Injunctions Two Years After eBay

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Patent Injunctions Two Years After eBay : 

Patent Injunctions Two Years After eBay Massachusetts Continuing Legal Education 2008 Intellectual Property Conference June 18 2008 Lee GesmerGesmer Updegrove LLP

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2 gesmer.com/mcleseminar

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3 Continental Paper (1908)

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4 never used

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5 never licensed

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6 "non-practicing entity" (NPE)

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7 Supreme Court: no obligation to make use or vend the invention

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8 patent grant is right to exclude others from making, using or vending

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9 "Anything but prevention takes away the privilege which the law confers upon the patentee"

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10 Carbice Corp (USSC 1931): "the [patent] owner can, of course, prohibit entirely the mfg., sale, or use of [the invention]

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11 Harford-Empire (USSC 1945): set price for use by others use and refuse to license neither use nor license

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12 U.S. v. Line Material (USSC 1948): "a patent confers a monopoly … so this court decided in Paper Bag"

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13 Zenith Radio (USSC 1969) "The heart of [legal monopoly]…is legal monopoly is the right to invoke the State's power to prevent others from utilizing his discovery without his consent"

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14 MercExchange v. eBay (E.D. Va)

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15 Patent 5,845,265: "Consignment nodes" Thomas G. Woolston Filed: November 7, 1995

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16 "What is claimed is: 1. A system for presenting a data record of a good for sale to a market for goods, said market for goods having an interface to a wide area communication network for presenting and offering goods for sale to a purchaser, …"

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17

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18

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19 District Court: Lack of commercial activity willingness to license business method patent

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20 permanent injunction denied

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21 Federal Circuit: right to exclude is "essence" of patent property right

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22 General Rule: Permanent injunction issues, except in "rare instances"

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23 case must be "exceptional to justify the denial of a permanent injunction"

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24 "practice" = irrelevant

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25 eBay v. MercExchange, 547 U.S. 1015 (May 15, 2006)

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26 U.S. Const. Art. I, §8,cl. 8:

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27 "The Congress shall have power to:

28 "promote the progress of science and useful arts, by securing for limited times to authors and inventors

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29 …the exclusive right to their respective writings and discoveries"

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30 35 U.S.C. 261 : "patents shall have the attributes of personal property"

* : 

31 * 35 U.S.C. 154(a)(1): "the right to exclude others from using, offering for sale or selling throughout the United States"

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32 but …

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33 35 U.S.C. 283: "courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity …

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34 . . .to prevent the violation of any right secured by patent, on such terms as the court deems reasonable."

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35 Justice Thomas: "right to exclude" distinct from "provision of remedies"

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36 Four-factor test:

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37 plaintiff must prove: irreparable harm remedies at law inadequate

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38 equity warranted considering balance of hardships; and public interest not disserved

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39 no categorical rule for nonpracticing patentees, but:

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40

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41 university researchers self-made inventors

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42 Thomas: "we hold only that"

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43 "equitable discretion"

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44 "traditional principles of equity"

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45 Roberts (Scalia, Ginsburg): injunctive relief in vast majority of cases Court is not "writing on a completely clean slate"

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46 "a page of history is worth a volume of logic"

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47 Kennedy (Stevens, Souter, Breyer): "right to exclude does not dictate the remedy"

48 "nature of the patent and the economic function of the patent holder"

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49 "new era" of patent holding companies "vagueness and suspect" of business method patents

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50 small component leverage/bargaining tool

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51 experience since eBay

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52

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53

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54

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55 (1)

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56 z4 v. Microsoft (EDtTx 2006, Davis)

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57 Windows XP, 2000 activation codes willful infringement, enhanced damages

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58 eBay: "plaintiff must prove:" irreparable harm …

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59 Judge Davis: after eBay, irreparable harm not presumed

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60 z4 licensor, not competitor small component no obstacle to z4 licensing to others

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61 MS "parade of horribles"- software redesign re-releases product delays

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62 piracy industry wide ripple effect/OEMs

