U.S. District Judge Rodney Gilstrap’s
May 18 opinion in Collision Communications, Inc. v. Samsung Electronics, Inc., Civil Action No. 2:23-CV-00587-JRG,
has gotten quite a lot of coverage already elsewhere. In November, the
jury awarded Collision a running royalty amounting to $445,494,160 for the
infringement of four patents, and found the infringement to be willful.
Whether Judge Gilstrap will award enhanced damages remains to be
seen. The issue in the May 18 opinion was whether to award Collision a
permanent injunction for the infringement of one of the four patents, U.S.
Patent No. 7,593,492. (According to the opinion, Collision did not seek
an injunction for the other three because their remaining terms are
“negligible.”) The case is notable because, among other things, Collision
argued that as a matter of law ongoing infringement constitutes
irreparable harm, because that would have been the understanding in courts of
equity in 1789, and under Trump v. CASA federal courts are obligated to
apply the law of equity as it would have been understood as of that time.
The case is also notable because the U.S. Department of Justice and the U.S.
Patent and Trademark Office filed a Statement of Interest, not supporting
Collision’s argument as such but contending instead that injunctive relief can
be an appropriate remedy for the infringement of a patents owned by a
non-practicing entity (NPE), because patents can be difficult to value and
damages difficult to calculate accurately. The case is therefore
reminiscent of another matter that was pending before Judge Gilstrap last year,
Radian v. Samsung (see discussion here); that case later settled.
To
make a long story short (again, others have already covered this at length),
the court denies the injunction, concluding inter alia that it remains
obligated to follow eBay, and thus ongoing infringement is not as a
matter of law or presumptively irreparable; that, nonetheless, under
the totality of the circumstances—including the fact that Collision had sought
a “design win” for its technology—Collision was faced with irreparable
harm, and an ongoing royalty would not be an adequate remedy at law, for
the reasons advanced by the DOJ and USPTO, even if the plaintiff is an NPE; and
yet, notwithstanding the irreparable harm, Collision had not demonstrated that
the balance of hardships favored it or that the public interest would not be
disserved by the entry of an injunction. As others have noted, the burden
of proof appears to have been important here, but it also seems a bit odd that
Collision argued for a one-month grace period which (it says) would suffice for
Samsung “to bring its infringement to an end.” Does this mean by settling, or
by designing around? The latter seems to be implied by the discussion at
p.15 n.2, but if so the judge concludes that this representation is hard to
square with Collision’s argument at trial that there were no noninfringing
alternatives; it also would seem to difficult to reconcile with the assertion
of irreparable harm in the absence of an injunction.
There’s
more to the opinion, but for my purposes I’d like to consider the case from a
different angle—namely, what the outcome of a case like this should be if one
were inclined to apply economic reasoning, as opposed to legal formalism or (as
Collision would have it) originalism. On this issue, the DOJ and USPTO
certainly are correct that patents can be hard to value and damages difficult
to calculate accurately; under the familiar Calabresi/Melamed formulation,
these are the standard reasons in favor of protecting entitlements by means of
property rules (injunctions). But, as I’ve tried to argue in several
single- or coauthored papers over the years, there are other considerations to
take into account as well. For one things, if we take it as a given that
the overarching goal should be to reward the prevailing patent owner
commensurate with its contribution to the state of the art, that means neither
under- nor overrewarding them. To assume that court-awarded ongoing
royalties underreward, rather than overreward, patent owners is just that, an
assumption, not a demonstrable fact. More to the point, let’s consider
why the parties in a case like Collision v. Samsung have staked out the
positions they have. It seems unlikely to me that Collision is ultimately
interested in excluding Samsung from the market for the technology at suit.
Rather, it thinks that an injunction will provide it with more leverage in
royalty negotiations; and Samsung must think the same thing, or it wouldn’t
oppose the injunction. So from a policy standpoint, it is reasonable to
ask whether it is more or less likely that the added leverage resulting from an
injunction would move the resulting royalty negotiations closer to or further
away from attaining the “right” number—one that would correlate with the contingent ex ante value of the patented
technology over alternatives, and that would not include a substantial premium
based on Samsung’s higher costs (if any) of switching to an alternative ex post
(i.e., holdup value). Further, if as a
practical matter the added leverage from an injunction risks overrewarding the
patent owner, an economic analyst would want to know whether that consequence
is more (or less) of a problem than the risk that a court-ordered ongoing
royalty will underreward them. This all sounds very abstract, to be sure,
and I recognize that we need legal standards that are operable in the real
world. But the goal should be to develop operable standards that are a
reasonably good proxy for the economic realities. (In some of my own work, I’ve proposed some
possibilities.) But until we get away from legal formalism, originalism,
inapt analogies to real property, etc., whether in the U.S. or elsewhere, those
economic realities are likely to remain obscured.
