations where “the patented invention is but a small

component of the [infringing] product” may be inappropriate for injunctive

relief due to the threat of holdup.

148

Existing scholarship suggests that district

courts frequently deny injunctive relief in these situations.

149

One additional factor that has been mentioned as potentially favoring

entry of an injunction is a finding of willful infringement. Willful misconduct

is traditionally considered in determining the availability of equitable relief.

150

For example, after remand in eBay, the district court concluded that eBay’s

“status as a willful infringer . . . plainly favors [the patentee] when conducting

an equitable balancing” in the injunction analysis.

151

However, other district

courts have denied injunctions against willful infringers,

152

and scholarship

published shortly after eBay concluded that “willful infringement does not

appear to be a significant factor in predicting or explaining judicial decisions

that grant or deny permanent injunctions.”

153

148. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396 (2006) (Kennedy, J.,

concurring).

149. See Benjamin Petersen, Note, Injunctive Relief in the Post-eBay World, 23 B

ERKELEY TECH.

L.J. 193, 198 (2008) (“[I]n five of the ten cases where courts denied an injunction, the court

found that the patented invention is merely a small component of the infringing product. There

were no instances where a court awarded an injunction after determining that the patent covers

only a small component of the infringing product.”); cf. Bernard Chao, Causation and Harm in a

Multicomponent World, 164 U.

PA. L. REV. ONLINE 61, 76 (2016) (arguing that courts should not

grant injunctions in patent cases involving infringing features for multicomponent devices if it

will cause holdup).

150. See Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 815 (1945)

(“Any willful act concerning the cause of action which rightfully can be said to transgress

equitable standards of conduct is sufficient cause for the invocation of the maxim by the

chancellor.”); see also Beckerman-Rodau, supra note 4, at 656 (noting that “[w]illful infringement,

arguably, should be relevant when the remedy being sought, such as permanent injunctive relief,

is equitable in nature”); Diessel, supra note 142, at 317 (explaining that “historically willfulness

has weighed heavily on the decision to grant an injunction”); William R. Everding, Comment,

“Heads-I-Win, Tails-You-Lose”: The Predicament Legitimate Small Entities Face Post eBay and the Essential

Role of Willful Infringement in the Four-Factor Permanent Injunction Analysis, 41 J.

MARSHALL L. REV.

189, 211–17 (2007) (contending that willful infringement is relevant in several factors of the

eBay test).

151. MercExchange III, 500 F. Supp. 2d 556, 590 (E.D. Va. 2007) (emphasis omitted); see also

Wald v. Mudhopper Oilfield Servs., Inc., No. CIV-04-1693-C, 2006 WL 2128851, at *5 (W.D.

Okla. July 27, 2006) (explaining that “the Court is unpersuaded that there is no need for an

injunction” in light of, inter alia, “the finding of willful infringement”).

152. See, e.g., Fractus, S.A., v. Samsung Elecs. Co., 876 F. Supp. 2d 802, 828–30, 852–54 (E.D.

Tex. 2012); Creative Internet Advert. Corp. v. Yahoo! Inc., 674 F. Supp. 2d 847, 849–52 (E.D.

Tex. 2009); Voda v. Cordis Corp., No. CIV–03–1512–L, 2006 WL 2570614, at *1, *5–6 (W.D.

Okla. Sept. 5, 2006), aff’d, 536 F.3d 1311 (Fed. Cir. 2008); z4 Techs., Inc., v. Microsoft Corp.,

434 F. Supp. 2d 437, 438–44 (E.D. Tex. 2006).

153. Beckerman-Rodau, supra note 4, at 656; see also Diessel, supra note 142, at 312–17

(analyzing the first twenty-five district court cases applying eBay and concluding “[w]hether

infringement was willful d[id] not bear on whether a plaintiff obtain[ed] an injunction”);

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While valuable, the existing scholarship on eBay’s impact is limited in

several important respects. First, many of the studies rely on a relatively small

number of decisions—usually several dozen cases—issued within a few years

of the Supreme Court’s decision.

154

This small size makes it difficult to

conduct rigorous empirical analysis due to the lack of statistical power.

155

Second, several of these studies appear to be limited to district court decisions

that are reported in the Federal Supplement or commercial electronic databases

like LexisNexis and Westlaw,

156

which may not be representative of all

injunction decisions.

157

Third, most studies report only a few data points for

each decision, such as the ultimate outcome on injunctive relief, the identity

of the patent owner, and whether the litigants were competitors.

158

This

introduces the possibility of omitted variable bias by failing to include one or

more potentially important factors in assessing the district court’s reasoning

Sandrik, supra note 4, at 111 (“Another area of tension within the structure of patent remedies

is in cases where a willful infringer is permitted to continue engaging in behavior that was deemed

punish-worthy.”).

154. See F

ED. TRADE COMM’N, supra note 8, at 257 (surveying 49 district court injunction

decisions from eBay through December 2008); Ellis et al., supra note 4, at 441–42 & nn.35–36

(studying 36 district court decisions issued from eBay through early 2008); Grumbles III et al.,

supra note 130, at 26 (reviewing 67 district court cases issued since the eBay decision); Newcombe

et al., supra note 142, at 557–59 & n.57, n.59 (evaluating 38 district court decisions from eBay

through February 2008); Petersen, supra note 148, at 196 (studying 33 district court decisions

applying eBay through February 2008). The exceptions are Chien & Lemley, supra note 2, at

9–10 & n.46 (analyzing 192 decisions from July 2006 through August 2011); Gupta & Kesan,

supra note 132, at 6 tbl.1 (tallying 514 permanent injunction motions after eBay); and

ATSTATS.ORG, supra note 133 (collecting 231 district court decisions from eBay through

December 2013).

155. See T

HE SAGE GLOSSARY OF THE SOCIAL AND BEHAVIORAL SCIENCES 489 (Larry E.

Sullivan ed. 2009) (explaining statistical power as “the probability of correctly rejecting a false

null hypothesis”).

156. See Ellis et al., supra note 4, at 441–42 nn.35–36 (relying on decisions reported in the Federal

Supplement and LexisNexis); Newcombe et al., supra note 142, at 557–59 & n.57, n.59 (same).

157. See Michael Heise, The Past, Present, and Future of Empirical Legal Scholarship: Judicial

Decision Making and the New Empiricism, 2002 U.

ILL. L. REV. 819, 843–44 (“Many [empirical legal]

studies are confined to a universe of written and published decisions. The focus on such

decisions . . . reduces the generalizability of the findings.”); David A. Hoffman et al., Docketology,

District Courts, and Doctrine, 85 W

ASH U. L. REV. 681, 686 (2007) (noting that published “opinions

might be unrepresentative of how trial courts resolve legal problems”); see also Hillel Y. Levin,

Making the Law: Unpublication in the District Courts, 53 V

ILL. L. REV. 973, 982 (2008) (“If we accept

that the law is what judges do, then we cannot evaluate the legal system by reference to only

published decisions because they may not reflect what goes on in the majority of cases.” (emphasis

omitted)).

158. See Chien & Lemley, supra note 2, at 9–11 & 10 fig.1 (reporting permanent injunction

grant rates by entity type—university, individual practicing company, and patent assertion entity);

Grumbles III et al., supra note 130, at 27–29 (reporting injunction decision, case name, date of

decision, district court, and whether the patentee and infringer were competitors); Gupta &

Kesan, supra note 132, at 7 fig.1 (reporting preliminary and permanent injunction motion and

grant rates by year); P

ATSTATS.ORG, supra note 133 (reporting permanent injunction decision,

names of plaintiff and defendant, district court, date of decision, and judge).

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1974 IOWA LAW REVIEW [Vol. 101:1949

for why an injunction was granted or denied.

159

Finally, the existing literature

does not study the characteristics of the patents at issue in these decisions—

such as the number of claims in each patent, the number of citations to prior

art, and the technological field of the patented invention—to determine

whether they are related to the grant or denial of injunctive relief.

160

IV. M

ETHODOLOGY

This Part first describes the research questions addressed through an

empirical study of district court decisions on permanent injunctions following

eBay. It then explains the study design and collection process for the data and

findings reported in this Article.

161

Finally, it describes some limitations of the

datasets.

162

A. R

ESEARCH QUESTIONS

This study seeks to evaluate how district courts have applied eBay’s four-

factor test for permanent injunctions in patent cases. In particular, it attempts

to determine how often injunctions are granted to prevailing patentees

following eBay, both in general and for particular types of patentees such as

PAEs. It also focuses on several considerations related to injunctive relief

mentioned in Justice Kennedy’s concurrence, such as the patentee’s

willingness to license the patent(s)-in-suit and the assertion of a “business

method” patent.

163

Furthermore, it seeks to determine whether injunction

grant rates vary based on several other factors, such as the field of technology,

the district court deciding the injunction request, and whether the infringer

acted willfully. In addition, this study seeks to determine if infringed patents’

characteristics correlate to district courts’ decisions on injunctive relief.

Previous empirical studies have found patents’ characteristics to be useful in

predicting their value and whether they will likely be the subject of an

infringement lawsuit.

164

159. See OXFORD DICTIONARY OF ECONOMICS (John Black et al. eds., 4th ed. 2012) (defining

omitted variable bias as “[a] bias . . . of a coefficient in a linear regression caused by the omission

of a relevant variable from the regression, when this variable is correlated with one or more of

the variables included in the regression”).

160. See John R. Allison, Mark A. Lemley, Kimberly A. Moore & R. Derek Trunkey, Valuable

Patents, 92 G

EO. L.J. 435, 438 (2004) (studying these and other patent characteristics and

concluding “that valuable patents differ in substantial ways from ordinary patents”); Colleen V.

Chien, Predicting Patent Litigation, 90 T

EX. L. REV. 283, 287 (2011) (finding that “patents that do

end up in litigation differ markedly from patents that do not”).

161. See Susan D. Franck, Empiricism and International Law: Insights for Investment Treaty Dispute

Resolution, 48 VA. J. INT’L L. 767, 786–88 (2008) (explaining the importance of transparency

regarding methodology, data collection, and analysis in empirical legal research). The data

collected in this study will be made publicly available upon this Article’s publication.

162. See infra Part IV.C.

163. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396–97 (2006).

164. See, e.g., Allison et al., supra note 160, at 448–60 (finding certain patent characteristics

correlated with assertion in litigation and thus patent value); Chien, supra note 160, at 297–326

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Empirical studies like this one use observations of data and statistical

analysis to evaluate causal inference—that is, “whether one factor or set of

factors leads to (or causes) some outcome.”

165

Empirical analysis can “allow[]

scholars to verify or refute . . . claims about case law,”

166

such as “the impact

of a new precedent,”

167

thus helping “identify[] previously unnoticed patterns

that warrant deeper study.”

168

This study engages in the technique of “content

analysis,” in which the investigator identifies relevant court decisions,

systematically reads and codes these decisions for information about the

issue(s) being studied, and then analyzes the resulting data.

169

Numerous

prior studies in the field of patent law have utilized a similar methodology.

170

B. STUDY DESIGN AND DATA COLLECTION

Two original datasets were created for this study. For the first dataset (the

“Decisions Dataset”), the author sought to identify all contested permanent

injunction decisions by federal district courts in patent infringement cases

from the date of the Supreme Court’s decision in eBay (May 13, 2006)

through December 2013. This represents over 7.5 years of court decisions on

injunctive relief.

(finding that litigated characteristics have different intrinsic and acquired characteristics than

non-litigated patents); Dietmar Harhoff et al., Citations, Family Size, Opposition and the Value of

Patent Rights, 32 R

ES. POL’Y 1343, 1344–45 (2003) (finding that various patent characteristics are

correlated with patent value); Jean O. Lanjouw & Mark Schankerman, Characteristics of Patent

Litigation: A Window on Competition, 32 RAND

J. ECON. 129, 129 (2001) (“[T]he frequency of legal

disputes is strongly correlated with a variety of characteristics of innovations and their

owners . . . .”); Kimberly A. Moore, Worthless Patents, 20 B

ERKELEY TECH. L.J. 1521, 1551 (2005)

(“The fact that certain patent characteristics do predict . . . likelihood of patent litigation suggests

that they are useful predictors of value.”).

165. Lee Epstein & Gary King, The Rules of Inference, 69 U.

CHI. L. REV. 1, 34–35 (2002); see

also Kevin M. Clermont & Theodore Eisenberg, Litigation Realities, 88 C

ORNELL L. REV. 119, 125

(2002) (“Empirical methods are those that employ means for the systematic observation of

experience in pursuit of inductive ends.”).

166. Mark A. Hall & Ronald F. Wright, Systematic Content Analysis of Judicial Opinions, 96

ALIF. L. REV. 63, 77 (2008).

167. Id. at 91.

168. Id. at 87.

169. See id. at 67–76 (describing the methodology of content analysis in the context of legal

studies).

170. See generally John R. Allison & Mark A. Lemley, Empirical Evidence on the Validity of Litigated

Patents, 26 AIPLA

Q.J. 185 (1998); John R. Allison, Mark A. Lemley & David L. Schwartz, Understanding

the Realities of Modern Patent Litigation, 92 T

EX. L. REV. 1769 (2014); Kimberly A. Moore, Markman Eight

Years Later: Is Claim Construction More Predictable?, 9 L

EWIS & CLARK L. REV. 231 (2005); Lee

Petherbridge, Jason Rantanen & Ali Mojibi, The Federal Circuit and Inequitable Conduct: An Empirical

Assessment, 84 S.

CAL. L. REV. 1293 (2011); Lee Petherbridge & R. Polk Wagner, The Federal Circuit and

Patentability: An Empirical Assessment of the Law of Obviousness, 85 T

EX. L. REV. 2051 (2007); Jason

Rantanen, The Federal Circuit’s New Obviousness Jurisprudence: An Empirical Study, 16 S

TAN. TECH. L. REV.

709 (2013); Christopher B. Seaman, Willful Patent Infringement and Enhanced Damages After In re Seagate:

An Empirical Study, 97 I

OWA L. REV. 417 (2012).

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Several sources were utilized to create a comprehensive list of these

injunction decisions. First, the author started with a spreadsheet of injunction

rulings compiled by Patstats.org from eBay through May 2013.

171

The author

also searched the Lex Machina database of intellectual property litigation

172

and the permanent injunction decisions listed in the Federal Trade

Commission’s 2011 report on patent notice and remedies

173

to identify

additional relevant decisions. Injunctions that were uncontested, such as

those following entry of a default judgment or where the infringer consented

to a permanent injunction, were excluded from the dataset.

174

Decisions

involving preliminary (rather than permanent) injunctions were also

omitted,

175

as were cases involving design patents.

