United States Supreme Court Rules That Permanent Injunctions Are Not Automatic in Patent Cases

A recent U.S. Supreme Court decision ruled that a prevailing patent owner in a patent infringement case cannot assume that it will obtain a permanent injunction against future infringing conduct. In the past, courts have generally granted a permanent injunction to the prevailing patent owner in patent infringement cases. The Supreme Court in eBay v. MercExchange unanimously concluded there is no basis in law for treating the equitable remedy of a permanent injunction differently in patent cases from other types of cases. In other cases, the court must make a four-point evaluation before it decides whether a permanent injunction will issue.

The Supreme Court was confronted with the issue of how the prior practice of granting permanent injunctions to the party obtaining a court ruling that a patent was valid and infringed and the prior court decisions was to be reconciled with the traditional four point test for establishing the right to a permanent injunction in other types of cases.

An injunction is available in the discretion of the court to require a party to either refrain from specifically identified conduct or to compel the doing of some positive act. In a patent case, a permanent injunction would typically compel the infringer to refrain from engaging in conduct which would violate the patent for the remainder of the term of the patent. One who fails to comply with the requirements of an injunction can be found to be in contempt of court and can be fined and subjected to other remedies.

In general, the decision as to whether to grant a permanent injunction to the prevailing party in litigation rests within the discretion of the court. The prevailing party seeking a permanent injunction must establish (a) that the failure to grant an injunction would result in irreparable injury to the prevailing party and (b) that money damages are inadequate to compensate for the injury and (c) that balancing the hardship on the respective parties of the injunction being granted or not granted would be in favor of granting the injunction and (d) that the public interest would not be disserved by the granting of a permanent injunction. These standards have been applied in non-patent cases; however, in patent cases, the granting of the permanent injunction has generally become an automatic matter where the patentee has established infringement of a valid patent. The Supreme Court, while ruling that the traditional four-point test must be considered by the court, did not rule on whether in the eBay case a permanent injunction should be granted, but rather remanded the case to the lower court for a ruling after the lower court applied the required test.

The case will obviously have an impact on patent owners who are not practicing the inventions commercially, as, among other things, the proof of “irreparable harm” will be made more difficult. The court may have been influenced by the so-called “patent trolls” who acquire patents with a view toward obtaining large settlements after making a charge of infringement. The threat of obtaining a permanent injunction against an infringer has been employed as leverage to obtain a substantial settlement. The eBay case decision weakens this threat.

It has also been suggested that a patent owner, who is not practicing the invention but has expressed a willingness to license the patent, would be placed at a disadvantage with respect to satisfying the “irreparable harm” standard.

In two concurring opinions, justices suggested that prior courts have taken into consideration the four-point tests and have reached the conclusion that monetary recovery alone is not an adequate remedy in patent cases. One of the opinions suggested that in certain types of patents, such as in method-of-doing-business patents, the four-point test might be applied differently than for patents on other subject matter. In summary, in evaluating a patent infringement issue, it will be important for both sides to look at the Supreme Court’s mandate that the four-point test applied in other types of cases must be applied in patent cases as well. This will present an additional challenge to one seeking to enforce the patent as a result of the enhanced proof requirements for one seeking a permanent injunction. It remains to be seen whether lower courts following the Supreme Court ruling regarding the four-point test results in a meaningful amount of denials of motions for permanent injunctions or, in the alternative, whether application of the standards due to real or perceived uniqueness of the patent case will approximate automatic granting of permanent injunctions.

Arnold B. Silverman is a member of the Intellectual Property Department and a member of Eckert Seamans Cherin & Mellott, LLC in Pittsburgh, Pennsylvania.

For more information, contact A.B. Silverman at Eckert Seamans Cherin & Mellott, LLC, 600 Grant Street, 44th Floor, Pittsburgh, Pennsylvania 15219 (412) 566-2077; fax (412) 566-6099; e-mail abs@escm.com.