Tuesday, August 13, 2013

Preliminary Injunctions and Awards of Attorney's Fees: Is the U.S. Becoming More Like Canada?

In a recent post (brought to my attention by Norman Siebrasse), Canadian patent attorney Alan Macek writes that the tough standard for obtaining a preliminary injunction in Canada is one reason (another is the ability of the prevailing party to recover a portion of its attorney's fees) that patent trolling hasn't had much of an impact in Canada:
First, interlocutory injunctions in patent cases are rarely granted by the Federal Court. The Federal Court has often applied the ‘irreparable harm’ component of the RJR Macdonald test for an injunction strictly and has denied injunctions in many cases. A plaintiff that only licenses its intellectual property would likely have a difficult time arguing that the damages it has suffered cannot be compensated with money.

Because patent assertion entities often use the threat of an injunction to try to obtain license or royalties fees from the defendants, pushing off the risk of an injunction for several years until after a full trial reduces the immediate risk to a defendant. In other jurisdictions, a quick order enjoining a defendant from selling its product or offering its services can be a significant risk, leading to a higher willingness to pay the patent owner for a license.
Meanwhile, over at Patently-O Dennis Crouch has a post about a recent Federal Circuit case, Core Labs v. Spectrum Tracer Services, in which the court reversed a denial of a preliminary injunction in a trade secret case.  Dennis suggests (correctly, in my view) that the presence of trade secret rights makes a big difference in the likelihood that a court will grant a preliminary injunction:

Patent plaintiffs have been having some difficulty proving irreparable harm at the preliminary injunction stage. Here, however, the Core Labs requested the PI as a mechanism to support its Texas state law trade secret rights. Under Texas state law, a defendant's possession of a plaintiffs' trade secret rights is sufficient to create a presumption of irreparable harm. In general, irreparable harm tends to be easier to show in trade secret cases as compared with patent cases since information secrecy is so difficult regain once it is lost. The U.S. Supreme Court wrote on this point in a 1984 Monsanto case: "The economic value of [a trade secret] lies in the competitive advantage over others that [the trade secret holder] enjoys by virtue of its exclusive access to the data, and disclosure or use by others of the data would destroy that competitive edge."
Dennis also blogs about another recent Federal Circuit case (decided today, in fact), Monolithic Power Systems, Inc. v. O2 Micro Int'l Ltd., in which the court affirmed an award of $8.4 million in attorneys' fees for alleged litigation misconduct and vexatious litigation. 
So:  is the U.S. becoming more like Canada--not very receptive to awarding preliminary injunctions in patent cases, and moving towards being more receptive to granting fee awards? 
On the first issue, it's hard to say, since there are (to my knowledge) no published statistics available on the frequency with which U.S. courts now grant preliminary injunctions in patent cases.  But it certainly is harder than it used to be, as detailed in my book at pages 98-99 and 104-05 (discussing, among other developments, the abolition of the presumption of irreparable harm) and as suggested further by the "causal nexus" requirement of Apple, Inc. v. Samsung Elecs. Co., 695 F.3d 1370 (Fed. Cir. 2012), and Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314 (Fed. Cir. 2012). Whether this is a good thing or a bad thing is hard to say, though I hope to blog more about this issue in the weeks to come. 

On the second issue, I'd say no.  Under section 285 of the U.S. Patent Act, attorneys' fees are to be awarded only in exceptional cases, and at least as portrayed in the opinion today's Federal Circuit case seems to have had some unusual facts.  Personally, I think it would be worthwhile to experiment with awarding fees in a greater percentage of cases, but we are nowhere close to awarding them in the majority of cases.  So need not raise the Maple Leaf flag just yet.

Overall, I'd say that on some issues Canada probably does things better, while on others the U.S. gets it right; see this post, for example, on noninfringing alternatives.  But one of the things I enjoy the most about comparative law is the opportunity it (ideally) provides for different countries to try to learn from one another's experience.

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