176

In total, 218 district court

171. Post-eBay Permanent Injunction Rulings in Patent Cases, PATSTATS.ORG,

http://patstats.org/Injunction_rulings_post-eBay_to_5-26-2013.xls (last visited Mar. 11, 2016)

(hereinafter Post-eBay Permanent Injunction Rulings). This document was updated to include

injunction rulings up to Dec. 31, 2013. See id.

172. L

EX MACHINA, https://lexmachina.com (last visited Mar. 11, 2016). The following

steps were taken to search Lex Machina: (1) selected “Documents” tab; (2) entered the following

text in the search bar: “permanent injunction” OR eBay; (3) selected “Order re: Injunction” in

“Document Tags”; (4) selected “Patent” in “Case Types”; and (5) reviewed entries for contested

injunction decisions issued between May 15, 2006 and December 31, 2013.

173. See F

ED. TRADE COMM’N, supra note 8, at 272–78. Five cases listed in the FTC’s report

were excluded for not satisfying the criteria for this study: Zen Designs Grp., Ltd. v. Clint, No. 08-

CV-14309, 2009 WL 4050247 (E.D. Mich. Nov. 23, 2009) (default judgment entered against

accused infringer); Acticon Techs. v. Heisei Elecs. Co., No. 06-CV-4316 (KMK), 2008 WL 356872

(S.D.N.Y. Feb. 5, 2008) (default judgment entered against accused infringer); Nichia Corp. v.

Seoul Semiconductor, Ltd., No. 06–0162 MMC, 2008 WL 346416 (N.D. Cal. Feb. 7, 2008)

(design patents); U.S. Philips Corp. v. KXD Tech., Inc., No. CV 05-8953 ER (PLAx), 2007 WL

4984150 (C.D. Cal. Sept. 7, 2007) (default judgment entered against accused infringer); and

Telequip Corp. v. Change Exch., No. 5:01-CV-1748 (FJS/GJD), 2006 WL 2385425 (N.D. N.Y.

Aug. 15, 2006) (default judgment entered against accused infringer).

174. Uncontested injunction decisions were excluded for two reasons. First, counting these

injunctions would likely have skewed the grant rate higher. Second, because uncontested

injunctions are typically granted with little or no discussion by the district court, they provide

little illumination regarding why an injunction was granted.

175. Preliminary injunction decisions in patent cases apply a distinct four-part test because

of the motion’s procedural posture—namely, the accused infringer’s liability has not yet been

determined, so the patentee’s likelihood of success must be considered as part of the court’s

analysis. See Trebro Mfg., Inc. v. Firefly Equip., LLC, 748 F.3d 1159, 1165 (Fed. Cir. 2014) (“A

plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits,

that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance

of equities tips in his favor, and that an injunction is in the public interest.” (quoting Winter v.

Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008))). In addition, grants of preliminary

injunctions appear to be significantly less frequent than permanent injunctions. See Chien &

Lemley, supra note 2, at 2 (noting that patentees can obtain a preliminary injunction only

“rarely”). But cf. M. A. Cunningham, Preliminary Injunctive Relief in Patent Litigation, 35 IDEA J.L.

& Tech. 213, 231 (1995) (finding that district courts granted preliminary injunctions in slightly

over 61% of the time in district court cases between 1982 and 1993).

176. See 35 U.S.C. §§ 171–173 (2012) (statutory provisions governing design patents).

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decisions on permanent injunctive relief were identified and included in the

Decisions Dataset.

177

A list of these decisions is included in Appendix A.

Each injunction decision then was hand coded

178

for a variety of

information using standardized coding instructions.

179

Coded information

included the names of the litigants,

180

the district court that decided the

injunction request,

181

whether the injunction was granted or denied,

182

and

other basic information about the case and injunction decision.

183

The patent

owner in each case was classified into one of eight different types of entities.

184

177. Two cases were counted as each having two separate decisions on permanent injunctive

relief: Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill. 2012) (district court denying

permanent injunctions for both Motorola and Apple); and O2 Micro Int’l Ltd. v. Beyond

Innovation Tech. Co., No. 2-04-CV-32 (TJW), 2007 WL 869576 (E.D. Tex. Mar. 21, 2007)

(denying permanent injunction), vacated, 521 F. 3d 1351, remanded to No. 2:04-

CV-00032-CE,

2010 WL 8753254 (E.D. Tex. Sept. 27, 2010) (denying permanent injunction again after

remand from the Federal Circuit).

178. Several student research assistants conducted an initial draft of the coding. The author

then personally reviewed the coding decisions for each case and made a final decision for all

variables. The coding process took several hundred hours of time in the aggregate. See Allison et

al., supra note 170, at 1773–74 (explaining that “[c]oding of outcomes, especially in patent cases,

is notoriously difficult and time consuming”); see also Heise, supra note 157, at 829

(“Unfortunately, data gathering is frequently labor-intensive and time-consuming and,

consequently, often quite expensive.” (footnote omitted)).

179. In empirical research, written coding instructions are preferred so that all coders apply

the same criteria for each coding decision. This helps promote consistency in coding and serves

as “a check against looking, consciously or not, for confirmation of predetermined positions.”

Hall & Wright, supra note 166, at 81; see also Lee Epstein & Andrew Martin, Coding Variables, in 1

NCYCLOPEDIA OF SOCIAL MEASUREMENT 321, 325 (Kimberly Kempf-Leonard ed., 2005)

(explaining that “the overriding goal of a codebook is to minimize human judgment—to leave

as little as possible to interpretation”). In addition, written coding instructions are desirable

“because the scientific standard of replicability requires a written record of how categories were

defined and applied.” Hall & Wright, supra note 166, at 109. A copy of the author’s written coding

instructions are available upon request.

180. Variable names are listed in capital letters and brackets in the following footnotes.

String variables were used for the name of the plaintiff [PLAINTIFF] and the defendant

[DEFENDANT] in the case. If multiple plaintiffs or defendants existed, only the first-named party

was used. The type of the patent owner—for instance, whether it was a PAE—was also classified

as a separate variable, as explained in more detail below. See infra note 184.

181. The district court was initially recorded as a string variable [DISTRICT] using a three-

or four-letter abbreviation consistent with PACER Case Locator. See U.S. Courts, Individual Court

Sites, PACER, https://www.pacer.gov/psco/cgi-bin/links.pl (last visited Mar. 11, 2016). This

string variable was then encoded into a separate, categorical (numeric) variable [DISTRICT_N]

for use in statistical analysis.

182. This was coded as a binary variable [INJUNCTION] indicating whether a permanent

injunction was granted for at least one claim of the patent(s)-in-suit.

183. These variables included the docket number for the case [DOCKET], a citation to the

injunction decision in Westlaw or PACER [CITE], and the date of the injunction decision [DATE].

184. Each patent holder for this variable [PATENTEE] was coded into one of the following

categories: “(1) University; (2) Individual Inventor; (3) Large Patent Aggregator; (4) Failed

Operating or Start-up Company; (5) Patent Holding Company; (6) Operating Company; (7) IP

Holding Company Owned by Operating Company; and (8) Technology Development

Company.” These classifications were adopted from a recent empirical study by several patent

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The technological field of the asserted patent(s),

185

whether the patent(s)-in-

suit claimed a business method,

186

and whether the case involved a claim of

infringement by a pharmaceutical manufacturer under the Hatch–Waxman

Act

187

were also captured. The district court’s conclusions on each of the four

eBay factors were coded as well.

188

Finally, the Decisions Dataset included

other factors potentially related to decisions on injunctive relief, such as

whether the litigants were found to be competitors,

189

whether the patent

holder had licensed or offered to license the patent(s)-in-suit to others,

190

whether the district court found that the patented invention was a “small

component” of the accused product,

191

and whether the infringer willfully

infringed the patent(s)-in-suit.

192

A second dataset consisting of the patents-in-suit at issue in these

injunctions decisions (the “Patents Dataset”) was also created to help

determine if these patents’ characteristics were correlated with the outcomes

of these injunction decisions.

193

The Patents Dataset includes 392 separate

U.S. patents.

194

In addition to the outcome on injunctive relief for each

scholars on the types of patent holders in patent litigation. See Christopher A. Cotropia, Jay P.

Kesan, and David L. Schwartz, Unpacking Patent Assertion Entities (PAEs), 99 M

INN. L. REV. 649,

667–70 (2014) (defining each category). The author used information from the complaints and

other publicly available sources, such as the patentee’s website, to make classification decisions

for this variable. Id. at 667–68.

185. This variable [TECH] was broken down into 9 different technological categories:

(1) Computer Software; (2) Electronics; (3) Electrical; (4) Mechanical, (5) Chemical;

(6) Biotechnology, (7) Drugs; (8) Medical Devices, and (9) Other. These categories were

modified from John R. Allison, Mark A. Lemley & Joshua Walker, Extreme Value or Trolls on Top?

The Characteristics of the Most-Litigated Patents, 158 U.

PA. L. REV. 1, 6–8 (2009).

186. This was coded as a binary variable [BUSMETHOD].

187. This was coded as a binary variable [ANDA]. See Drug Price Competition and Patent Term

Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (codified as amended at 21 U.S.C. § 355(j)

(1984) and 35 U.S.C. § 271(e) (1984)) (commonly known as the Hatch–Waxman Act). For an

overview of patent litigation under the Hatch–Waxman Act, see F

ED. JUDICIAL CTR., PATENT CASE

MANAGEMENT JUDICIAL GUIDE 10-1 to 10-11 (Peter S. Menell et al. eds., 2009).

188. These were coded as binary variables: (1) irreparable harm [FACTOR1];

(2) inadequate remedy at law [FACTOR2]; (3) balance of hardships [FACTOR3]; and (4) the

public interest would not be disserved by an injunction [FACTOR4].

189. This was coded as a binary variable [COMPETE]. Parties were classified as competitors

if they competed in a product market at any time during the patent term. Licensing of the patent

alone was considered insufficient to demonstrate competition. In addition, litigation involving

generic pharmaceutical manufacturers who indicated an intent to compete with an original

(brand name) drug manufacturer by filing an Amended New Drug Application (“ANDA”) under

the Hatch–Waxman Act were classified as competitors.

190. This was coded as a binary variable [LICENSE]. Exclusive licenses by the patent owner

to a co-plaintiff were excluded.

191. This was coded as a binary variable [COMPONENT].

192. This was coded as a binary variable [WILLFUL].

193. See supra notes 160, 164 and accompanying text.

194. Four patents are included in the dataset twice (for a total of 396 entries) because they

were either the subject of multiple patent lawsuits that resulted in a contested injunction decision

or because they were the subject of more than one decision on injunctive relief in the same case.

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patent, several variables regarding each patent-in-suit were hand coded. These

variables include the total number of claims in the patent,

195

the number of

prior art references cited by the patent,

196

the number of predecessor

(parent) applications for the issued patent,

197

whether the original patentee

was a small entity,

198

and the number of years between the patent’s issuance

and the injunction decision.

199

The National Bureau of Economic Research

(“NBER”) technology classification for each patent was included as well.

200

Finally, the number of subsequent citations by later-issued U.S. patents to

each patent-in-suit (i.e., forward citations), which is a common proxy for

patent value and quality,

201

was coded.

202

C. LIMITATIONS

Before discussing the study’s findings, it is important to note several

potential limitations of the methodology employed.

203

First, patent litigation

These patents are: U.S. Patent No. 5,790,512; U.S. Patent No. 5,972,401; U.S. Patent No.

6,259,615; and U.S. Patent No. 6,396,722.

195. This was coded as a numeric variable [CLAIMS].

196. This was coded as a numeric variable [PRIORART].

197. This was coded as a numeric variable [PARENT]. “Parent” applications included

continuation and continuation-in-part applications. See 35 U.S.C. §§ 120, 361–376 (2012); see id.

§ 121 (PCT applications). It excluded other foreign patent application filings, provisional patent

applications, and reissue/reexamination applications.

198. This was coded as a binary variable [SMALL]. A small entity is defined as an individual,

small business concern, or nonprofit organization (including a university) who meet certain

criteria. 37 C.F.R. § 1.27(a) (2010). Small entities are entitled to a 50% reduction in patent fees.

35 U.S.C. § 41(h) (2012); 37 C.F.R. § 1.27(b) (2010).

199. This was coded as a numeric variable [ISSUE2INJUNCTION].

200. This variable [TECH] coded for NBER’s six primary technology categories:

(1) Chemical (excluding Drugs); (2) Computer and Communications; (3) Drugs and Medical;

(4) Electrical and Electronics; (5) Mechanical; and (6) Other. See Bronwyn H. Hall et al., The NBER

Patent Citations Data File: Lessons, Insights, and Methodological Tools 13, 41–42 (Nat’l Bureau of Econ.

Research, Working Paper No. 8498, 2001), http://papers.nber.org/papers/w8498.pdf.

201. See generally Bronwyn Hall et al., Market Value and Patent Citations, 36 RAND

J. ECON. 16

(2005). But see David S. Abrams et al., Patent Value and Citations: Creative Destruction or Strategic Disruption?

(Pa. Inst. for Econ. Research, Working Paper 13-065, 2013), http://papers.ssrn.com/sol3/

papers.cfm?abstract_id=2351809 (questioning this assumption); Alan C. Marco, The Dynamics of Patent

Citations, 94 E

CON. LETTERS 290, 294 (2007) (finding an unobserved heterogeneity in the rate of

patent citations because forward citations to a patent may beget more forward citations).

202. The number of forward citations to a patent by later-issued U.S. patents (as of July

2014) is included in the “Referenced By” portion of each patent’s page on Google Patents. See

generally Patents, G

OOGLE.COM, https://www.google.com/?tbm=pts&gws_rd=ssl (last visited Mar.

11, 2015) (search “Patents” in the search field). This information was then captured in two

separate numeric variables—one that included the total number of forward citations

[FWDCITE], and a second that captured the average number of forward citations per year since

the patent’s issuance [FWDCITEPERYEAR]. The latter variable was included to address the

problem of truncation due to unobserved future citation behavior.

203. See William M. Sage, Judicial Opinions Involving Health Insurance Coverage: Trompe L’oeil or

Window on the World?,

31 IND. L. REV. 49, 61–68 (1998) (noting that “[e]mpirical studies of

judicial decisions suffer from significant limitations,” including sample size, time lag, selection

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is extremely complex and frequently involves “numerous issues raised by the

parties,” such as claim construction, infringement (direct and indirect),

various grounds for invalidity (including anticipation, obviousness, and

patentable subject matter), other defenses (such as inequitable conduct,

exhaustion, laches, and prosecution history estoppel), and remedies

(including injunctive relief and damages).

204

Moreover, the underlying

technology and the parties’ strategic objectives can vary greatly as well.