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63 permanent injunction denied reasonable royalty imposed for past infringement used for ongoing royalty

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64 (2)

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65 Finisar v. DirectTV (EDtTx 2006, Clark)

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66 willful infringement enhanced damages licensor, not competitor permanent inj. denied

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67 $1.60 per set top box

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68 "it is anticipated that, as sophisticated entities with experience in licensing agreements, the parties may wish to agree to more comprehensive or convenient terms"

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69 (3)

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70 Paice v. Toyota (EDtTx 2006)

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71 hybrid drive trains Prius II, Highlander Lexus RH400

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72 irreparable harm not presumed NPE small component

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73 harm to Toyota reputation cost of redesign post-trial offer to license

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74 harm to dealers and suppliers harm to "burgeoning hybrid market"

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75 Holding: permanent injunction denied - "ongoing royalty" = $25/vehicle

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76 (4)

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77 Paice v. Toyota - CAFC decision on appeal (Oct. 2007):

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78 jury trial? on remand: negotiate before court-ordered license ongoing royalty rate

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79 Judge Rader: remand to parties, or obtain parties’consent

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80 ongoing royalty = compulsory license

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81 "Pre-suit and post-judgment acts of infringement are distinct, and may warrant different royalty rates given the change in the parties’ legal relationship and other factors"

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82 (5)

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83 MercExchange on remand to E.D. Va. 2007

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84 permanent injunction denied a second time

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85 finding of willfulness not dispositive willingness to license significant factor

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86 obtained licenses through threat of litigation didn’t seek preliminary injunction business method patent

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87 if money is all it seeks, money is sufficient remedy PTO reexam "impacts the equitable calculus" no B/M "second look" by PTO

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88 (6,7)

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89 Visto v. Seven Networks (EDtTX 2006, Ward) Brooktrout v. Eicon (EDtTX 2007, Ward)

Marshall, Texas : 

90 Marshall, Texas

District Court Judge T. John Ward : 

91 District Court Judge T. John Ward

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92 fact parties are direct competitors weighs heavily

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93 "intellectual property enjoys its highest value when … asserted against a direct competitor in plaintiff’s market"

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94 "right to exclude is the very essence of the intellectual property at issue"

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95 Other factors: goodwill potential revenues market share damages, reasonable/precision

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96 (8)

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97 Akamai Technologies v. Limelight Networks (D. Mass, Zobel)

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98

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99 Graphic

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100

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101 Akamai: direct competitors customer relations goodwill

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102 Akamai has never licensed damages/reasonable certainty alternatives

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103 Limelight: Akamai prospered restraint on monopoly power preliminary injunction

104 non-willful cost to poorer customers job loss

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105 What questions remain? What have we learned?

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106 ?

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107 compulsory license rewards infringer?

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108 should patent holder be comp’d at higher / different rate after finding of infringement?

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109 eBay Hearings?

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110 indemnification? audit rights? choice of law? new products? royalty escalations?

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111 Alternative? - no forced royalties new suit damages; trebling for willfulness; att. fees; interest

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112 preliminary injunctions?

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113 Copyright, trademark?

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114 but we know …

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115 "automatic" or "semi-automatic" injunction

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116 presumption of irreparable harm

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117 non-practicing patentees face steep odds "patent holding companies" face extremely steep odds

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118 in NPE / non-competitive cases, threat of catastrophic result is greatly minimized, if not gone

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119 NTP v. Research in Motion

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120

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121 $612,500,000 On March 3, 2006

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122 May 15, 2006

123 easier to analyze and calculate risk

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124 litigation strategies

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125 Patent holder: practice compete limited license deals avoid "undue leverage" defense

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126 reject settlement offers name your licensee in suit ITC exclusion order?

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127 accused infringer: reasonable royalties equities - economic hardships need for product

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128 bait settlement offer (FRE 408?) public interest (medical, safety, defense) workaround

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129 THANK YOU!

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130 and remember: gesmer.com/mcleseminar

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