What is an injunction?

In the patent law context, an injunction is a court order that puts someone out of business. Whether it is a small business or a large multinational corporation, an injunction means the company is excluded from the market.

Does U.S. law currently allow for injunctions?

Yes. U.S. law has always allowed for patent injunctions. A patent means that someone invented a new technology. When an inventor creates something, takes it to market, and keeps that invention only to himself, it can be fair to let the inventor maintain his “patent monopoly” by excluding competitors during the term of the patent.

But some patent owners voluntarily choose to license their patents to others for money – creating competitors. Others do not actually make or sell anything – they just wait to sue other companies to get money.  In situations where it is fair that the patent owner be paid royalties, and where market exclusion is not necessary to uphold the patent owner’s interests – the U.S. courts find that money damages are the right remedy instead of injunctions. This is called equitable injunctions – an injunction is only available when it is fair to order one.

Are equitable injunctions unique to patent law?

No.  Equitable injunctions are the rule throughout the U.S. legal system for all kinds of disputes.  U.S. law has always recognized that money damages are often sufficient to resolve disputes in a fair fashion.  The U.S. inherited this tradition from the British Common Law, and it is one of the founding principles of our legal system.

What are automatic injunctions?

Automatic injunctions mean that every time a patent is infringed, no matter the situation and no matter whether money damages would be sufficient to compensate the patent owner, the defendant can be put out of business. If the U.S. adopted this approach, U.S. courts would lose the “equitable discretion” they have always had to order money payments instead of an injunction. In other words, no matter how unfair it would be to put a company out of business, the court would have no choice but to do so.

What is wrong with automatic injunctions?

Lots of things. But as a starting point, it shifts a patent holder’s interest from being compensated for the value of the invention to a new situation where the patent holder can instead seek compensation based on the value of exclusion from the market.

This is dangerous and unfair. For example, in today’s modern economy it is estimated that there are more than 100,000 patents applicable to a single laptop computer. That means that every one of those patent holders could put the laptop manufacturer out of business, no matter how unfair such a result would be. This would undermine U.S. technology leadership and drastically harm the economy.

Would the U.S. be following other countries if it changes its traditional equitable approach to injunctions?

There are some examples of failed experiments with automatic injunctions. Today, the most well-known example is in Germany.  Companies—including Microsoft just a few years ago—have shut down factories and fired employees in Germany just to avoid the automatic injunction rules that some German courts are enforcing.  Right now, German companies are telling the German government that this approach is wrong and must be changed. America should not follow the lead of a European nation that has experienced far less innovation over the past decades, and from which American companies such as Microsoft have moved away.

If not injunctions, what other remedies are there for patent owners?

Money! The most common remedy in patent litigation is monetary damages. Relatively few patent owners actually want to prevent others from using their inventions, they just want to be paid for that use. Many patent owners enter into voluntary license agreements with companies that wish to practice the patents. If a company refuses to take a license, the patent owner can sue and have the court award damages in the amount of the license fee. If the infringement is deemed “willful,” then the court can actually triple the damages award! In light of these remedies—which give most patent owners exactly what they want—there is no need for automatic injunctions. 

As one patent owner’s representative told a U.S. court, patent injunctions are like negotiating with a gun to the head.  Instead of paying what is owed, the defendant pays whatever it takes to get out alive. It is no wonder, then, that some patent owners might want such power to demand unfair payments.  But that does not mean they should get it.