205

As a

result, it can be “difficult to make generalizations about patent litigation from

the study of individual cases.”

206

Second, this study is based primarily on litigated court decisions, which

are subject to selection effects. “[T]he selection effect refers to the

proposition that the selection of tried cases is not a random sample of the

mass of underlying cases.”

207

This is because “[c]ases only go to trial when the

parties substantially disagree on the predicted outcome.”

208

Thus, when the

applicable legal standard clearly favors one side or the other, parties tend to

settle their disputes rather than incur the expense of litigation,

209

which can

be considerable, particularly in patent litigation.

210

As a result, “the disputes

selected for litigation . . . will constitute neither a random nor a representative

sample . . . of all disputes.”

211

Here, the court decisions studied are not representative of all patent

disputes, or even all patent infringement litigation, because they require that

the patentee have both filed suit and then prevailed on liability (i.e.,

infringement and validity), which occurs in only about a quarter of all cases

litigated to judgment.

212

The selection criteria also require that the winning

bias, and unstated rationales, but “[d]espite these limitations, the study of judicial decisions has

redeeming qualities”); David L. Schwartz, Explaining the Demise of the Doctrine of Equivalents, 26

ERKELEY TECH. L.J. 1157, 1187 (2011) (“All projects involving empirical studies of legal

decisions have limitations . . . .”).

204. Schwartz, supra note 203, at 1187.

205. Id.

206. Id.

207. Kevin M. Clermont & Theodore Eisenberg, Trial by Jury or Judge: Transcending Empiricism, 77

ORNELL L. REV. 1124, 1129 (1992) (alteration in original) (quoting Theodore Eisenberg, Testing the

Selection Effect: A New Theoretical Framework with Empirical Tests, 19 J.

LEGAL STUD. 337, 337 (1990)). For

the seminal article on the “selection effect,” see generally George L. Priest & Benjamin Klein, The

Selection of Disputes for Litigation, 13 J.

LEGAL STUD. 1 (1984). But see Theodore Eisenberg, Testing the

Selection Effect: A New Theoretical Framework with Empirical Tests, 19 J.

LEGAL STUD. 337, 339–40 (1990)

(concluding that the refined Priest/Klein hypothesis “can be rejected as a description of all civil

litigation” but that it may accurately describe products liability litigation).

208. Clermont & Eisenberg, supra note 207, at 1129.

209. Id.

210. The most recent edition of the AIPLA Report of the Economic Survey reports that median

litigation costs exceed $5 million in patent infringement suits where more than $25 million is at stake.

M. INTELLECTUAL PROP. LAW ASS’N, AIPLA 2015 REPORT OF THE ECONOMIC SURVEY 37 (2015).

211. Priest & Klein, supra note 207, at 4.

212. See Allison et al., supra note 170, at 1787–88 & fig.5 (finding that patentees prevailed

in only 26% of cases litigated to final judgment that were filed in 2008 and 2009).

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patentee seek a permanent injunction

213

instead of monetary damages to

compensate for future infringement, such as an ongoing royalty.

214

The

selection effect is compounded by the asymmetric stakes of injunctive relief,

which typically “harms the infringer more than it benefits the patentee.”

215

These factors may result in underrepresentation of certain types of patent

cases. For instance, injunction decisions involving PAEs appear to be

underrepresented in the Decisions Dataset, as they are patentees in

approximately 12% (25 of 218 cases) of permanent injunction decisions, but

PAE litigation may represent as much as almost half of all patent cases filed.

216

Thus, selection effects may have a significant, although difficult to ascertain,

impact on the cases studied.

Third, there are several limitations inherent in content analysis. For

example, if the coding instructions are imprecise or include room for

subjectivity, this could introduce errors and negatively impact

reproducibility.

217

However, this concern can be mitigated by creating, pilot

testing, and implementing clear written coding rules that all coders must

follow, as was done in this study.

218

Another possible concern is that judicial

opinions may exhibit circularity. Circularity occurs when the court’s opinion

incompletely or selectively describes the relevant facts to justify its outcome.

219

Thus, “the facts and reasons found in [the court’s] opinion might or might

not accurately describe the real world facts or the true nature of the judge’s

213. See Gupta & Kesan, supra note 132, at 8 fig.2 (finding that the filing of permanent

injunction motions in patent cases decreased from 3.3% of all cases in 2000 to 0.6% in 2012).

214. See Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1314 (Fed. Cir. 2007) (“Under

some circumstances, awarding an ongoing royalty for patent infringement in lieu of an injunction

may be appropriate.”). See generally Christopher B. Seaman, Ongoing Royalties in Patent Cases After

eBay: An Empirical Assessment and Proposed Framework, 23 T

EX. INTELL. PROP. L.J. 203 (2015)

(reporting the results of an empirical study of ongoing royalty awards after eBay).

215. David L. Schwartz, Pre-Markman Reversal Rates, 43 L

OY. L.A. L. REV. 1073, 1105 (2010).

216. See Cotropia et al., supra note 184, at 674 fig.1 (combining percentage of cases filed by

Large Aggregators, Failed Operating Company/Start-up, Patent Holding Company, and

Technology Development Company for 2012); see also infra note 243 and accompanying text. For

instance, one recent study finds that operating companies prevail on the merits in patent

litigation almost twice as often as non-practicing entities, thus suggesting that fewer PAEs would

be in a position to seek an injunction. See John R. Allison, Mark A. Lemley & David Schwartz, How

Often Do Non-Practicing Entities Win Patent Suits? B

ERKELEY TECH. L.J. (forthcoming) (Stanford Law

& Econ. Olin Working Paper No. 485, at 42 tbl.6a), http://papers.ssrn.com/sol3/

papers.cfm?abstract_id=2750128 (finding that operating companies won 30.6% of definitive

patent rulings in cases filed in 2008 and 2009 compared to only 14.4% of NPEs, and this

difference was statistically signficant).

217. See Rantanen, supra note 170, at 723–24.

218. See Hall & Wright, supra note 166, at 109–16; see also supra note 179 and accompanying

text (explaining the importance of written coding rules).

219. Hall & Wright, supra note 166, at 95–96; see also Ann Juliano & Stewart J. Schwab, The Sweep

of Sexual Harassment Cases, 86 C

ORNELL L. REV. 548, 559 (2001) (“The judicial opinion is the judge’s

story justifying the judgment. The cynical legal realist might say that the facts the judge chooses to relate

are inherently selective and a biased subset of the actual facts of the case.”).

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1982 IOWA LAW REVIEW [Vol. 101:1949

decision-making process.”

220

In addition, information about the court’s

reasoning may not be publicly available—for instance, if the opinion granting

the injunction is under seal,

221

or if the court’s reasoning for granting or

denying an injunction is given orally in court and a transcript of the

proceeding is inaccessible.

222

Fourth, this study is limited to district court decisions; as a result, it does

not consider the outcome of any appeal to the U.S. Court of Appeals for the

Federal Circuit or the reasoning by that court for its decision.

223

Thus, if a

decision on injunctive relief is vacated or reversed on appeal, this information

is not included in the Decisions Dataset.

224

Finally, this study treats permanent

injunction decisions as a binary variable (granted or denied) without

considering the timing, duration, or scope of any injunction entered.

225

V. RESULTS AND DISCUSSION

This Part first describes various findings from the Decisions Dataset and

the Patents Dataset, respectively.

226

It then discusses some implications of

these findings.

A. D

ECISIONS DATASET

1. Overall Grant Rate

The overall grant rate for contested permanent injunction requests

following eBay was a principal issue investigated. As shown in Figure 1, below,

220. Hall & Wright, supra note 166, at 95; see also Rantanen, supra note 170, at 724 (“An opinion

author might present a biased view of the facts or might not reveal his or her true reasoning.”).

221. See, e.g., Order, O2 Micro Int’l Ltd. v. Beyond Innovation Tech. Co., No. 2-04-CV-32 (TJW)

(E.D. Tex. July 2, 2010), ECF No. 662 (sealed decision on injunctive relief). See generally Bernard Chao

& Derigan Silver, A Case Study in Patent Litigation Transparency, 2014 J.

DISPUTE RESOL. 83 (2014)

(describing the problem of lack of transparency in patent litigation proceedings).

222. See, e.g., Transcript of Hearing on Post-Trial Motions, Affinity Labs of Tex., LLC v. BMW

N.A., LLC, No. 9:08-CV-00164 (E.D. Tex. Feb. 14, 2011), ECF No. 546 (injunction hearing

transcript under seal); Transcript of Post-Trial Motion Hearing, Finisar Corp. v. DirectTV Group

Inc., No. 1:05-CV-00264 (E.D. Tex. July 6, 2006), ECF Nos. 318, 334 (transcript of court hearing

unavailable on PACER).

223. The author is collaborating with Professor Ryan T. Holte on an empirical study of

Federal Circuit decisions on permanent injunctive relief following eBay for the cases contained

in this dataset.

224. See, e.g., Douglas Dynamics, LLC v. Buyers Prods. Co., 747 F. Supp. 2d 1063 (W.D. Wis. 2010)

(denying permanent injunction), rev’d and remanded to 717 F.3d 1336, 1344–46 (Fed. Cir. 2013);

Presidio Components Inc., v. Am. Tech. Ceramics Corp., 723 F. Supp. 2d 1284 (S.D. Cal. 2010)

(denying permanent injunction), vacated and remanded in relevant part to 702 F.3d 1351 (Fed. Cir. 2012)

(holding the district court clearly erred in concluding that no irreparable injury existed and remanding

to district court); Robert Bosch, LLC v. Pylon Mfg. Corp., 748 F. Supp. 2d 383 (D. Del. 2010) (denying

permanent injunction), rev’d and remanded to 659 F.3d 1142 (Fed. Cir. 2011).

225. See Golden, supra note 28, at 1405–09 (raising concerns about the scope of permanent

injunctions in patent cases).

226. All data analysis was conducted using Stata/IC 14.0.

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permanent injunctions were granted slightly less than three-quarters of the

time (72.5%) during the time period studied (May, 2006 to December,

2013). This figure is consistent with previous empirical scholarship on the

rate of permanent injunctions following eBay, which range between 72% and

75%.

227

However, it represents a decline from the state of play before eBay,

when injunctions were granted to prevailing patentees in almost all cases.

228

Figure 1. Permanent Injunction Grant Rate: May 2006 to December

2013

Figure 2 illustrates the injunction grant rate by year. Notably, injunctions

were granted over 80% of the time in the 1.5 year period following eBay

(2006–2007), but after that, injunctions were generally granted slightly less

than 70% of the time (the exception is 2009, where 77% of contested

injunction motions were granted).

227. See Chien & Lemley, supra note 2, at 9 (finding that permanent injunctions were

“granted about 75%” of the time from July 2006 to August 2011); Grumbles III et al., supra note

130, at 26 (finding that permanent injunctions were “granted approximately 72% of” the time

between May 2006 and May 2009); Gupta & Kesan, supra note 132, at 9 fig.3 (finding that

permanent injunctions were granted about 80% of the time between May 2006 and December

2012); see also P

ATSTATS

ORG

, supra note 133 (finding that permanent injunctions were granted

75% of the time between May 2006 and May 2013).

228. See supra notes 74–75 and accompanying text; see also Lim & Craven, supra note 135, at

798 (“Before eBay, courts granted patentees injunctions 95% of the time after finding

infringement.”).

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Figure 2. Permanent Injunction Grant Rate by Year

In sum, the overall injunction grant rates suggest that Chief Justice

Roberts’s concurring opinion was accurate in contending that injunctive

relief would continue to be granted to prevailing patentees “in the vast

majority of patent cases.”

229

However, as described in more detail below,

injunctions are rarely granted in several types of patent disputes, suggesting

that these cases have shifted to a liability rule following eBay.

2. Grant Rate by Patented Technology

A second issue is whether the injunction grant rate varies based on the

field of patented technology. Patent litigation has long varied by industry, with

electronics, computer software, pharmaceuticals, and medical devices among

the most-litigated technologies.

230

Table 1 depicts the injunction grant rate by

technological field.

229. eBay Inc. v. MercExchange, L.L.C., 547 U.S 388, 395 (2006) (Roberts, C.J.,

concurring).

230. See P

RICEWATERHOUSE

OOPERS

LLP,

2014

ATENT

ITIGATION

TUDY

12 fig.7a (2014),

http://www.pwc.com/en_US/us/forensic-services/publications/assets/2014-patent-litigation-

study.pdf (listing consumer products as 17% of all patent cases, biotechnology and pharmaceuticals as

14% of all patent cases, computer hardware and electronics at 10% of all patent cases, medical devices

as 9% of all patent cases, and software as 7% of all patent cases from 1995–2013).

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Table 1. Injunction Grant Rate, by Technology

Technolo

Grant Rate

Biotechnolo

100% 4

Pharmaceuticals 92% 25

Othe

87% 23

Electrical 83% 12

Chemistr

78% 9

Mechanical 75% 36

Electronics 67% 39

Medical Devices 65% 34

Software 53% 36

As illustrated above, permanent injunctions are almost always granted in

cases where the patented technology at issue involves biotechnology (100%)

or pharmaceuticals (92%).

231

In contrast, injunctions were granted only

about two-thirds of the time for electronics (67%), and for medical devices

(65%). Most notably, permanent injunctions were granted only slightly over

half the time in cases involving computer software (53%)—a result that was

statistically significant.

232

3. Grant Rate by District

A third issue considered was whether permanent injunction grants varied

by district. This is a salient consideration because patentees have significant

leeway under the existing venue rules to choose the forum where they wish to

litigate.

233

The existing literature suggests that the forum selected can play an

231. In the two pharmaceutical cases where an injunction was not issued, the district court found

the patent(s)-in-suit’s listing in the Orange Book and final judgment in the patentee’s favor was

sufficient to protect its right to exclude. See Order Denying Motion for Injunctive Relief, Valeant Int’l

v. Watson Pharms., Inc., No. 1:10-CV-20526 (S.D. Fla. July 9, 2012), ECF No. 198; Alcon, Inc. v. Teva

Pharm., USA, Inc., Civ. No. 06-234-SLR, 2010 WL 3081327 at *2–*3 (D. Del. Aug. 5, 2010).

232. p = 0.004 using Pearson’s chi-square (χ

). This result remained statistically significant

at the p < 0.05 level after imposing a multiple testing penalty (Bonferroni adjustment) for the

nine different technology categories.

233. See 28 U.S.C. § 1400(b) (2012) (providing that a “patent infringement [action] may be

brought in the judicial district where the defendant resides, or where the defendant has

committed acts of infringement and has a regular and established place of business”); id.

