What is the current controversy regarding injunctions?

Certain patent owners who stand to gain from patent hold-up are actively lobbying to change the law to give themselves the weapon of automatic injunctions.  One of the more visible efforts in this regard is the STRONGER Patents Act of 2019 that was introduced in the U.S. House of Representatives in July 2019.  That bill contains numerous provisions aimed at empowering patent owners – including Asian and European companies that have filed large numbers of patents in the United States – to extract excessive royalties from companies doing business in America.  For example, the bill would require that “[u]pon a finding by a court of infringement of a patent not proven invalid or unenforceable, the court shall presume that—(1) further infringement of the patent would cause irreparable injury; and (2) remedies available at law are inadequate to compensate for that injury.”  In doing away with the traditional equitable test for injunctions, the STRONGER Patents Act would place a heavy thumb on the scales in favor of patent owners to use market exclusion as a tool to abuse companies selling products and services in the United States.

Who is leading the charge to abandon the traditional four-part test?

 Unsurprisingly, the charge for automatic injunctions is being led by those entities that have the most to gain.  Certain companies with substantial patent licensing programs wish to boost their profits by using the threat of injunctions to collect royalties far in excess of what a court would deem is appropriate.  Likewise, non-practicing entities (often called “patent trolls”) would love to threaten injunctions to coerce large payments from productive companies.  The latter is particularly egregious, given that such entities entire purpose is to collect money for use of their patents—exactly what monetary damages provide.

Does the current U.S. approach to injunctions sufficiently protect patent owners and promote innovation?

• Absolutely. Patent holders are currently incentivized to develop innovations which can be designed into products for sale. Companies making consumer products using patented technologies compensate patent owners through royalties based on the value consumers place on the technology.  Patent holders should be rewarded for their innovations, but injunctions give them undue leverage in royalty negotiations, which ultimately hurts consumers.

•  Consumers are best positioned to determine the value of particular technologies.  By limiting the use of injunctions, companies are able to use innovations to deliver new and useful consumer products. The marketplace is then able to make a determination of each product’s value.  The payment to the patent holder should be commensurate with the value that the patented technology adds to the product.

•  In contrast, when patent owners can hold a threat of an injunction over the negotiations, thousands of patent owners can each demand unreasonable royalties-backed by the threat of excluding a product from the market.  In that case, the making and selling of consumer products can become prohibitively expensive, driving manufacturers out of business and preventing the sale of such products.

•  Even when a product implements a lot of different technologies, the market is still best positioned to determine the value of the inventions.  If a product is successful, royalty payments increase for the patent holder, the consumer gets what is desired, and the company that produces the product is able to make profitable sales.  

Has U.S. innovation declined since eBay?

 No, quite the opposite.  From 2006 (when the Supreme Court decided eBay) to 2015, patent application filings increased by nearly 40%.  In 2015, there were 629,647 patent applications filed.  Clearly, inventors are highly motivated to obtain patents under the equitable approach to injunctions in the U.S.  And companies can create innovative consumer products without the fear of patent owners coming out of the woodwork threatening to shut down its business.