By Paul Michel and Kathleen O’Malley
A little-known Supreme Court decision is allowing corporations to violate the intellectual property rights of their rivals — and largely get away with it. Letting this precedent stand any longer would discourage America’s innovators, and by extension, harm our economy and our competitive standing in the world.
We are two former federal judges appointed by presidents of different parties, but we agree that it is past time for the Court to revisit its 2006 decision in eBay Inc. v. MercExchange, L.L.C. Since it has not, Congress ought to step in and protect U.S. inventors from patent predators.
The problem involves “injunctions,” the legal term for when judges order someone to stop their illegal actions.
Injunctions are legally-binding, and force patent predators to stop making merchandise that incorporates stolen IP. Crucially, they restore patent owners’ ability to manufacture and sell products incorporating their proprietary technology — without unfair competition from copycats.
That brings us to the eBay case. Almost 17 years ago, the Supreme Court decided that injunctions would no longer be the legal system’s default response to proven patent theft. Instead, courts increasingly refuse to award anything other than monetary damages to the patent owner — without forcing the infringer to stop violating the patent owner’s rights.
But as many inventors could attest, no payout could approximate the loss of the opportunity to see one’s own invention through from an abstract idea to a product on supermarket shelves or in doctors’ offices. In some sense, monetary damages cannot compensate for the irreparable harm done when an inventor loses their “exclusive right to their respective writings and discoveries,” as stated in the Constitution itself.
The eBay decision made patent theft more tempting than ever. Sometimes, it is cheaper for a large company to steal another’s IP, develop a competing business using that IP, and pay court-awarded damages long after the fact, than it is to strike a good faith licensing deal from the start. Such “efficient” infringement would not be possible in a world where injunctions are the standard remedy for patent theft.
And even in cases where a patent does have quantifiable value, court-imposed damages rarely reflect it. The reason is simple: large infringers can easily drag out infringement lawsuits as long as possible and make those lawsuits as costly as possible. The strategy makes it likelier that cash-strapped innovators will cry uncle and settle, even if that means accepting monetary damages far below the true value of their IP.
Lawmakers recently took the first step toward overruling eBay by codifying a presumption of irreparable harm — a key perquisite for an injunction — for instances of trademark infringement. Senator Chris Coons (D-DE), recently indicated that he may soon introduce a bill that would do the same for patent theft.
It’s long past time for Congress to clarify that injunctions are often the most appropriate response in cases of proven patent infringement, not money damages.
Paul Michel served on the United States Court of Appeals for the Federal Circuit from 1988 to his retirement in 2010, and as its chief judge from 2004 to 2010. Kathleen O’Malley served on the United States Court of Appeals for the Federal Circuit from 2010 to 2022 and the U.S. District Court for the Northern District of Ohio from 1994 to 2010. Both currently serve as board members of the Council for Innovation Promotion.