§ 1391(c)(2) (providing that for venue purposes, an entity is “deemed to reside . . . in any judicial

district in which such defendant is subject to the court’s personal jurisdiction with respect to the

civil action in question”); In re TC Heartland LLC, __ F.3d __, 2016 WL 1709433 (Fed. Cir. Apr.

29, 2016) (reaffirming that the patent venue statute, 28 U.S.C. § 1400, incorporated the

definition of corporate residence in the general venue statute, 28 U.S.C. § 1391(c)); Kimberly A.

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1986 IOWA LAW REVIEW [Vol. 101:1949

important role in the ultimate outcome of the litigation.

234

Table 2 depicts

the injunction grant rates for all districts with at least ten decisions during the

relevant time period, with the national average for purposes of comparison.

Table 2. Injunction Grant Rate by District (Minimum of 10 Decisions)

District Cour

Grant Rate

District of New Jerse

92% 13

District of Massachusetts 82% 11

Central District of Californi

73% 11

National Average 72.5%

Eastern District of Texas 61% 36

Northern District o

Californi

60% 10

District of Delaware 50% 26

Injunction grant rates are far from uniform, ranging from over 90% in

the District of New Jersey (92%) to a low of 50% in the District in Delaware.

Notably, two districts that are preferred forums for patent assertion entities

(PAEs)—the Eastern District of Texas and the District of Delaware

235

—have

injunction grant rates that fall below the national average, with the District of

Delaware’s difference from the national average being statistically

Moore, Forum Shopping in Patent Cases: Does Geographic Choice Affect Innovation?, 79 N.C. L. REV.

889, 889–90 (2001) (“[T]he patent jurisdiction and venue statutes allow plaintiffs to bring their

patent suits in virtually any district in the country.”); see also Richard C. Wydick, Venue in Actions for Patent

Infringement, 25 S

TAN. L. REV. 551, 551 (1973) (“All too often, patent infringement suits begin with a

battle over where the war is to be fought.”). Pending legislation in Congress, if adopted, would

significantly limit patentees’ choice of venue. See infra note 356 and accompanying text.

234. See Moore, supra note 233, at 917–19 & tbl.8 (finding a “significant difference in outcome

(patent holder win rate)” among the top ten patent districts); Matthew Sag, IP Litigation in U.S. District

Courts: 1994 to 2014, 101 I

OWA L. REV. 1065, 1104 (2016) (explaining that “the Eastern District of

Texas and the District of Delaware have consciously adopted norms, practices, and procedures” that

make these forums “better for patent plaintiffs and worse for patent defendants”). See generally Mark A.

Lemley, Where to File Your Patent Case, 38 AIPLA Q.J. 401 (2010).

235. See Daniel Klerman & Greg Reilly, Forum Selling, 89 S.

CAL. L. REV. 241, 268 (2016)

(“Notably, the Eastern District of Texas is especially popular with patent assertion entities . . . .”);

Yan Leychkis, Of Fire Ants and Claim Construction: An Empirical Study of the Meteoric Rise of the Eastern

District of Texas as a Preeminent Forum for Patent Litigation, 9 Y

ALE J.L. & TECH. 193, 214 (2007)

(finding that patent trolls “have shown a clear preference for the Eastern District [of Texas] over

other venues”); Mark Liang, The Aftermath of TS Tech: The End of Forum Shopping in Patent Litigation

and Implications for Non-Practicing Entities, 19 T

EX. INTELL. PROP. L.J. 29, 42–43 tbl.1 (2010)

(listing the Eastern District of Texas as the top forum for infringement suits by non-practicing

entities); Fabio E. Marino & Teri H.P. Nguyen, Has Delaware Become the “New” Eastern District of

Texas? The Unforeseen Consequences of the AIA, 30 S

ANTA CLARA HIGH TECH. L.J. 527, 529–30 (2014)

(“Recent survey data on new patent suit filings suggests that [non-practicing entities] have found

a new ‘forum of choice’ in the District of Delaware. . . .”).

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significant.

236

Conversely, the District of New Jersey has a large proportion of

pharmaceutical litigation, which may help explain its high injunction grant

rate.

237

4. Grant Rate by PAE Status

Fourth, this study attempted to determine whether injunction grant rates

varied based on the identity of the patentee. The past decade has seen a

significant increase in patent holders who do not manufacture products, but

instead attempt to monetize their patent portfolio through litigation and

licensing.

238

These actors, commonly referred to as PAEs, have been highly

controversial; some scholars have argued that PAEs are costly and harmful to

innovation and the broader economy,

239

while others contend that at least

some PAEs play a valuable role by helping compensate small inventors and

companies for their innovations.

240

This debate is currently playing out in

numerous arenas, most notably in Congress where legislation to curb so-called

“patent trolls” is being considered.

241

This study classified each patent holder into one of eight categories based

on a classification system developed in a recent empirical study by

Christopher Cotropia, Jay Kesan, and David Schwartz regarding the role of

PAEs in the patent system.

242

It then aggregated several of these categories

236. p = 0.006 using Pearson’s chi-square (χ

). This result remained statistically significant

at the p < 0.05 level after imposing a multiple testing penalty (Bonferroni adjustment) for the six

top districts being studied.

237. See Eric H. Weisblatt & Claire Frezza, Who to Sue and Where in ANDA Litigation: Personal

Jurisdiction Post-Daimler, 69 F

OOD & DRUG L.J. 351, 351 (2014) (noting that pharmaceutical

patent holders in Abbreviated New Drug Application (ANDA) litigation often sue in the District

of New Jersey).

238. See eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396 (2006) (Kennedy, J., concurring)

(“An industry has developed in which firms use patents not as a basis for producing and selling goods

but, instead, primarily for obtaining licensing fees.”); Cotropia et al., supra note 184, at 649–50.

239. See Bessen & Meurer, supra note 8, at 389 (estimating the “direct, accrued costs of NPE

patent assertions totaled $29 billion in 2011”); Sannu K. Shrestha, Trolls or Market-Makers? An

Empirical Analysis of Nonpracticing Entities, 110 C

OLUM. L. REV. 114, 129 (2010) (noting that NPEs

“may reduce social welfare” or “have an efficiency-reducing effect”).

240. See, e.g., F

ED. TRADE COMM’N, supra note 8, at 9 (“Some argue that PAEs encourage

innovation by compensating inventors . . . .”); Peter N. Detkin, Leveling the Patent Playing Field, 6

MARSHALL REV. INTELL. PROP. L. 636, 636 (2007) (“Small companies and individuals have few

good options for licensing their patents or developing their inventions without interference from

infringers.”); James F. McDonough III, Comment, The Myth of the Patent Troll: An Alternative View

of the Function of Patent Dealers in an Idea Economy, 56 E

MORY L.J. 189, 190 (2006) (contending that

PAEs “actually benefit society” by “act[ing] as a market intermediary in the patent market . . .

provid[ing] liquidity, market clearing, and increased efficiency to the patent markets”). But see

Robert P. Merges, The Trouble with Trolls: Innovation, Rent-Seeking, and Patent Law Reform, 24

BERKELEY TECH. L.J. 1583, 1588 (2009) (questioning arguments that allege that all PAEs are

beneficial to economic activity).

241. See, e.g., Innovation Act, H.R. 9, 114th Cong. (2015); PATENT Act, S. 1137, 114th

Cong. (2015).

242. See Cotropia et al., supra note 184, at 654, 660–71; see also supra note 184 (listing the

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into a single PAE category for data analysis.

243

Figure 3 shows the injunction

grant rates for PAEs compared to all other patentees.

Figure 3. Injunction Grant Rate by PAE Status

As illustrated above, PAEs rarely obtained a permanent injunction after

prevailing on liability (16%; 4 of 25 cases),

244

while other patentees are

successful in obtaining injunctions in the vast majority of cases (80%; 154 of

193 cases). This difference in grant rates was highly statistically significant,

eight categories).

243. This was coded as a binary variable [PAE]. The following categories from Cotropia et

al., supra note 184, were classified as PAEs for purposes of data analysis: Large Patent Aggregator;

Failed Operating or Start-Up Company; Patent Holding Company; and Technology Development

Company. Universities were excluded from the PAE category because their primary business is

the creation of knowledge and education of students, not the assertion of patents. See F

RADE

OMM

’

, supra note 8, at 8 n.5 (“Taken literally, the term NPE encompasses patent owners that

primarily seek to develop and transfer technology, such as universities . . . . Patent assertion

entities do not include this latter group.”); see also Mark A. Lemley, Are Universities Patent Trolls?,

18 F

ORDHAM

NTELL

ROP

EDIA

L.J. 611, 612 (2008) (“Universities are non-practicing

entities. They share some characteristics with trolls, at least if the term is broadly defined, but

they are not trolls.”). Individual inventors were also excluded from the PAE category because at

least some individual inventors actually make and/or sell a product that practices the patented

technology or attempt to do so. See Christopher A. Cotropia, The Individual Inventor Motif in the

Age of the Patent Troll, 12 Y

ALE

J.L.

ECH

. 52, 63–64 (2009) (contending that some individual

inventors “are legitimately patent trolls” but that “a significant number [are] certainly not”). Even

if both of these categories of patentees were classified as PAEs, the difference would remain highly

statistically significant (p < 0.001).

244. 25 district court cases in the Decisions Dataset were found to involve PAEs. PAEs were

granted injunctions in only 4 of these 25 cases. See, e.g., i4i Ltd. P’ship v. Microsoft Corp., 670 F.

Supp. 2d 568 (E.D. Tex. 2009); 800 Adept, Inc. v. Murex Sec., Ltd., 505 F. Supp. 2d 1327 (M.D.

Fla. 2007); Commonwealth Sci. & Indus. Research Organisation v. Buffalo Tech. Inc., 492 F.

Supp. 2d 600 (E.D. Tex. 2007); Reporter’s Transcript of Hearing on Post-Trial Motions,

Anascape, Ltd. v. Microsoft Corp., No. 9:06-cv-00158 (E.D. Tex. July 18, 2008), ECF No. 395.

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suggesting that it was not due to chance alone.

245

This finding appears to lend

weight to the view expressed in Justice Kennedy’s concurrence that district

courts should be reluctant to grant injunctions when the patentee is using the

patent “not as a basis for producing and selling goods but, instead, primarily

for obtaining licensing fees.”

246

It also is consistent with prior studies finding

that PAEs are rarely granted injunctions.

247

Even in the rare cases where a PAE was granted an injunction, the

patentee was generally a failing or failed operating company that had

previously sought to commercialize the patent and thus was only a non-

practicing entity at the time of the injunction decision.

248

For instance, in 800

Adept, Inc. v. Murex Securities, the district court found that the patentee and

the defendants were “competitors in the market for telephone call routing

services,”

249

although at the time of the injunction the patentee—who faced

significant financial challenges—only had a “small share of that market”

250

and was simultaneously engaged in a widespread patent litigation campaign

against numerous competitors and end users (mainly former customers) of

the patented technology.

251

The district court concluded that the defendants’

attempts to reduce the patentee’s market share supported a finding of

irreparable harm.

252

Similarly, in Anascape, Ltd. v. Microsoft Corp., the district

court found irreparable harm and granted an injunction because although

the patentee did not presently offer a product that practiced the patented

technology (an analog stick for a video game system controller), it had been

denied what the district court called “the opportunity to go forward”—in

other words, the ability to introduce its own competing controller—due to

245. p < 0.001 using Pearson’s chi-square (χ

246. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396 (2006) (Kennedy, J. concurring).

247. See Chien & Lemley, supra note 2, at 10 fig.1 (finding that PAEs were granted

injunctions in 26% of all decisions, including only 7% of cases where the injunction request was

contested by the infringer); see also Shrestha, supra note 239, at 134–35 (noting the “post-eBay

trend” that “[d]istrict courts in an increasing number of cases have refused to issue injunctions

when the patent owner did not practice the invention”).

248. See Cotropia et al., supra note 184, at 657 (defining “Failed Operating Companies” as

firms that “either manufactured products or seriously attempted to break into the market. For

some reason, these entities failed at selling or developing products or services. They retained

their original patents, and later seek to enforce them.”).

249. 800 Adept, Inc., 505 F. Supp. 2d at 1337.

250. Id. at 1338.

251. For example, in 2007, 800 Adept sued nearly two dozen defendants for patent

infringement in the Eastern District of Texas. See, e.g., Complaint for Patent Infringement, 800

Adept, Inc. v. Enterprise Rent-A-Car Co., No. 5:07-CV-00057 (E.D. Tex. filed Apr. 10, 2007);

Complaint for Patent Infringement, 800 Adept, Inc. v. AT&T Mobility, LLC, No. 5:07-CV-00023

(E.D. Tex. filed Feb. 6, 2007).

252. 800 Adept, Inc., 505 F. Supp. 2d at 1337. The injunction was later vacated on appeal by the

Federal Circuit because the defendants’ services were found to not infringe under the correct claim

construction. 800 Adept, Inc. v. Murex Sec., Ltd., 539 F.3d 1354, 1367 (Fed. Cir. 2008).

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defendant’s infringement.

253

And in i4i Limited Partnership v. Microsoft Corp.,

the district court found that Microsoft’s inclusion of the patented custom

XML technology into Microsoft Word created irreparable harm because it

“would not only directly compete with [the patentee]’s products, but render

them obsolete within the market.”

254

At the time of the injunction, however,

the patentee’s primary business appeared to be patent litigation.

255

These

cases suggest that a patentee who has attempted to commercialize its

invention—even if that effort was ultimately unsuccessful—has a better

chance than other PAEs of demonstrating irreparable harm, which is a critical

part of the eBay analysis.

5. Grant Rate and Competition Between Litigants

Whether the litigants were competitors is another relevant consideration

identified in the literature.

256

This issue was studied as well. The different

grant rates for competitors and non-competitors are depicted in Figure 4.

Figure 4. Injunction Grant Rates: Competition Between Litigants

Again, there was a large disparity in injunction grant rates between these

two categories of patentees. Patent holders who competed with an infringer

were granted a permanent injunction in the overwhelming majority of cases

(84%; 150 of 179 cases), while patentees who were not market competitors

253. Reporter’s Transcript of Hearing on Post-Trial Motions, supra note 244, at 124–25.

254. i4i Ltd. P’ship v. Microsoft Corp., 670 F. Supp. 2d 568, 599 (E.D. Tex. 2009).

255. For example, i4i Limited Partnership’s website is almost exclusively devoted to its

litigation with Microsoft, which culminated in a $240 million award that was affirmed on appeal.

See i4i v. Microsoft,

, http://www.i4ilp.com (last visited Mar. 12, 2016); see also i4i Ltd. P’ship v.

Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), aff’d, 131 S. Ct. 2238 (2011).

