In the months following the U.S. Supreme Court’s decision in eBay Inc. v. MercExchange, LLC, district courts have had several opportunities to consider the circumstances under which a permanent injunction should issue against patent infringers. In particular, two cases — one issuing a permanent injunction, the other denying a permanent injunction — shed light on the factors district courts analyze in determining whether to issue a permanent injunction.
In Paice LLC, v. Toyota Motor Corp., Case No. 2:04-CV-211-DF (E.D. Tex., Aug. 16, 2006) (Folsom, J.), the court denied Paice’s request for permanent injunctive relief against Toyota. In denying the request, the court applied the traditional four-factor test, reiterated by the Supreme Court in eBay v. MercExchange, which requires that, in order for a court to grant an injunction, the plaintiff must demonstrate (1) that it has suffered irreparable harm; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
Specifically, the court focused on the first two factors — irreparable harm and adequate remedy at law — of the traditional four-factor test. Focusing on the first factor, the plaintiff argued that that absence of a permanent injunction had resulted in an inability to successfully license the patented technology. The court summarily dismissed this argument stating there was evidence in the record that potential licensees may have declined business deals for other reasons. The court went on to state that irreparable harm lies only when injury cannot be undone by monetary damages. The court found that the plaintiff does not manufacture products that compete with the defendant’s infringing product, but rather the plaintiff is geared towards licensing its technology. As a result, the plaintiff’s losses from the defendant’s sales of the infringing products could only be remedied via monetary damages.
With respect to the second factor, the court found that the infringed claims make up only a "small component" of the overall accused products and cited the jury’s reasonable royalty rate as demonstrative of the relatively small contribution of the plaintiff’s invention to the accused product as a whole. Moreover, the reasonable royalty rate determined by the jury could easily be calculated for future sales on the accused devices, thereby removing any uncertainty from future damage calculations. In addition, the court noted that the infringement was found only under the doctrine of equivalents and was not to be found willful. However, it is unclear as to whether the court considered these factors in denying the plaintiff’s motion for entry of a permanent injunction.
Conversely, in TiVo Inc., v. EchoStar Communications Corp., Case No. 2:04-CV-1-DF (E.D. Tex., Aug. 17, 2006) (Folsom, J.), the same judge granted the plaintiff’s request for a permanent injunction. Again, the court applied the traditional four-factor test and again, focused on the first two factors of the test. In explaining the difference between Paice v. Toyota and this case, the court stated that the plaintiff, TiVo, continues to suffer irreparable harm in the absence of an injunction and that there is no adequate remedy at law. Of particular significance, the defendant competes directly with the plaintiff by marketing its infringing products to potential customers as an alternative to purchasing the plaintiff’s products. This availability of infringing products leads directly to a loss of market share for the plaintiff. The court found that the plaintiff was losing market share at a critical time in the market’s development and would not have the same opportunity to capture the market share once the market matures. As a result, the court focused on the loss of market share in the still-emerging market place as a key consideration in finding that the plaintiff suffers irreparable harm.
In considering the second factor — inadequate remedy at law — the court again focused on the marketplace. Specifically, the court noted that impact of the defendant’s continued infringement is shaping the market to the detriment of the plaintiff and results in long-term customer loss. Further, because the plaintiff is a relatively new company with only one primary product, a loss in market share and customer base as a result of infringement causes severe injury that cannot be remedied by monetary damages. In addition, the court noted that, unlike the defendant in Paice v. Toyota, the defendant in TiVo v. EchoStar had literally and willfully infringed the claims of the patent. Again, it is unclear whether the court considered these factors in granting the plaintiff’s motion for entry of a permanent injunction.
Practice Note
The initial district court cases after eBay v. MercExchange indicate that the "irreparable harm" and "inadequate remedy at law" factors will be the primary battleground in determining whether to issue a permanent injunction once a defendant is found to infringe. In particular, a plaintiff who is a non-practitioner of patented technology, such as a patent troll, is less likely to obtain a permanent injunction than a plaintiff who is a marketplace competitor of the defendant.
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