It has been about six years since the Supreme Court changed the rules for obtaining an injunction in patent cases in eBay, Inc. v. MercExchange, LLC. Patent holders who succeeded in proving liability lost the presumptive entitlement to injunctive relief they previously enjoyed. Instead, the eBay court ruled that, going forward, patent infringement injunctions had to satisfy the four-part test used to assess other requests for an injunction.
Since eBay, district courts have had difficulty deciding when a successful patent holder should also be entitled to an injunction. In particular, eBay’s holding that proof of patent infringement and validity does not equal proof of irreparable harm has left some courts unsure what evidence satisfies that requirement in patent cases. But, despite some inconsistent outcomes, trends have begun to emerge that give patent holders and accused infringers guidance on how courts decide whether a patent holder has satisfied its burden of showing irreparable harm when seeking an injunction.
Specifically, important factors that help prove irreparable harm include:
- Market impact of the infringement
- Amount of competition in the market
- Practice of the invention by the patent holder
- Business importance of the invention to the patent holder
Injunctions and patent infringement
It was easier before eBay for successful patent holders to obtain injunctive relief. The presumption in favor of injunctions meant many district courts almost automatically issued an injunction on request once infringement and validity had been adjudged.
But in eBay, the Supreme Court said that a “categorical grant of . . . relief” in the form of an injunction upon a showing of “infringement and validity” was against the traditional equitable principles surrounding injunctions as a form of discretionary equitable relief. The Supreme Court held that patent holders seeking to enjoin an adjudged infringer instead had to meet the usual standards for an injunction, including:
- That the patent holder has suffered irreparable harm
- Remedies available at law, including monetary damages, are inadequate
- Injunctive relief is warranted considering the balance of hardships that the accused infringer will suffer if an injunction is granted versus the patent holder if the injunction is not granted
- The public interest would not be harmed by issuing the injunction
Post-eBay success or failure most often depends on proving irreparable harm.
Proving irreparable harm
Various factual patterns have begun to emerge as proof of irreparable harm in favor of injunctive relief. Specific evidence regarding market impact, amount of competition, practice of the invention and the invention’s business importance to the patent holder have all proved important in proving irreparable harm.
1. Market impact
Proving irreparable harm is easiest when market data makes the effects of the accused infringer’s infringement readily apparent. Market data proving lost sales alone is usually insufficient to prove irreparable harm because lost sales are presumed compensable through money damages, but courts have found sufficient a range of injuries that include:
- Whether the patent holder suffered losses to market share, profits, price erosion, royalty rates, goodwill or reputation
- Whether the patent holder’s harm is unquantifiable
- Whether the patent holder suffered lost opportunities, including research, development and sales of other services to lost customers
Evidence of lost sales, in conjunction with these other injuries, also can be viewed as evidence favoring irreparable harm.
2. Amount of competition
Showing the existence of a two-player market where the patent holder is a direct market competitor of the accused infringer usually serves as strong evidence of irreparable harm. That evidence creates an inference that an infringing sale amounts to a lost sale for the patent holder.
Some district courts have seemed to indicate that direct market competition is required to find irreparable harm. Other district courts, however, have indicated the opposite. As one district court said: “Federal Circuit authority in the preliminary injunction context suggests that [a two-competitor market] is not a requirement to show irreparable harm . . . particularly when . . . there is some indication that other market competitors may also be infringers.”
3. Practice of invention
Whether or not the patent holder actually practices the claimed invention has also seemed to prove important to the determination of irreparable harm. District courts have typically frowned on those who primarily license their claimed invention to others and seek an injunction as a way to potentially obtain higher royalties. Patent holders who seek an injunction to narrowly limit the practice of their claimed invention seem to fare better.
But non-practicing entities like university researchers or self-made investors can still show irreparable harm when they can demonstrate that it is reasonable to prefer to license their patent(s) rather than undertake efforts to secure the financing necessary to bring their works to market themselves.
4. Invention’s business importance
District courts tend to find irreparable harm where a patent holder’s claimed invention is at the core of its business or where the market for the claimed invention is still developing. Conversely, if the claimed invention is a small component of the accused product, the district court may find that monetary relief is enough to compensate for the infringement and deny the requested injunction.
But no irreparable harm when . . .
Patent holders and accused infringers should be aware of facts that are likely to weigh against a finding of irreparable harm. These include evidence of a patent holder’s willingness to forego enjoining infringing activity for compensation by way of licensing royalties. Similarly, if a district court finds that the patent holder has unduly delayed in bringing suit, it is unlikely that the court will find the irreparable harm necessary to support issuance of an injunction.
Patent holders and accused infringers should be aware of how district courts treat the irreparable harm factor now that there is no longer a presumption of irreparable harm after infringement and validity have been found. Although a patent holder is afforded the right to exclude others from practicing their claimed invention, district courts will consider evidence of market data demonstrating irreparable harm due to the accused infringement, unquantifiable injury, direct or indirect competition between the patent holder and the accused infringer, whether the patent holder practices the claimed invention and whether the claimed invention is the core of the patent holder’s business. In addition, facts surrounding the patent holder’s pre-litigation behavior are important as to whether they are likely to succeed in proving irreparable harm. Understanding these facts will better set expectations for probable relief at the outset of litigation, rather than presenting unwelcome surprises.