256. See supra notes 139–44, 189 and accompanying text.

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rarely succeeded in obtaining injunctive relief (21%; 8 of 39 cases).

257

This

difference was statistically significant as well.

258

Thus, as one district court

explained, “eBay has changed little where a prevailing plaintiff seeks an

injunction to keep an infringing competitor out of the market.”

259

Medical device manufacturers represented one notable group of

competitors who were commonly denied injunctions post-eBay, as nearly a

third of medical device firms who sued a competitor were denied an

injunction (31%; 10 of 32 cases). In many of these cases, the district court

found that the patentee failed to satisfy one or both of the final two eBay

factors, balance of hardships and public interest.

260

In other words, although

these patentees usually could demonstrate irreparable harm, the district court

nonetheless denied an injunction because removing the infringing product

from the market might adversely affect patients’ health and safety.

261

In several other cases involving competitors, the district court declined

to grant an injunction because the patented technology was only a “small

component” of the infringing product, thus following the reasoning of Justice

Kennedy’s concurrence that injunctions in such cases might result in

holdup.

262

And one case denied an injunction between competitors because

257. For district court opinions in the Decisions Dataset, 179 were found to involve

competitors, while 39 cases did not involve competitors.

258. p < 0.001 using Pearson’s chi-square (χ

). This difference remains statistically

significant if Hatch–Waxman (pharmaceutical) litigation is excluded.

259. Amgen, Inc. v. F. Hoffman–La Roche Ltd., 581 F. Supp. 2d 160, 210 (D. Mass. 2008),

aff’d in part, vacated in part, and remanded by 580 F.3d 1340 (Fed. Cir. 2009).

260. See, e.g., Smith & Nephew, Inc. v. Interlace Med., Inc., 955 F. Supp. 2d 69, 79–80 (D.

Mass. 2013) (holding that “the balance of hardships weighs against a permanent injunction”

because it would cause the loss of over $250 million in investment and over 150 employees would

lose their jobs and that “the public interest weighs against granting a permanent injunction”

because “at least some doctors and their patients will suffer a negative impact if [the infringer] is

enjoined from selling its medical device”); Conceptus, Inc. v. Hologic, Inc., No. C 09-02280

WHA, 2012 WL 44064, at *3 (N.D. Cal. Jan. 9, 2012) (denying an injunction because the

infringer demonstrated “substantial hardship . . . would occur if a permanent injunction is

imposed” and “[t]he public interest would undoubtedly be harmed by an injunction” because it

“would leave only one product” on the market and thus “would have eliminated an important

alternative for patients”); Respironics, Inc. v. Invacare Corp., No. 04-0336, 2008 WL 111983, at

*6 (W.D. Pa. Jan. 8, 2008) (holding that the patentee failed to show that either “the balance of

hardships” or “the public interest” weighed in favor of granting an injunction).

261. See, e.g., Tyco Healthcare Grp. LP v. Ethicon Endo-Surgery, Inc., 936 F. Supp. 2d 30, 86

(D. Conn. 2013) (holding that granting an injunction was contrary to the public interest because

it “would pull many devices that are presently used in surgery off the market”); Johnson &

Johnson Vision Care, Inc. v. CIBA Vision Corp., 712 F. Supp. 2d 1285, 1292 (M.D. Fla. 2010)

(concluding that “an injunction will create consequential medical, practical and economic issues”

for users’ of defendants’ product, and “[t]he deleterious effects of the injunction on the general

public would simply be too great to permit”); Bard Peripheral Vascular, Inc. v. W.L. Gore &

Assocs., Inc., No. CV-03-0597-PHX-MHM, 2009 WL 920300, at *9 (D. Ariz. Mar. 31, 2009)

(“Given . . . the important role that [the defendant’s] products play in aiding vascular surgeons

who perform life-saving medical treatments, sound public policy does not favor removing [them]

from the market.”).

262. See Douglas Dynamics, LLC v. Buyers Prods. Co., 717 F. 3d 1336 (Fed. Cir. 2013);

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1992 IOWA LAW REVIEW [Vol. 101:1949

the patented technology was not causally connected to the alleged irreparable

harm, which has been referred to by some courts as the “causal nexus”

requirement.

263

6. Irreparable Harm Findings

This study also sought to determine the basis for the district courts’

conclusion regarding irreparable harm, which is the first factor of the eBay

test. Prior to eBay, prevailing patentees were presumed to suffer irreparable

harm,

264

and this presumption was rarely rebutted.

265

After the Supreme

Court’s decision, however, patentees must demonstrate irreparable harm

before an injunction can issue.

266

As a result, the issue of what harm qualifies

as “irreparable” has taken on new significance since eBay.

In most cases where an injunction issued, the district court made an

explicit finding regarding the harm(s) that it found irreparable.

267

Figure 5

depicts the percentage of cases where one of the following types of irreparable

harm was found: (1) loss of market share (including lost customers and lost

sales) due to infringement;

268

(2) price erosion for the patentee’s product or

services that practiced the patent;

269

(3) loss of goodwill or damage to the

patentee’s brand or reputation;

270

(4) loss of future business opportunities;

271

(5) the infringer’s potential inability to pay a monetary judgment;

272

and

(6) any other type of irreparable harm that does not fall into one of the

previous five categories.

273

Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill. 2012); Humanscale Corp. v CompX

Int’l Inc., No. 3:09-

CV-86, 2010 WL 3222411 (E.D. Va. Aug. 16, 2010).

263. See Apple, Inc. v. Samsung Elecs. Co., 909 F. Supp. 2d 1147, 1153–57 (N.D. Cal. 2012),

aff’d in part, vacated in part by 735 F.3d 1352, 1359–68 (Fed. Cir. 2013). Injunctions were also

denied in several other decisions after the time period of this study based on lack of evidence of

a “causal nexus.” See Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., No. C 09-

5235 MMC, 2015 WL 604582, at *4 (N.D. Cal. Feb. 12, 2015); Riverbed Tech., Inc. v. Silver Peak

Sys., Inc., No. 11–484–RGA, 2014 WL 4695765, at *12 (D. Del. Sept. 12, 2014).

264. See Smith Int’l, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1581 (Fed. Cir. 1983)

(“[W]here validity and continuing infringement have been clearly established, as in this case,

immediate irreparable harm is presumed.” (citations omitted)).

265. One situation where this presumption could be rebutted was when the infringing party

voluntarily terminated the allegedly infringing activities with no reasonable prospect of

resumption. See Polymer Techs., Inc. v. Bridwell, 103 F.3d 970, 974 (Fed. Cir. 1996) (affirming

the denial of injunctive relief when the accused infringer “has or will soon cease the allegedly

infringing activities”).

266. See supra note 117 and accompanying text.

267. Injunctions issued in 158 decisions in the dataset. Of these, 112 decisions (71%)

included an express finding regarding the type(s) of irreparable harm.

268. This was coded as a binary variable [MKTSHARE].

269. This was coded as a binary variable [PRICE].

270. This was coded as a binary variable [GOODWILL].

271. This was coded as a binary variable [FUTUREBUS].

272. This was coded as a binary variable [INABILITY].

273. This was coded as a binary variable [OTHER]. A narrative description of the nature of

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Figure 5. Types of Irreparable Harm Found

As illustrated in the farthest left column in Figure 5, the most common

reason by far for finding irreparable harm was loss of market share (80%).

This is perhaps unsurprising in light of district courts’ willingness to grant an

injunction when the parties are competitors.

274

When a competitor infringes

by introducing a new product with the patented feature, the infringer will

likely capture some of the patentee’s market share. This is especially true since

the infringer, unlike the patentee, can often charge a lower price and still

turn a profit, as it does not have to recoup the cost of developing the patented

technology.

275

Similarly, price erosion (13%) and loss of future business

opportunities (19%) are competition-related harms.

Another significant source of irreparable harm was loss of goodwill or

reputation (43%) due to the infringement. This type of loss may be

irreparable because goodwill is “often difficult to quantify” and thus may be

difficult or impossible to compensate with money damages.

276

A less common

basis for finding irreparable harm is the infringer’s potential inability to pay

damages (5%), which typically occurs when a sizable monetary judgment

would render the infringer insolvent.

277

Finally, other types of irreparable

the irreparable harm was also included [COMMENTS_HARM].

274. See supra Figure 4.

275. See, e.g., Douglas Dynamics, LLC v. Buyers Prods. Co., 717 F.3d 1336, 1344–46 (Fed.

Cir. 2013) (infringing product gained 5% market share because the infringer was “competing in

the marketplace using [plaintiff’s] patented technology” and was able to “undercut[ ] prices”).

276. Id. at 1344; see also MicroAire Surgical Instruments, LLC v. Arthrex, Inc., 726 F. Supp.

2d 604, 635 (W.D. Va. 2010) (“The loss of goodwill is a well-recognized basis for finding

irreparable harm. . . .”).

277. See Coloplast A/S v. Generic Med. Devices, Inc., No. C10–227BHS, 2012 WL 3262756, at *2

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1994 IOWA LAW REVIEW [Vol. 101:1949

harm due to the infringer’s conduct—such as loss of qualified employees,

278

diversion of funds from research and development opportunities,

279

loss of

revenue from other licensees,

280

and impairment of a patent’s market

value

281

—were infrequently found as well (17%).

7. Other eBay Factors

This study also revealed a very strong relationship between the first and

second eBay factors—irreparable harm and absence of an adequate remedy at

law. Scholars have previously noted these two factors often collapse into a

single inquiry.

282

Indeed, the district court in eBay recognized in its decision

denying injunctive relief after remand from the Supreme Court that the

adequate remedy at law factor “inevitably overlaps” with the irreparable harm

requirement.

283

The data collected for this study reveal that in 136 decisions where the

district court made an express finding that irreparable harm would occur

absent an injunction (the first eBay factor), it also found in all but one of these

cases that there was no adequate remedy of law as well (the second eBay

factor).

284

Similarly, in the 42 cases in the dataset where the district court

found no irreparable injury, it also found that an adequate remedy at law

existed in all but one case.

285

(W.D. Wash. Aug. 9, 2012) (finding that irreparable harm exists because, inter alia, the infringer “will

be unable to satisfy any judgment entered against it”); Symbol Techs., Inc. v. Janam Techs., LLC, 729

F. Supp. 2d 646, 665 (D. Del. 2010) (“In some instances, a defendant’s inability to satisfy a money

judgment has been deemed sufficient to establish irreparable injury.” (citations omitted)).

278. See Research Found. of State Univ. of N.Y. v. Mylan Pharm., Inc., Nos. 09-184-LPS, 10-

892-LPS, 2012 WL 1901267, at * 2 (D. Del. May 25, 2012).

279. See ePlus, Inc. v. Lawson Software, Inc., No. 3:09

CV620, 2011 WL 2119410, at * 12 (E.D.

Va. May 23, 2011).

280. See Smith & Nephew, Inc. v. Arthrex, Inc., 629 F. Supp. 2d 1176, 1181 (D. Or. 2008).

281. See Joyal Prods., Inc. v. Johnson Elec. N. Am., Inc., No. 04–5172 (JAP), 2009 WL

512156, at *11 (D. N.J. Feb. 27, 2009).

282. See Gergen et al., supra note 4, at 209 (noting that eBay’s “requirements of

(1) irreparable injury and (2) inadequacy of legal remedies are redundant as these are,

traditionally speaking, one and the same”); Jeremy Mulder, Note, The Aftermath of eBay: Predicting

When District Courts Will Grant Permanent Injunctions in Patent Cases, 22 B

ERKELEY TECH. L.J. 67, 80

(2007) (“Courts collapse the first two factors [of the eBay test], apparently viewing irreparable

harm, if an injunction is not granted, and inadequate remedy at law, in the form of damages, as

opposite sides of the same coin.”).

283. MercExchange III, 500 F. Supp. 2d 556, 582 (E.D. Va. 2007).

284. The lone exception is Conceptus, Inc. v. Hologic, Inc. where the district court found

irreparable harm because the infringer took market share away from the patentee in a two-

supplier market, thus causing loss of customers and potential customers, but it also found that

the patentee had an adequate remedy at law because “it will be reasonable and practical to

estimate the extent of damages.” Conceptus, Inc. v. Hologic, Inc., No. C 09-02280 WHA, 2012

WL 44064 at *2–3 (N.D. Cal. Jan. 9, 2012) (quoting ECF No. 131 at 10).

285. See Accentra Inc. v. Staples, Inc., 851 F. Supp. 2d 1205, 1238 (C.D. Cal. 2011) (finding that

the infringer did not challenge patentee’s showing that its legal remedies are inadequate, but the

district court concluded the patentee had failed to show irreparable harm and denied an injunction).

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In addition, in cases where the district court denied an injunction, it also

commonly found that the third and fourth eBay factors—the balance of

hardships and the public interest—weighed against injunctive relief.

Specifically, of the 60 cases in the dataset where an injunction was denied, the

district court found that the balance of hardships weighed against an

injunction half of the time (50%; 30 cases), and that the public interest

weighed against an injunction slightly over half of the time (52%; 31 cases).

286

8. Regression Analysis

Finally, this study sought to evaluate the potential impact of several

additional factors on injunction decisions following eBay using multiple

regression analysis. Factors included in this analysis were whether the patent

holder licensed or offered to license the patent(s)-in-suit,

287

whether the

patent(s)-in-suit claimed a business method,

288

and whether the patent(s)-in-

suit covered a “small component” of an infringing product,

289

all of which

were anticipated to be negatively correlated with an injunction. In contrast, a

finding of willful infringement was anticipated to be positively correlated with

injunctive relief.

290

The previously discussed factors of patentee type (i.e., PAE

status) and competition between the litigants were anticipated to be

statistically significant as well.

Three different regression models were created to assess the impact of

these factors. The first model (Model #1) included only the factors described

above. The second model (Model #2) controlled for field of technology.

291

The third model (Model #3) controlled for both field of technology and the

six district courts with the most injunction decisions.

292

A statistical test called

logistic (logit) regression

293

was used to assess the relationship between these

The remaining district court decisions did not make an express finding on both eBay factors.

286. Not all decisions made an express finding on all four eBay factors. Cases where a district

court failed to expressly state that these factors weighed against an injunction or was otherwise

silent regarding them are not included in this tally.

287. See supra notes 145–47 and accompanying text.

288. See supra note 114 and accompanying text.

289. See supra notes 148–49 and accompanying text.

290. See supra notes 150–53 and accompanying text.

291. It is particularly important to control for technology when evaluating the significance of

patentee type, as PAEs commonly assert software and computer-related patents in litigation. In contrast,

PAEs rarely assert patents in the chemical and pharmaceutical fields. See Michael Risch, Patent Troll

Myths, 42 S

ETON HALL L. REV. 457, 477–78 (2012). Biotechnology [BIOTECH] was omitted from

Models #2 and #3 because it has a perfect predictive rate on injunction decisions (i.e., injunctions were

granted in all 4 cases in the dataset involving biotechnology patents).

