Permanent Injunctions in Patent Litigation After eBay: An Empirical Study

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 seamanc@wlu.edu. 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. H ISTORICAL D EVELOPMENT ................................................... 1959 1. Initial District Court Decision .................................... 1962 2. Federal Circuit Decision ............................................. 1963 3. Supreme Court Decision ............................................ 1964 4. After Remand .............................................................. 1967 B. E XISTING L ITERATURE ON EBAY’ S I MPACT ............................. 1968 IV. METHODOLOGY .......................................................................... 1974 A. R ESEARCH Q UESTIONS ........................................................... 1974 B. S TUDY D ESIGN AND D ATA C OLLECTION .................................. 1975 C. L IMITATIONS ........................................................................ 1979 V. RESULTS AND DISCUSSION .......................................................... 1982 A. D ECISIONS D ATASET .............................................................. 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. P ATENTS D ATASET ................................................................ 2000 C. I MPLICATIONS ....................................................................... 2002 VI. CONCLUSION .............................................................................. 2006 APPENDIX A: LIST OF INJUNCTION DECISIONS ....................................... 2007 I. INTRODUCTION 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, 1 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”). 2016] PERMANENT INJUNCTIONS IN PATENT LITIGATION 1951 patent law decisions of the past decade. 2 It has been extensively cited by lower federal courts, 3 and is the subject of numerous law review articles. 4 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. 5 Despite its perceived importance, however, there has been little rigorous empirical examination of eBay ’s actual impact in patent litigation. 6 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 CORNELL 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 , LAW360 (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. , WESTLAWNEXT (last visited May 10, 2016); see also Dennis Crouch, Most Cited Supreme Court Patent Decisions (2005–2015) , PATENTLY-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 BeckermanRodau, 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 MICH. TELECOMM. & TECH. L. REV. 421 (2007); Bernard H. Chao, After eBay, Inc. v. MercExchange : The Changing Landscape for Patent Remedies , 9 MINN. J.L. SCI. & TECH. 543 (2008); Chien & Lemley, supra note 2; Eric R. Claeys, The Conceptual Relation Between IP Rights and Infringement Remedies , 22 GEO. 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 FED. 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 COLUM. L. REV. 203 (2012); John M. Golden, “Patent Trolls” and Patent Remedies , 85 TEX. L. REV. 2111 (2007) [hereinafter Golden, Patent Trolls ]; John M. Golden, Principles for Patent Remedies , 88 TEX. 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 CHAP. L. REV. 677 (2015) [hereinafter Holte, Misinterpretation of eBay]; Ryan T. Holte, Trolls or Great Inventors: Case Studies of Patent Assertion Entities , 59 ST. LOUIS U. L.J. 1 (2014) [hereinafter Holte, Trolls or Great Inventors ]; Sarah R. Wasserman Rajec, Tailoring Remedies to Spur Innovation , 61 AM. U. L. REV. 733 (2012); Doug Rendleman, The Trial Judge’s Equitable Discretion Following eBay v. MercExchange, 27 REV. 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 HARV. 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 LEWIS & 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). 1952 IOWA LAW...