Professor Michael Carroll is moderating this session. Speakers are Suzanne Munck of the FTC, Jim Sherwood of Google, and Paul Schoenhard of Ropes & Gray.
Carroll: In eBay, the Supreme Court articulated the four-factor test for determining whether to grant injunctive relief for the prevailing patent owner. Unanimous decision in that respect. Concurrence by Justice Kennedy suggested that in certain types of cases (e.g., business methods, cases brought by PAEs) injunctive relief might be less common. How influential have his concerns been? Are there other factors the courts have focused on?
Munck: Trend: no hard and fast rules, but should be focusing on facts and circumstances. Potential for patent holdup (switching costs) in many contexts, not just SEPs. Whenever product has many patents, an injunction may lead to alleged infringer paying a larger license fee to avoid switching costs, more than value of infringed technology.
Sherwood: A lot of our cases fit into Justice Kennedy's concurrence: often a product allegedly infringes because of one aspect of the product out of many. Post-eBay, the risk of an injunction is mitigated, but there is some risk. Still many cases in which injunctive risk is an issue. Apple v. Samsung: delayed enforcement gives defendants faced with injunctive risk the possibility of designing around without having to first take down the entire system, which would be very disruptive.
Post-eBay, two things in particular. First, seven years after eBay, still seeing courts grapple with what to do if injunction doesn't issue. Ongoing royalty may leave no option but to design around, effectively same as injunction. Second, focus of getting exclusionary relief moves to ITC and abroad. Re ITC actions, a big question under section 337 is when infringement is tested (time of importation or later?). IP enforcement coordinator requested comments on coordinating with Customs. Customs is going to need help from ITC with clearer guidance on what should be barred from importation. Moreover, proceedings before Customs traditionally ex parte; some need for more inter partes proceeding to provide guidance to Customs. As for issues abroad, when injunctions come up, Germany is usually mentioned first. Germany has bifurcated proceedings, and injunctions usually issued as a matter of course. Bifurcation presents challenges, because nullity actions usually take longer than infringement proceedings, so infringement tested first and possibility of injunction before a ruling on validity. Bar for getting a stay is pretty high. Even after nullity judgment, open question whether grounds for invalidation are strong enough to justify a stay. Interesting issue in India as well. Before defendant is served, possibility of ex parte injunctions. May be of increasing importance. Back to Europe, in 17th draft of UPC rules Rule 118.2 was deleted (it specified that damages could be an alternative to injunctive relief). Injunctions still discretionary, though.
Schoenhard: Justice Kennedy's opinion changed the world. Alters how we try cases, litigate. You can now figure out in what percentage of cases NPEs get injunctions, competitors get injunctions. What has that practically meant? I don't think anyone really cares about the four-factor test. Instead, focus is on more of the other factors Justice Kennedy called out, public interest, theoretical notions of what a patent grant should be; those factors are very ill-defined, totality of circumstances handled on an ad hoc basis. If we call someone a patent troll, surely no injunction. Another factor, are there other competitors? Just one or many? Shut down or design around? But no clear guidance on how this should play out. On the private party side, therefore, much of the discussion is on "should we bring this case?" Are we likely to get an injunction or just a royalty? Will it justify expense? On defense side, what are our risks? Likely to get an injunction and have to design around?
Second aspect of Justice Kennedy's concurrence to note: he didn't give us an alternative. We've seen many cases in which ongoing royalties are assessed. But are they permitted under Title 35?
So, many factors can play in that are not explicitly in four-factor test. If no injunction, what do we do, but if it's ongoing royalties, how to do it?
Question from audience: Can you determine at outset there is no risk of injunction? Even a troll could transfer patent to a competitor. [Note: my paper with Erik Hovenkamp argues injunctions shouldn't issue here.]
Schoenhard: No, you can't completely rule out the risk. Conversation, though, still has to happen. Is injunction likely or unlikely?
Munck: You have to have infringement before injunction, so need to consider risk of infringement. Second, re risk that injunction would issue based on holder of patent, it goes to the equitable principles of eBay. When there is competitor litigation/accusation of copying, more likely to enjoin. In your hypo, patent held by PAE and then transferred to competitor who alleges infringement, needs to be considered in total. Even if a competitor owns a patent, if it's not practicing it, maybe no injunction. Finally, remedies intended to be compensatory.
Sherwood: In my experience, only 2 cases where can be certain no injunction. If plaintiff doesn't ask for it. Or, if patent is going to expire pretrial.
Question from audience: First, can any statements be made re choice of law clauses in contracts? Second, re emerging markets, should African markets be looking more to US or EU for guidance? Some follow German civil law system, others English common law. Those residual rules guide which regime to follow in developing their own rules.
Carroll: Implicit in your discussion of German courts, technology is part of global market. Could an injunction in Germany have worldwide effect, just given business realities that you don't want to withhold product from Germany?
Sherwood: In terms of design arounds, hard to do it country-specific.
Schoenhard: There is a customer-friendly aspect to courts. What you may find is that parties (corporations) look to the laws that are evolving in different countries to decide whether to invest there. Global design arounds sometimes may be necessary.
Question from Jorge Contreras: In Apple v. Samsung, is there a fifth factor, nexus? Where is it going? Will Supreme Court find nexus rule sufficiently tied to eBay factors?
Munck: eBay: there are no special tests. It's an equitable analysis. Courts could begin reading nexus as a part of irreparable harm. Artificiality of four-factor test. Looking at a connection between infringing component and the fairly large remedy of an injunction. Is it equitable to take product off the market? Unlikely you would see Court add a fifth factor, but would come out in terms of irreparable harm.
Contreras: My chip in a smart phone might be worth $1, I might be irreparably harmed, but overall value of component is low.
Munck: In your scenario, why would manufacturer not be made whole by compensatory remedies? Need to develop facts.
Schoenhard: Might be able to design around small component if there is a discrete saleable unit can swap in or out. Or not. So nexus could be a grave concern in some cases.
Question from audience: First a comment: Federal Circuit quotes Chief Justice's concurrence, not Justice Kennedy's, according to my analysis. Question: Pre-market clearance seems to have diminished this century. Are trends in remedies affecting what companies are doing pre-launch?
Sherwood: One of the biggest challenges in doing premarket clearance with software is that software is constantly changing. [Audience member: isn't that a cost issue?] In terms of the number of iterations that go into software, not clear how you'd analyze cost issue. Raises difficult practical challenges.
Schoenhard: Two components to cost. Time and money. In rapidly evolving technologies, time is often paramount. If you have to delay launch or patch to perform reasonable clearance, very difficult. Moreover, patent issuance timing issues.
Question from audience: A delay could be very lengthy when you change a component. Is the harm really irreparable if you can wait six months, whatever, to allow infringer to make appropriate corrections?
Sherwood: Courts haven't ignored monetary damages. As for delay, focus on public/users. Delayed injunction may be more equitable because injunction won't capture entire product, minimize harm to users.
Carroll: Ronald Coase: parties can try to bargain around injunctions; shows importance of transaction costs. And yet the animosity that can build up in litigation makes postinjunction negotiation difficult.
Note too that in pharma, injunctions may be more important; eBay provides space for dealing with different industries differently.