292. See supra Table 2.

293. Logistic (logit) regression is “an estimation technique . . . commonly used by legal scholars

and others to analyze judicial decisions. . . . Like other regression models, logit analyses simultaneously

measure the individual relationships between several independent variables and a single dependent

variable.” David B. Spence & Paula Murray, The Law, Economics, and Politics of Federal Preemption

Jurisprudence: A Quantitative Analysis, 87 C

ALIF. L. REV. 1125, 1179, 1200 (1999).

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1996 IOWA LAW REVIEW [Vol. 101:1949

factors and the court’s ultimate decision on injunctive relief. The results in

Table 3 report the odds ratio—which is a measure of the strength of

association between the independent variable and the dependent variable

(here, whether an injunction was granted)—for each factor, with standard

errors in parentheses.

294

One or more asterisks indicate statistical significance

for an independent variable.

295

The pseudo-R

value reported in the final row

(in italics) is a measure of the predictive power of the independent variables

included in each model.

296

Table 3. Logistic Regression Models: Permanent Injunction Decisions

Variable

297

Odds Ratio

Model #1 Model #2 Model #3

PAE .28

(.22)

.18

(.16)

.12*

(.12)

COMPETE 13.49***

(8.04)

18.65***

(12.40)

27.68***

(20.2)

LICENSE 1.64

(.74)

1.66

(.80)

2.28

(1.23)

BUSMETHOD .60

(.42)

.36

(.31)

.41

(.41)

294. Odds ratios of greater than 1 indicate that the variable has a positive association with entry

of a permanent injunction, while odds ratios of less than 1 indicate the variable has a negative

relationship with entry of a permanent injunction. The amount by which the odds ratio is more or less

than 1 reveals the magnitude of the association between the independent variable and the injunction

decision. All odds ratios are reported to two decimal places. For a useful primer on odds ratios in logistic

regression, see UCLA Institute for Digital Research and Education, FAQ: How Do I Interpret Odds Ratios

in Logistic Regression?, http://www.ats.ucla.edu/stat/mult_pkg/faq/general/odds_ratio.htm (last

visited Mar. 12, 2016).

295. For all results, * indicates p < 0.05, ** indicates p < 0.01, and *** indicates p < 0.001.

296. Pseudo R

values range between 0 and 1, with higher values indicating better model fit.

See UCLA Institute for Digital Research and Education, FAQ: What are Pseudo R-squareds?,

http://www.ats.ucla.edu/stat/mult_pkg/faq/general/Psuedo_RSquareds.htm (last visited Mar.

12, 2016).

297. From top to bottom in this column, the first six variables [PAE, COMPETE, LICENSE,

BUSMETHOD, COMPONENT, and WILLFUL] have been previously described. See supra notes

184, 186, 18992. The next seven variables [SOFTWARE, ELECTRONICS, ELECTRICAL,

MECHANICAL, CHEMISTRY, DRUGS, and MEDICALDEVICE] involve the field of technology

for the patent(s)-in-suit. See supra note 185. The final six variables correspond to the top six

district courts for injunction decisions: Central District of California [CDCAL]; Northern District

of California [NDCAL]; District of Delaware [DDEL]; District of Massachusetts [DMASS]; District

of New Jersey [DNJ]; and Eastern District of Texas [EDTEX]. See supra Table 2.

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COMPONENT .06**

(.05)

.04**

(.04)

.02***

(.02)

ILLFUL 1.89

(.83)

1.76

(.84)

1.46

(.76)

SOFTWARE

.65

(.63)

.37

(.41)

ELECTRONICS

.92

(.93)

.60

(.66)

ELECTRICAL

2.91

(4.52)

1.88

(3.11)

MECHANICAL

.29

(.28)

.20

(.22)

CHEMISTR

.28

(.36)

.17

(.23)

DRUGS

.84

(.97)

1.18

(1.55)

MEDICALDEVICE

.13*

(.12)

.06*

(.07)

CDCAL

.69

(.77)

NDCAL

.61

(.60)

DDEL

.07***

(.05)

DMASS

1.03

(.97)

DNJ

1.39

(1.94)

EDTEX - - 1.76

(1.33)

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Pseudo

.31 .37 .45

Not surprisingly, whether the patentee and infringer were competitors is

the single most significant factor related to injunctive relief in all three

models. This variable is highly statistically significant,

298

and its predictive

power increases as control variables are added.

299

Whether the patentee was a

PAE is also statistically significant in the expected direction (i.e., fewer

permanent injunctions were granted to PAEs) in the final model, which has

the highest degree of predictive power.

300

However, the models probably tend

to underestimate the strength of the relationship between PAE status and

injunctive relief, as there is a high degree of collinearity between the PAE and

COMPETE variables

301

—by definition, a PAE cannot currently compete in a

product market against an infringer.

302

In addition, whether a patent claims a “small component” of an

infringing product is statistically significant for injunctive relief.

303

When a

patent is found to cover a small component, district courts rarely grant an

injunction, as reflected by the low odds ratio for this variable.

304

Thus, it

appears that district courts are heeding Justice Kennedy’s advice to avoid

injunctive relief “[w]hen the patented invention is but a small component of

the product the [infringer] seek[s] to produce.”

305

However, several other factors identified in the existing literature as

relevant to the injunction calculus appear not to be statistically significant

and/or do not have the anticipated impact. For instance, a patentee’s

willingness to license the patent(s)-in-suit is actually positively correlated with

injunctive relief after controlling for all other factors, although this finding is

298. p < 0.001 in all three models.

299. The odds ratio for COMPETE increased from 13.49 in Model #1 to 27.68 in Model #3.

Similarly, the 95% confidence interval (not reported in Table 3) for the variable increased from

4.2043.38 in Model #1 to 6.62115.68 in Model #3.

300. p = 0.035 in Model #3.

301. p < 0.001 using Pearson’s chi-square (χ

) test.

302. In two cases, PAEs were found to have competed in the past with the infringer. See i4i

Ltd. P’ship v. Microsoft Corp., 670 F. Supp. 2d 568, 599 (E.D. Tex. 2009) (finding that there was

evidence of direct competition between patentee and defendant within the custom XML marketplace,

but at the time of decision patentee’s primary business appeared to be patent licensing and litigation);

800 Adept, Inc. v. Murex Sec., Ltd., 505 F. Supp. 2d 1327, 1337 (M.D. Fla. 2007) (finding that “800

Adept and the Murex–Targus Parties are competitors in the market for telephone call routing

services”). Both patentees appeared to be engaged primarily in patent litigation by filing multiple

lawsuits in the Eastern District of Texas against at least twenty other defendants.

303. p < 0.01 in Models #1 and #2, and p < 0.001 in Model #3.

304. District courts only granted injunctions 14% of the time (2 of 14 cases) where the

district court found that the patent covered a “small component.”

305. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396 (2006) (Kennedy, J.,

concurring).

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not statistically significant.

306

Similarly, a finding of willful infringement does

not have a statistically significant correlation with permanent injunction

decisions.

307

Perhaps most notably, business method patents do not have a

statistically significant relationship with injunction denials,

308

despite Justice

Kennedy’s concurring opinion expressing skepticism about the quality of

such patents.

309

Two other variables have a statistically significant relationship with

injunction decisions in the second and third models. First, injunctions are

granted at a significantly lower rate in cases involving medical device

technology, even after controlling for the litigants’ status as competitors.

310

This higher-than-anticipated injunction denial rate may be at least partly due

to the final eBay factor; several district court decisions have declined to award

injunctive relief on the basis that it would disserve the public interest to

restrict doctors’ and patients’ access to the infringing devices.

311

Second, one

forum—the District of Delaware—was found to have a statistically significant

negative correlation with injunctive relief.

312

This may be related to the fact

that Delaware is currently a preferred forum for PAE litigants, who rarely

obtain injunctive relief.

313

306. p = 0.125 in Model #3. Overall, patentees who have engaged in licensing efforts are

slightly less likely to obtain a permanent injunction (64% of the time) than patentees who are

not (77% of the time).

307. p = 0.470 in Model #3. Overall, patentees have a slightly higher injunction grant rate

against willful infringers (77% of the time) than against non-willful infringers (70%).

308. p = 0.375 in Model #3. Prevailing patentees in business method cases win injunctions

slightly over half the time (53%), compared to almost three-quarters of the time in all other cases

(74%), but the small number of decisions involving business method patents (N = 17) renders

this difference statistically insignificant.

309. eBay, 547 U.S. at 397 (Kennedy, J., concurring).

310. p = 0.011 in Model #3.

311. See, e.g., Tyco Healthcare Grp. LP v. Ethicon Endo–Surgery, Inc., 936 F. Supp. 2d 30,

86 (D. Conn. 2013) (finding it “an important consideration that a permanent injunction would

pull many devices that are presently used in surgery off the market”); Conceptus, Inc. v. Hologic,

Inc., No. C 09-02280 WHA, 2012 WL 44064, at *4 (N.D. Cal. Jan. 9, 2012) (finding that “the

public benefit of having two products with different qualities in the transcervical hysteroscopic

sterilization market militates strongly against an injunction”); Johnson & Johnson Vision Care,

Inc. v. CIBA Vision Corp., 712 F. Supp. 2d 1285, 1292–93 (M.D. Fla. 2010) (concluding “that

the public interest would be disserved if an injunction were to be entered” because “millions of

innocent contact lens wearers will suffer real adverse consequences if sale of [the infringing

contact lenses] is enjoined”); Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs. Inc., No. CV-

03-0597-PHX-MHM, 2009 WL 920300, at *5–6 (D. Ariz. Mar. 31, 2009) (finding the public

interest “weigh[s] heavily against imposing an injunction” because of “the public health

consequences of enjoining Gore from producing or selling its infringing products”); Reporter’s

Transcript of Proceedings at 7, Medtronic Sofamor Danek USA v. Nuvasive, Inc., No. 08-CV-

01512 (S.D. Cal. Jan. 26, 2012), ECF No. 461 (“[I]t appears to the Court that the potential risk

to patient health and safety is too great to justify enjoining NuVasive from continuing to sell its

infringing products.”).

312. p < 0.001 in Model #3.

313. See supra notes 234–35 and accompanying text.

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B. PATENTS DATASET

Multiple regression analysis also was performed on numerous variables

in the Patents Dataset to assess whether they had a statistically significant

relationship with injunctive relief. For example, prior studies have found that

patents with more claims,

314

higher citations to prior art,

315

more related

predecessor (parent) applications,

316

and greater citations by subsequently-

issued patents (i.e., forward citations)

317

are more likely to be asserted in

litigation and thus more likely to be considered valuable by their owners.

318

Similarly, the length of time a patent is in prosecution has been correlated in

past studies with increased patent value.

319

As a result, these variables were

anticipated to be positively correlated with injunctive relief, on the theory that

infringement of a valuable patent is more likely to result in irreparable harm.

In contrast, several other variables were anticipated to be negatively

correlated with an injunction. For instance, prior studies have found that

small entity status is negatively correlated with patent value,

320

and small

entities are less likely to prevail in patent litigation.

321

Moreover, since one

asserted justification for PAEs is that they assist small inventors in monetizing

their innovation, patents obtained by small entities may be more likely to be

acquired and asserted by PAEs,

322

which rarely obtain injunctions. Similarly,

patents closer to expiration are less likely to be valuable than newly-acquired

patents,

323

and so the time period between the patent’s issuance and the

314. See Allison et al., supra note 160, at 451–53 (finding “that litigated patents include

significantly more claims than [non-litigated] patents,” and suggesting “that a larger number of

claims suggests the owners knew at the time of prosecution that these patents would turn out to

be important”); Chien, supra note 160, at 326 fig.6, 329 app. A (finding a statistically significant

relationship between the number of claims and whether a patent is litigated).

315. See Allison et al., supra note 160, at 453 (finding that “[l]itigated patents . . . also cite

significantly more prior art than [non-litigated] patents”).

316. See id. at 457 (“Litigated patents also tended to be part of ‘families’ of issued patents.”).

317. See id. at 455 (“Patents that end up being litigated are much more likely to be cited as

prior art by other issued U.S. patents than are non-litigated patents. . . . Indeed, the number of

citations received has a particularly strong association with litigation.”); see also supra note 201.

318. See James Bessen, The Value of U.S. Patents by Owner and Patent Characteristics, 37 R

ES.

POL’Y 932, 939 (2008) (“A litigated patent is, all else equal, nearly six times more valuable”); see

also Allison et al., supra note 160, at 437 (assuming “that litigated patents are at least a subset of

the most valuable patents . . . .”).

319. See Allison et al., supra note 160, at 459 (“Litigated patents also spent significantly

longer in prosecution than issued patents.”).

320. See Bessen, supra note 318, at 937 (finding that “patents owned by small entities are

dramatically less valuable than patents owned by large entities”).

321. See John R. Allison et al., Patent Quality and Settlement Among Repeat Patent Litigants, 99

EO. L.J. 677, 690 (2011) (finding that “large patent plaintiffs are significantly more likely than

small ones to win” in patent litigation).

322. See Shrestha, supra note 239, at 127–28.

323. See Allison et al., supra note 160, at 460 (“Litigation is more likely to occur when patents are

young . . . . Given the connection between litigation and value, it follows that the potential value of a

patent is known early on; it is rare for a patent to become valuable and be litigated late in its life.”)

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2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 2001

injunction decision was expected to be negatively correlated with injunction

grants.

A regression model incorporating these variables was created. In addition,

the NBER technology categories

324

for each patent-in-suit were added as

controls,

325

with one modification—the “Drugs and Medical” category was

divided into two separate categories because of the differences in injunction rates

observed in the Decisions Dataset.

326

The odds ratios, standard errors, statistical

significance, and pseudo R

are reported in Table 4.

Table 4. Logistic Regression: Patent Characteristics

Variable Odds Ratio

CLAIMS .998

(.004)

PRIORART .998

(.002)

PARENT .982

(.058)

FWDCITEPERYEA

.997

(.018)

PROSECUTIONYEA

1.032

(.060)

SMALL 1.591

(.509)

ISSUE2INJUNCTION .965

(.027)

Pseudo

.071

In sum, none of the measured patent characteristics had a statistically

significant relationship with injunction outcomes. This was surprising in light

324. See supra note 200 and accompanying text.

325. Each of these technology categories was included in the regression model as dummy

variables. The odds ratios and standard errors for these variables are omitted from Table 4, but

they are included in the reported pseudo R

statistic for goodness-of-fit.

