Wednesday, August 24, 2016

Two New Empirical Studies of Injunctions

1. Ryan T. Holte and Christopher B. Seaman have posted a paper on ssrn titled Patent Injunctions on Appeal:  An Empirical Study of the Federal Circuit's Application of eBay.  Here is a link to the paper, and here is the abstract:
Ten years after the U.S. Supreme Court’s 2006 seminal decision in eBay v. MercExchange, the availability of injunctive relief in patent cases remains hotly contested. For example, in a recent decision in the long-running litigation between Apple and Samsung, members of the U.S. Court of Appeals for the Federal Circuit sharply divided regarding whether an injunction was warranted to prevent Samsung from continuing to infringe several smartphone features patented by Apple. To date, however, nearly all empirical scholarship regarding eBay has focused on trial court decisions, rather than the Federal Circuit.
This article represents the first comprehensive empirical study of permanent injunction decisions by the Federal Circuit following eBay. Through an original dataset of appeals in nearly 200 patent cases — representing all cases involving contested permanent injunction decisions for a 7½ year period after eBay — we assess the impact of the Federal Circuit on the availability of permanent injunctions. The findings from this study indicate that the Federal Circuit is generally more favorable to prevailing patentees regarding permanent injunctive relief than the district courts following eBay. District courts that grant an injunction after a finding of liability are highly likely to be affirmed on appeal, whereas district courts that deny an injunction have a statistically significant lower affirmance rate. This suggests the Federal Circuit is generally inclined toward a property rule rather than a liability rule as a remedy against future patent infringement. It also appears to lend support to claims by scholars and others that the Federal Circuit, as a specialized court with a large number of patent cases, is more pro-patentee than the generalist district courts. Finally, some implications of this and other empirical findings from the study are considered.
2.  Kirti Gupta and Jay P. Kesan have posted a paper on ssrn titled Studying the Impact of eBay on Injunctive Relief in Patent Cases.  (This appears to be a substantial reworking of the paper by the same name that they posted a little over a year ago, which I mentioned on the blog here.)  Here is a link to the paper, and here is the abstract:
We find that the U.S. Supreme Court decision in eBay v. MercExchange has had a significant impact on injunctive relief in patent cases. Our extensive analysis with a significant dataset involving thousands of patent cases both pre- and post-eBay shows that the eBay decision has reduced, rather dramatically, both the level at which injunctive relief is sought in patent cases and the rate at which they are granted, particularly for preliminary injunctions. We find that all entities – practicing and non-practicing – are less likely to file for a motion of an injunction after eBay, and that this likelihood of filing for an injunction reduces at a higher rate for NPEs compared to PEs. Therefore, the fact that the rate at which injunctions are granted – calculated as a proportion of the total number of patent cases filed – is decreasing is clearly occurring due to the self-selection by patentees who are moving less often for an injunction.
We also study the impact of the eBay decision on the quality of patents for which injunctive relief is sought and the nature of the patent plaintiff (operating company vs. non-operating company) and their relative success rates with obtaining injunctive relief. We do find a statistically significant difference between some of the observable patent quality characteristics of the patents held by PEs vs. NPEs, for which a motion for an injunction is filed, but we find that NPEs tend to file a motion for an injunction for higher quality patents on average. We do not find that the overall quality characteristics of patents for which a motion for an injunction is filed has increased after eBay, which could have served as one potential mechanism of the self-selection by firms to seek injunctions only for slightly higher quality patents post-eBay.
By controlling for various patent and case level observable characteristics, we estimate whether or not the likelihood of obtaining an injunction varies across PEs and NPEs. We find that both for preliminary and permanent injunctions, NPEs are less likely to obtain an injunction, after controlling for patent characteristics and the length of the case (from filing to termination) throughout the 2000-2012 time period. We also find that the eBay ruling reduced the likelihood of all firms receiving either preliminary or permanent injunctions.
In order to understand whether or not the eBay ruling had a differential impact on PEs vs. NPEs, we utilize a diff-in-diff model. We find that the eBay ruling did not have a differential impact on the likelihood of NPEs to be granted a preliminary injunction as compared to PEs – in other words – the likelihood of being granted a preliminary injunction reduced equally both for NPEs and PEs post eBay. However, we do find a differential impact of the eBay ruling on PEs vs. NPEs for permanent injunctions. We find that NPEs are less likely to be granted a permanent injunction post-eBay compared to PEs, after eBay. In sum, this study raises important policy questions about the current diminished role for injunctive relief in patent cases.
This is an interesting paper, though I still wonder as I did last year why the authors' descriptive statistics for grants of permanent injunctions pre-eBay (which in the current draft never exceed 80.7% during any of the years studied) are so much lower than would ve suggested by the conventional wisdom that permanent injunctions were almost always granted to the prevailing patentee.  Is it because some motions for permanent injunctions were withdrawn prior to being adjudicated, as a result of settlement leading to the licensing of the patented technology?  

I also disagree with the authors' statement, toward the end of the paper, that "classic legal and economic theory suggests that patent courts should be agnostic regarding who owns the patents [that is, PE versus NPE] but rather rule upon the quality of the patents at issue and their infringement."  It seems to me, however, that NPEs on average would have a much harder time showing irreparable harm, inadequacy of a remedy at law, or that the balance of hardships favors them, than would a PE, since unlike many PE/competitors, NPEs are not, ultimately, interested in excluding the defendant from the market.  From an economic standpoint, I would also think that the risk of holdup on average tends to be greater with NPE litigation, much of which does not involve copying by the defendant but rather inadvertent infringement for which an injunction would enable the extraction of sunk costs (i.e., holdup).

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