Injunctions Give Teeth to Property Rights

  • by:
  • 08/21/2022

If you unlocked the door to your home and discovered trespassers had moved in, should the court have to presume your right to expel the trespassers from your property?

You’re thinking, “That’s a silly question. Of course there should be a presumption that I, the property owner, can have trespassers kicked off my own property.”

There is no question that you control who may and may not have or use something that you own.

The right to exclude other people from using your property — your house, your car, your money — without first getting your permission is self-evident.

You may lend someone your property. You may lease it to them, if they agree to your terms. You may sell it to them. You may even give it to them.

But there is no question that you control who may and may not have or use something that you own. And if you own it, you have the right to say no to anyone who would borrow, lease, buy or use something of yours.

This straightforward tenet follows from the rights of ownership. Otherwise, there is no enforceable property right.

The high court in 2006 effectively revoked what federal courts across the country for two centuries had presumed: if you prove someone is infringing your patent — the intellectual property equivalent of living in your house without your permission — then that finding established a legal presumption that the court would grant you a permanent injunction.

[caption id="attachment_179230" align="aligncenter" width="3000"] eBay Office Berlin, Germany.[/caption]

The district court had found MercExchange’s business method patent valid and infringed, but after weighing the equities withheld an injunction against eBay. The Federal Circuit reversed the injunction ruling. The Supreme Court opined little more than that the four-factor equities test (which the district court used) applies in patent cases.

It never was automatic that the court would enjoin patent infringers from making, using or selling knockoffs of patent owners’ inventions.  But once a jury found patent infringement happening, this served as a strong indicator that the patent owner should be able to stop the continuation of infringement.  The legal means of halting further wrongdoing involves the court issuing a permanent injunction.

An injunction keeps the patent infringer from continuing to make, use or sell knockoff products or otherwise continue earning ill-gotten gains from copying the invention. The injunction shuts down the infringer’s business. It keeps the infringer from remaining in the market that justly belongs to the invention’s owner.

The sacred right to exclude all others from trespassing your invention’s property boundaries provides you freedom to create a commercial market for your newly created property.

Why is this important? Because the essence of the property rights patent secures is exclusivity. You invent it, you get it patented (you show that the invention is new, useful and not obvious to someone with expertise in that area), the patent secures your exclusive right to make, use or sell the invention for the life of the patent.

This sacred right to exclude all others from trespassing your invention’s property boundaries provides you freedom to create a commercial market for your newly created property.

If someone else competes with you commercially without your knowledge or permission, that’s patent infringement — trespassing. If you prove infringement, the court should presume your right to an injunction.

Former Federal Circuit Chief Judge Paul Michel and attorney Matthew Dowd ask, reasonably: “Indeed, is not every infringer who continues infringement after judgment a ‘willful’ infringer?“

Clearly. And Chief Justice John Roberts acknowledged in a concurring opinion (joined by Scalia and Ginsberg): “From at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.”  Not automatically, but upon analyzing the parties’ equities.  Roberts noted the logic of the disposition toward injunctions for patent owners and cited the court’s 1982 Weinberger v. Romero-Barcelo case, which characterized injunction upon patent infringement a “long tradition of equity practice.”

Justice Clarence Thomas’s opinion for a unanimous court may not have intended to create a categorical rule, but lower courts have misinterpreted the eBay v. MercExchange decision, effectively setting a categorical rule against issuing injunctions to patent owners.

[caption id="attachment_179231" align="aligncenter" width="1599"] The Supreme Court held a special sitting on November 8, 2018, for the formal investiture ceremony of Associate Justice Brett M. Kavanaugh. President Donald J. Trump and First Lady Melania Trump attended as guests of the Court. ..Photo Caption: The President and First Lady with Associate Justice Brett M. Kavanaugh and his wife, Mrs. Ashley Kavanaugh, and the other members of the Supreme Court in the Justices’ Conference Room at a courtesy visit prior to the investiture ceremony. From left to right: retired Justice Anthony M. Kennedy, Associate Justices Neil M. Gorsuch, Sonia Sotomayor, Stephen G. Breyer, Clarence Thomas, Chief Justice John G. Roberts, Jr., President Donald J. Trump, First Lady Melania Trump, Associate Justice Brett M. Kavanaugh, Mrs. Ashley Kavanaugh, Associate Justices Samuel A. Alito, Jr. and Elena Kagan.[/caption]

The mischief arises from Justice Anthony Kennedy’s concurring opinion, joined by Stevens, Souter and Breyer. Kennedy et al. derided patents on innovative new areas and on patent owners who (like most of the iconic, prolific inventors) license out their patents instead of manufacturing their inventions. They asserted that “district courts must determine whether past practice fits the circumstances of the cases before them,” urging courts to draw distinctions and disregard fundamental private property ownership rights. This concurrence has proven problematic in policy and practice, and lower courts have made a bad decision worse by applying Kennedy’s concurrence over the unanimous opinion itself.

The damage done by the court’s reversal of a presumption is exceedingly harmful.  Before eBay, courts issued injunctions 95 percent of the time. Since the ruling, injunctions follow in only 72.5 percent of cases.

It most harms patent owners that don’t manufacture their own inventions.  Now, those who license their patents to commercializers are granted injunction only 16 percent of the time. Again, this decision occurs after infringement’s been proven.

Who are these “nonpracticing” patent owners? Universities, research-and-development companies in the most sophisticated sectors, garage inventors and, historically, two-thirds of the most prolific, greatest American inventors.

Without injunction, the infringer can continue making and selling knockoffs, feels no urgency to negotiate a license and can force the patent owner to settle for a low royalty rate.

Injunctions primarily drive infringers to the bargaining table. If the court halts the infringement, the infringer is eager to get production restarted. The patent owner has a stronger hand to get a fairer licensing deal from the infringer. And, if there’s no agreement, the right to exclude the infringer kicks in.

Which brings us to the need to restore the presumption of injunction once infringement is proven. Since eBay, patent values have dropped. Without this presumption, the only option the patent owner has is to go hat in hand to the infringer and beg it to take a license.

Without injunction, the infringer can continue making and selling knockoffs, feels no urgency to negotiate a license and can force the patent owner to settle for a low royalty rate.

In short, the eBay decision has substituted a compulsory licensing scheme for an exclusive right. The only thing to discuss with infringers is the price of a de facto compulsory license, because the property owner can no longer boot the trespasser from his property.

James Edwards is executive director of Conservatives for Property Rights (@4PropertyRights) and patent policy advisor to Eagle Forum Education & Legal Defense Fund. The views expressed are his own.



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