326. See supra Table 1 (showing permanent injunction grant rate is 92% for drugs and 65%

for medical devices).

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2002 IOWA LAW REVIEW [Vol. 101:1949

of the existing literature, which suggested these characteristics could have

predictive value.

327

Indeed, the only variable in this model that had a

statistically significant relationship was one of the control variables, the NBER

technology category of Computers and Communications, which was

negatively correlated with injunctive relief.

328

C. I

MPLICATIONS

This study’s findings have several implications for both participants and

policy makers in the patent system. First, district courts have applied eBay in a

manner that awards permanent injunctions to operating companies who

compete with the infringer in the vast majority of cases, while simultaneously

denying them to most PAEs and non-competitors.

329

This result holds even

after controlling for other potentially confounding factors, such as the field

of patented technology and courts where PAEs commonly file infringement

claims.

330

In particular, the first factor of the eBay test appears to be the main

stumbling block for PAEs and other non-competing entities, as they rarely can

demonstrate the type of competition-related harm that qualifies as an

irreparable injury under existing precedent.

331

Denying injunctive relief to PAEs may be normatively desirable in many

cases, such as patentees who engage in rent-seeking behavior by exploiting

the high transaction costs of patent litigation to extract nuisance-value

settlements without any corresponding public benefit.

332

eBay’s four-factor test

apparently has helped mitigate holdup by such patentees,

333

even if PAE

litigation remains widespread.

334

327. See supra note 160. But cf. Allison et al., supra note 170, at 1798–99 (finding that “the

observable characteristics of the patents[-in-suit] don’t seem to have much, if any, bearing on the

outcome of the cases involving those patents”).

328. Odds ratio 0.448, standard error 0.169, p = 0.033.

329. See supra notes 243–44 and accompanying text; see also Golden, Patent Trolls, supra note

4, at 2113–14 (asserting that “district courts’ post-eBay practice may be in some tension with the

Supreme Court’s warning against the ‘categorical denial of injunctive relief’ to broad classes of

patent holders”); Sandrik, supra note 4, at 97 (“Case law in the last five years has established a

near categorical rule that [non-practicing entities] cannot obtain injunctive relief.”).

330. See supra note 301 and accompanying text.

331. See supra Figure 5.

332. See Mark A. Lemley & A. Douglas Melamed, Missing the Forest for the Trolls, 113 C

OLUM. L. REV.

2117, 2126 (2013) (referring to “bottom-feeder trolls” as patent owners that “rely on the high cost of

patent litigation” to induce alleged infringers to enter into “quick, low-value settlements”).

333. See Chien & Lemley, supra note 2, at 2 (“By requiring federal courts to consider the

equities of a particular case before granting an injunction, eBay solved much of the patent

system’s holdup problem.”); Robert P. Merges, Foundations and Principles Redux: A Reply to Professor

Blankfein-Tabachnick, 101 C

ALIF. L. REV. 1361, 1373 (2013) (same).

334. See Colleen V. Chien, Patent Trolls by the Numbers (Santa Clara Univ. Legal Studies, Research

Paper No. 08-13, 2013), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2233041 (finding that

PAEs initiated 62% of all patent litigation filed in 2012 based on data provided by RPX); cf. Cotropia

et al., supra note 184, at 676 fig.2 (finding that operating companies represented 68.9% of unique

patentees in patent cases filed in 2012).

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However, the near-categorical denial of injunctive relief to non-

practicing entities seemingly conflicts with the Supreme Court’s admonition

in eBay that lower courts should avoid “categorical rule[s]” prohibiting

injunctive relief “in a broad swath of cases,” including when the patentee does

not commercially practice its patents.

335

As the Court’s unanimous opinion

explained, such “broad classifications” are not permitted by “traditional

equitable principles.”

336

Furthermore, the routine denial of injunctive relief

to non-practicing entities is in tension with the Court’s century-old holding in

Continental Paper Bag—which was cited in eBay

337

—that a patentee’s failure to

practice the patented invention does not, standing alone, preclude equitable

relief.

338

The imposition of a liability rule for most non-practicing patentees may

adversely affect entities that engage in innovation and utilize a business model

that relies heavily on the right to exclude others, such as startups that have

developed a new technology but have not yet brought a product to market.

339

For many startups, the process of commercializing an invention is costly and

complex, with uncertain prospects for success.

340

Empirical researchers have

found that many startup companies seek patents to secure rights to their

inventions, particularly in the biotechnology and medical device industries,

341

335. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393 (2006); see also Sandrik, supra note 4,

at 111 (contending that “[t]he denial of injunctive relief . . . to patentees that practice their technology

but do not compete in the same market as their infringers . . . is in conflict with the Supreme Courts

warning against the ‘categorical denial of injunctive relief’” (citations omitted)).

336. eBay, 547 U.S. at 393.

337. See id. (“The [district] court’s categorical rule is also in tension with [Continental Paper

Bag], which rejected the contention that a court of equity has no jurisdiction to grant injunctive

relief to a patent holder who has unreasonably declined to use the patent.” (citation omitted)).

338. See supra notes 60–68 and accompanying text; see also Holte, Misinterpretation of eBay,

supra note 4, at 727 (noting “the Supreme Court affirmed the Continental Paper Bag case” in eBay).

339. See Andrew Beckerman-Rodau, The Supreme Court Engages in Judicial Activism in

Interpreting the Patent Law in eBay, Inc. v. MercExchange, L.L.C., 10 T

UL. J. TECH. & INTELL. PROP.

165, 198 (2007) (“Nonpracticing entities can be small enterprises that have developed innovative

technology but have been unable to generate the necessary capital or marketing expertise to

compete successfully [in] the marketplace.”); see also Stuart J.H. Graham, Robert P. Merges, Pam

Samuelson & Ted Sichelman, High Technology Entrepreneurs and the Patent System: Results of the 2008

Berkeley Patent Survey, 24 B

ERKELEY TECH. L.J. 1255, 1297 (2009) (finding that among surveyed

startups who apply for patent protection, “the most important reason for patenting is to prevent

others from copying the startup’s products and services”).

340. See F. Scott Kieff, Property Rights and Property Rules for Commercializing Inventions, 85 M

INN.

L. REV. 697, 707–08 (2001) (explaining the activities associated with commercializing an

invention, including developing a commercial embodiment, raising capital, securing production

facilities and labor, creating distribution channels, and informing potential consumers about the

product’s availability and benefits); Ted Sichelman, Commercializing Patents, 62 S

TAN. L. REV. 341,

343 (2010) (“[T]he inventor must undertake costly and risky development and testing to

transform the invention into a commercially viable product.”).

341. See Graham et al., supra note 339, at 1277 tbl. 1 (showing that 39% of all surveyed

startups, and 75% of biotechnology and 76% of medical device startups, hold U.S. patents or

patent applications).

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2004 IOWA LAW REVIEW [Vol. 101:1949

and the vast majority of startups that successfully secure venture capital

financing have applied for patent protection.

342

The effective loss of the right

to exclude post-eBay may hinder these firms’ ability to subsequently

commercialize their inventions.

343

In addition, a liability rule may decrease the value of patents owned by

PAEs and other non-practicing entities. By removing the threat of a

permanent injunction, and thus the ability to potentially force infringing

products off the market, eBay has “decrease[d] the incentives for potential

licensees to seek a license rather than practice patents without permission.”

344

The loss of the right to exclude erodes the patentee’s bargaining power and

consequently may result in lower licensing rates.

345

Indeed, this second-order

effect is likely to have a much wider impact than injunction denials in

litigation, as only a small fraction of patents are ever litigated, while many

more are licensed.

346

Third, district courts exhibit a technology-specific bias in applying the

facially-neutral four-factor test in eBay. This phenomenon is not uncommon

342. See id. (showing that 82% of surveyed venture-backed companies either have at least

one U.S. patent or have applied for a U.S. patent, and that venture-backed firms hold an average

of 18.7 U.S. patents and patent applications); David H. Hsu & Rosemarie H. Ziedonis, Resources

as Dual Sources of Advantage: Implications for Valuing Entrepreneurial-Firm Patents, 34 S

TRATEGIC

MGMT. J. 761, 762 (2013) (finding “that successful patent filings are . . . influential determinants

of financing outcomes for new ventures” for semiconductor startups); see also Beckerman-Rodau,

supra note 338, at 199 (“Strong patent rights provide an incentive for enterprises, such as venture

capitalists, to provide capital to smaller enterprises . . . .”); Samuel Kortum & Josh Lerner,

Assessing the Contribution of Venture Capital to Innovation, 31 RAND

J. ECON. 674, 674–75 (2000)

(finding that “venture capital is associated with a substantial increase in patenting” and suggesting

several models to explain this relationship); Celia Lerman, Patent Strategies of Technology

Startups: An Empirical Study 26-27 (May 25, 2015) (unpublished manuscript),

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2610433 (finding in empirical study of

startups listed in CruchBase that “patents have a positive effect on funding” from investors and

that “the number of patents matters”).

343. See Golden, Patent Trolls, supra note 4, at 2117 (“By discouraging innovation, and the

ownership of rights in innovation, by independent inventors, universities, technology start-ups,

research-oriented spin-offs, and patent holding companies, a categorically discriminatory market

for patent rights may slow, rather than promote, progress.”); Kieff, supra note 340, at 703 (“[T]he

treatment of patents as property rights is necessary to facilitate investment in the complex, costly,

and risky commercialization activities required to turn nascent inventions into new goods and

services.”); see also Ted Sichelman & Stuart J.H. Graham, Patenting by Entrepreneurs: An Empirical

Study, 17 M

ICH. TELECOMM. & TECH. L. REV. 111, 112 (2010) (explaining that “patents provide

substantial ex post incentives to commercialize inventions”).

344. Ellis et al., supra note 4, at 459; see also Tang, supra note 135, at 250 (contending that

“[s]ince eBay drastically reduced the threat of permanent injunctions over large corporations’

core products or services, these corporations now have even less financial incentive to license

from non-practicing patent owners”).

345. Ellis et al., supra note 4, at 460.

346. See, e.g., Mark A. Lemley, Essay, Rational Ignorance at the Patent Office, 95

NW. U. L. REV.

1495, 1507 (2001) (asserting that “only about 1.5% of patents are litigated at all,” but estimating

that “the total number of patents litigated or licensed for a royalty (as opposed to a cross-license)

is on the order of [5%] of issued patents”).

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in patent law. As Dan Burk and Mark Lemley have explained, although

“patent law is technology-neutral in theory, it is technology-specific in

application.”

347

In particular, Burk and Lemley point to how federal courts

apply various doctrines, such as nonobviousness, enablement, written

description, and best mode, differently in fields like biotechnology and

computer software.

348

Injunctive relief appears to be another doctrine that fits

this description. In particular, it appears that industries which depend on

strong patent rights to encourage innovation—most notably biotechnology

and pharmaceuticals

349

—are the most likely to obtain injunctive relief.

350

Notably, these industries also have extremely high research and development

costs, running into the hundreds of millions of dollars in some cases.

351

contrast, injunctions are granted at lower rates for industries where patent

protection is viewed as less vital, such as computer software.

352

Finally, differences in injunction rates by district open the possibility to

forum shopping by litigants who are concerned about their prospects for

injunctive relief.

353

For example, although PAEs rarely receive injunctions,

three of the four decisions where they were able to do so were from the

Eastern District of Texas,

354

which is a favored venue of non-practicing

entities.

355

This finding may weigh in favor of adopting venue-limiting

347. Dan L. Burk & Mark A. Lemley, Is Patent Law Technology-Specific?, 17 BERKELEY TECH.

L.J. 1155, 1156 (2002).

348. Id.; see also D

AN L. BURK & MARK A. LEMLEY, THE PATENT CRISIS AND HOW THE COURTS

CAN SOLVE IT 59–62 (2009) (advancing a similar argument).

349. See B

URK & LEMLEY, supra note 348, at 50 (discussing prior empirical work finding “that

patents play a major role in supporting innovation in only a few industries, most notably in

chemistry and pharmaceuticals”); Graham et al., supra note 339, at 1278 (finding that

“biotechnology and medical device companies are much more likely to hold patents and

applications than are software and Internet firms”); see also Edwin Mansfield, Patents and

Innovation: An Empirical Study, 32 M

GMT. SCI. 173, 175 tbl.1 (1986) (finding in a cross-section

survey of firms that 65% percent of pharmaceutical innovations would not have been introduced

without patent protection).

350. See supra Table 3 (finding pharmaceutical and biotechnology patents received

injunctions over 90% of the time).

351. See Joseph A. DiMasi et al., The Price of Innovation: New Estimates of Drug Development Costs, 22 J.

HEALTH ECON. 151, 166–67, 167 fig.2 (2003) (finding that the total cost per FDA approved new drug

exceeds $800 million); see also J

OSEPH A. DIMASI, TUFTS CTR. FOR THE STUDY OF DRUG DEV.,

INNOVATION IN THE PHARMACEUTICAL INDUSTRY: NEW ESTIMATES OF R&D COSTS (2014),

http://csdd.tufts.edu/files/uploads/Tufts_CSDD_briefing_on_RD_cost_study_-_Nov_18,_2014..pdf

(finding in updated study that estimated average pre-tax industry costs per new prescription drug

approval exceeds $2.5 billion).

352. See Graham et al., supra note 339, at 1278 (finding that most startup software firms hold

no patents).

353. See supra Table 2 (describing differential grant rates by district).

354. See, e.g., i4i Ltd. P’ship v. Microsoft Corp., 670 F. Supp. 2d 568, 608 (E.D. Tex. 2009);

Final Judgment and Permanent Injunction, Anascape Ltd. v. Nintendo of Am., Inc., No. 9:06-CV-

158 (E.D. Tex. July 23, 2008), ECF No. 384; Commonwealth Sci. & Indus. Research Organisation

v. Buffalo Tech. Inc., 492 F. Supp. 2d 600, 607–08 (E.D. Tex. 2007).

355. See supra note 235.

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2006 IOWA LAW REVIEW [Vol. 101:1949

provisions for patent cases in district courts, as currently proposed in some

versions of patent reform legislation.

356

VI. C

ONCLUSION

The Supreme Court decision in eBay has ushered in a new era in patent

remedies by creating a bifurcated system of property rules and liability rules

for different categories of patentees. Little has changed for prevailing

patentees who compete in a product market against an infringer, as they still

obtain permanent injunctions in the vast majority of cases. In contrast, PAEs

are generally subject to a liability rule because they rarely can obtain an

injunction at the trial court level. This dichotomy may have a negative impact

on certain types of non-practicing entities by effectively eliminating their right

to exclude others from practicing the patented technology. Moreover, it

appears to conflict with the Court’s own conclusion in eBay that such a

“categorical rule” is inappropriate in determining entitlement to equitable

relief.

356. See Venue Equity and Non-Uniformity Elimination (VENUE) Act of 2016, S. 2733,

114th Cong. § 2(a) (proposed amendment to 35 U.S.C. § 1400(b)); Amendment in the Nature

of a Substitute to H.R. 9, 114th Cong. § 281B(g) (2015) (proposed amendment to 35 U.S.C.

§ 1400(b)), https://www.congress.gov/bill/114th-congress/house-bill/9/text.

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2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 2007

Appendix A:

List of Injunction Decisions

Plaintif

Defendan

Cour

Docke

Cite Date

Briese

Lichttechnik

Verttriebs

GmbH

Langton NYSD 1:09

09890 ECF No. 477 12

2013

XpertUniverse,

Inc.

Cisco Sys., Inc. DED 1:09

00157 2013 WL 6118447 11

2013

TransPerfect

Global, Inc.

MotionPoint

Corp.

CAND 4:10

02590 ECF No. 468 11

2013

Global Traffic

Techs., LLC

Emtrac Sys, Inc. MND 0:10

04110 2013 WL 5964454 11

2013

Bristol

Myers

Squibb Co.

Mylan Pharms.,

Inc.

DED 1:09

00651 ECF Nos. 242, 243 11

2013

CardSoft, Inc. VeriFone

Holdings, Inc.

TXED 2:08

00098 2013 WL 5862762 10

2013

BIP, LLC Kohler Co. MAD 1:11

10374 ECF No. 257 08

2013

Stryker Corp. Zimmer Inc. MIWD 1:10

01223 2013 WL 6231533 08

2013

Smith &

Nephew, Inc.

Interlace Med.,

Inc.

MAD 1:10

10951 955 F. Supp. 2d 69 06

2013

esternGeco

L.L.C.

ION Geophysical

Corp.

TXSD 4:09

01827 953 F. Supp. 2d 731 06

2013

Halo Elecs., Inc. Pulse Elecs., Inc. NVD 2:07

00331 2013 WL 3043668 06

2013

Alps South, LLC The Ohio Willow

Wood Co.

FLMD 8:08

01893 ECF No. 418 05

2013

Allergan, Inc. Apotex Inc. et al. NCMD 1:10

00681 2013 WL 1750757 04

2013

Unicom

Monitoring,

LLC

Cencom, Inc. NJD 3:06

01166 2013 WL 1704300 04

2013

In re

Armodafinil

Patent Litigation

(‘722 Patent

Litigation)

DED 1:10

02200 939 F. Supp. 2d 456 03

2013

Tyco Healthcare

Group LP

Ethicon Endo

Surgery Inc.

CTD 3:10

00060 936 F. Supp. 2d 30 03

2013

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2008 IOWA LAW REVIEW [Vol. 101:1949

VirnetX Inc. Apple Inc. TXED 6:10

00417 925 F. Supp. 2d 816 02

2013

Brocade

Commc’ns Sys.

Inc.

A10 Networks,

Inc.

CAND 5:10

03428 2013 WL 140039 01

2013

Apple, Inc. Samsung Elecs.

Co., Ltd.

CAND 5:11

01846 909 F. Supp. 2d 1147 12

2012

E2Interactive,

Inc.

Blackhawk

Network, LLC

IWD 3:09

00629 ECF No. 536 12

2012

Graphic

Packaging

Intern., Inc.

C.W. Zumbiel Co. FLMD 3:10

00891 2012 WL 3536983 08

2012

Coloplast A/S Generic Med.

Devices, Inc.

AWD 2:10

00227 2012 WL 3262756 08

2012

Carl Zeiss Vision

Int’l GmbH

Signet Armorlite,

Inc.

CASD 3:07

00894 ECF No. 1561 08

2012

Tev

Pharms.

USA

Sandoz, Inc. NYSD 1:08

07611 ECF No. 338 07

2012

Integrated Tech.

Corp.

Rudolph Techs.,

Inc.

AZD 2:06

02182 ECF No. 546 07

2012

Pfizer Inc. Teva Pharms.

U.S.A., Inc.

DED 1:09

00307 882 F. Supp. 2d 643 07

2012

Gen. Elec. Co. Mitsubishi Heavy

Indus. Ltd.

TXND 3:10

00276 ECF No. 640 07

2012

Valeant Int’l

atson Pharms.,

Inc.

FLSD 1:10

20526 ECF No. 198 07

2012

Fractus, S.A. Samsung Elecs.

Co.

TXED 6:09

00203 876 F. Supp. 2d 802 06

2012

Apple, Inc. Motorola, Inc. ILND 1:11

08540 869 F. Supp. 2d 901 06

2012

Motorola, Inc. Apple, Inc. ILND 1:11

08540 869 F. Supp. 2d 901 06

2012

St. Jude Med.

Inc.

Access Closure

Inc.

ARWD 4:08

04101 ECF No. 359 06

2012

Research

Found. of State

Univ. of NY

Mylan Pharm. NJD 1:09

00184 2012 WL 1901267 05

2012

Schering Corp. Mylan Pharm. NJD 2:09

06383 ECF No. 455 05

2012

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2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 2009

Layne

Christensen Co.

Bro

Tech Corp.

d/b/a The

Purolite Co.

KSD 2:09

02381 871 F. Supp. 2d 1104 05

2012

Hospira, Inc. Sandoz Int’l

GmbH

NJD 3:09

04591 2012 WL 1587688 05

2012

Meadwestvaco

Corp.

Rexam PLC VAED 1:10

00511 ECF No. 597 04

2012

Broadcom Corp. Emulex Corp. CACD 8:09

01058 ECF No. 1090 03

2012

Medtronic

Sofamor Danek

USA, Inc.,

Nuvasive, Inc. CASD 3:08

01512 ECF Nos. 460, 461 01

2012

Conceptus, Inc. Hologic, Inc. CAND 3:09

02280 2012 WL 44064 01

2012

Accentra, Inc. Staples, Inc. CACD 2:07

05862 851 F. Supp. 2d 1205 12

2011

Eli Lilly and

Company

Actavis NJD 2:07

03770 ECF No. 748 12

2011

ActiveVideo

Networks, Inc.

Verizon

Communications,

Inc.

VAED 2:10

00248 827 F. Supp. 2d 641 11

2011

Hurricane

Shooters, LLC

EMI Yoshi Inc. FLMD 8:10

00762 ECF No.. 144 11

2011

The Paw Wash

LLC

Paw Plunger LLC MOWD 4:08

00113 ECF No. 44 11

2011

Sanofi

Aventis

Deutschland

GmbH

Glenmark

Pharms., Inc. USA

NJD 2:07

05855 821 F. Supp. 2d 681 09

2011

Versata Software

Inc.

SAP Am., Inc. TXED 2:07

00153 2011 WL 4017944 09

2011

Lighting Ballast

Control LLC

Philips Elecs. N.

Am. Corp.

TXND 7:09

00029 814 F. Supp. 2d 665 08

2011

Belden Tech.

Inc.

Superior Essex

Communications

DED 1:08

00063 802 F. Supp. 2d 555 08

2011

Peach State

Labs, Inc.

Envtl. Mfg.

Solutions, LLC

FLMD 6:09

00395 ECF No. 276 08

2011

Pozen Inc. Par Pharma. Inc. TXED 6:08

00437 800 F. Supp. 2d 789 08

2011

Inventio AG Otis Elevator Co. NYSD 1:06

05377 2011 WL 3480946 08

2011

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2010 IOWA LAW REVIEW [Vol. 101:1949

Midtronics Inc. Aurora

Performance

ILND 1:06

03917 800 F. Supp. 2d 970;

ECF No. 196

2011

Soitec MEMC Elec.

Materials, Inc.

DED 1:08

00292 2011 WL 2748725 07

2011

LG Elecs. USA

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hirlpool Corp. DED 1:08

00234 798 F. Supp. 2d 541 07

2011

Metso Minerals

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2011

ePlus, Inc. Lawson Software,

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2011

3D Sys., Inc. Envisiontec, Inc. MIED 2:05

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2011

B. Braun

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2011

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2011

Douglas

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2011

Harris Corp. Fed. Express

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WL 3627379

2011

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Texas LLC

BMW N. Am.,

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2011

Tec Vit

Mix UTD 2:06

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2011

Ernie Ball Inc. Earvan

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2011

Brigham and

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2011

Bendix Comm.

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Haldex Brake

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Stone Strong,

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A5_SEAMAN (DO NOT DELETE) 7/4/2016 4:32 PM

2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 2011

O2 Micro Int’l

Ltd.

Beyond

Innovation Tech.

Co.

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ECF No. 424

2010

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2010

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00325 2010 WL 3238312 08

2010

ClearValue, Inc. Pearl River

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2010

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2010

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2010

Alcon, Inc. Teva Pharms.

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2010

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2010

Dow Chem.

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Nova Chems.

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2010

Custom Designs

of Nashville Inc.

Alsa Corp. TNMD 3:08

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2010

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2010

oods Deangelo Marine

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2010

Mitsubushi

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Barr Laboratories NYSD 1:07

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2010

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Quanta

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Smith &

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2010

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Tyco Healthcare

Group LP et al

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Parker

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Ricoh Co. Quanta Computer

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Presidio

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2010

udkins HT Window

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Eli Lilly & Co. Sicor Pharms, Inc. INSD 1:06

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IGT Bally Gaming Int’l

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2009

Creative

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Monsanto Co. Bowman INSD 2:07

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The Western

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A5_SEAMAN (DO NOT DELETE) 7/4/2016 4:32 PM

2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 2013

Eli Lilly & Co. Tev

Pharms.

USA, Inc.

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2009

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2009

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2009

Merck Sharp &

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SRL

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2009

Finjan Software

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Secure

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2009

i4i LP Microsoft Corp. TXED 6:07

00113 670 F. Supp. 2d 568 08

2009

Daiichi Sankyo

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Mylan Pharms. NJD 2:06

03462 ECF No. 143 08

2009

Medtronic

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Fallon Luminous

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2009

Transamerica

Life Ins. Co.

Lincoln Nat’l Life

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2009

Haemonetics

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Baxter Healthcare

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12572 ECF No. 328 06

2009

Hypoxico Inc. Colorado Altitude

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2009

Koninklijke

Philips Elecs.

Power Media CD

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Mass Eng’d

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2009

Bard Peripheral

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2009

Kowalski Mommy Gina

Tuna Resources

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oyal Prods., Inc.

ohnson Elec. N.

Am., Inc.

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Global Traffic

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U.S. Philips

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Telcordi

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Funai Elec. Co.,

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Daewoo Elecs.

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Sensormatic

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2008

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Smith &

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2008

American Calcar

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American Honda

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Callaway Golf

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Becton

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Extreme

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A5_SEAMAN (DO NOT DELETE) 7/4/2016 4:32 PM

2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 2015

Pressure Prods.

Med. Supplies

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Quan Emerteq

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2008

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2008

Anascape, Ltd. Nintendo of Am. TXED 9:06

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2008

Grantley Patent

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2008

Trading Tech.

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2008

Kowalski Ocean Duke

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00055 ECF No. 270 04

2008

Power

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2008

Fresenius USA,

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2008

Chase Med.,

L.P.

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2008

Ecolab, Inc. FMC Corp. MND 0:05

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2008

Orion IP, LLC Mercedes

Benz

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2008

Avid

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Philips Elecs. N.

Am. Corp.

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00183 2008 WL 819962 03

2008

Blackboard Inc. Desire2Learn Inc. TXED 9:06

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2008

Amgen F. Hoffman

LaRoche Ltd.

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12237 ECF No. 1675; 581 F.

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Cygnus

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2008

Broadcom Corp. Qualcomm, Inc. CACD 8:05

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2007

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DePuy Spine,

Inc.

Medtronic

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2007

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2007

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2007

Sundance, Inc. DeMonte

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2007

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2007

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Allan Block

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2007

ohns Hopkins

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Datascope Corp. MDD 1:05

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2007

Muniauction,

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Thomson Corp. PAWD 2:01

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MercExchange,

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Sanofi

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2007

Commonwealth

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00324 492 F. Supp. 2d 600 06

2007

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Heuft

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GmbH

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A5_SEAMAN (DO NOT DELETE) 7/4/2016 4:32 PM

2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 2017

Lexion Med Inc. Northgate Techs.

Inc.

ILND 1:04

05705 ECF No. 236 05

2007

Informatica

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Proveris

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12424 ECF No. 150 05

2007

MGM Well

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2007

800 Adept, Inc. Murex Securities,

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2007

O2 Micro Int’l,

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2007

Ortho

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Mylan Labs Inc. NJD 2:04

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2007

Amado Microsoft Corp. CACD 8:03

00242 ECF No. 661 03

2007

Verizon Servs.

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Vonage Holdings

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2007

Atlanta

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Leggett & Platt,

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2007

Momentus Golf,

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Swingrite Golf

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IASD 4:02

40252 ECF No. 224 02

2007

Novozymes A/S Genencor Int’l,

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DED 1:05

00160 474 F. Supp. 2d 592 02

2007

Genlyte Thomas

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10945 ECF No. 80 02

2007

MPT, Inc. Marathon Labels,

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2007

Exergen Corp. CVS Corp. MAD 1:01

11306 ECF No. 256 01

2007

Innogenetics,

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2007

IMX, Inc. LendingTree, Inc. DED 1:03

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2007

Transocean

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Deepwater

Drilling, Inc.

Visto Corp. Seven Networks,

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2006

Cybersettle, Inc. Nat’l Arbitration

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Color Kinetics,

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2006

Omegaflex, Inc. Parker Hannifin

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2006

Rosco, Inc. Mirror Lite Co. NYED 1:96

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2006

Smith &

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2006

3M Innovative

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Avery Dennison

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2006

Int’l Rectifier IXYS Corp. CACD 2:00

06756 ECF Nos. 689, 690 09

2006

Vod

Cordis Corp. OKWD 5:03

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2006

Finisar Corp. DirecTV Group

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2006

Pods, Inc. Porta Stor, Inc. FLMD 8:04

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2006

Litecubes, LLC Northern Light

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2006

TiVo Echostar (Dish

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00001 446 F. Supp. 2d 664 08

2006

Paice LLC Toyota Motor

Corp.

TXED 2:04

00211 2006 WL 2385139 08

2006

Brinton Loggans TNMD 3:04

00177 ECF Nos. 153, 154,

160

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ald Mudhopper

Oilfield Servs.,

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2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 2019

z4 Microsoft Corp. TXED 6:06

00142 434 F. Supp. 2d 437 06

2006