AIPLA Spring Meeting: District Court Judge Has Not Seen Impact post-eBay

by Brian Fletcher on May 18, 2009

After hearing presentations describing a different “post-eBay world” in the wake of the U.S. Supreme Court’s much debated decision on injunctive relief, Judge Joseph J. Farnan of the U.S. District Court for the District of Delaware argued that the high court’s 2006 ruling “hasn’t done a whole lot,” and rather can best be seen as telling federal judges to “make sure you do what you’ve been doing.”  Farnan was speaking on May 15 at the 2009 spring meeting of the American Intellectual Property Law Association in San Diego.

 

At issue was the court’s ruling in eBay Inc. v. MercExchange LLC, 547 U.S. 388, 78 USPQ2d 1577 (2006), a decision that practitioners generally believe substantially reduced the chances for a permanent injunction in a patent infringement case.

 

According to Farnan, however, the district court judge in the case, Judge Jerome B. Friedman of the U.S. District Court for the Eastern District of Virginia, generally applied the same analysis in the first instance as he did when the case came back to him on remand from the Supreme Court, so “Friedman didn’t see too much in [the Supreme Court’s decision] apparently.”  Looking at his own record as a judge, Farnan noted that he has awarded permanent injunctions in 16 cases, and that all four of his denials of an injunction preceded the Supreme Court’s decision.

 

According to Judge Farnan, the eBay decision is actually a “trilogy” of opinions by Justice Clarence Thomas, Chief Justice John G. Roberts Jr., and Justice Anthony M. Kennedy (“TRK”).

 

He quoted first from Thomas’s majority holding:  “We hold only that the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.”  Farnan paraphrased that as “Make sure you do what you’ve been doing.”

 

“Then Roberts told me,” Farnan said, that history shows “courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases,” and also told me that “Discretion is not whim.”  That looks like a general rule, Farnan suggested, adding that it was “pretty much” applied as such when the Federal Circuit initially reversed the district court in eBay Inc., 401 F.3d 1323, 74 USPQ2d 1225 (Fed. Cir. 2005).

 

Kennedy provided “what I consider the actual teaching of the case,” he said— that there is an exception to the general rule for non-practicing entities.  “In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases,” Farnan said, quoting from Kennedy’s concurrence.

 

He went on to quote Kennedy’s recognition that “An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.”  “Oh, my God, somebody is trying to make money out of private property and he is on to them,” Farnan said, again questioning what was new in the high court’s analysis.

 

He concluded by summarizing the TRK trilogy’s holding in eBay as follows:  (1) always touch on the four factors for injunction analysis, (2) grant permanent injunction in the majority of cases and (3) seriously consider denying injunctive relief when a non-practicing patent holder is the plaintiff.*

 

But if the patent holding plaintiff is “a real fine university like Johns Hopkins, think twice” before you deny an injunction, Farnan added.  “And don’t ever, ever use words like ‘presumption,’ or ‘general rule,’ or ‘categorical,’ and certainly never use ‘patent troll’ ” when referring to patent holders that do not practice their patents, he said.

 

We hope the good judge will also keep in mind inventors like Dean Kamen, who runs a company called DEKA Research & Development and is inventor of the Segway, among other things.  In congressional testimony, Kamen has stated that versions of patent reform bills proposing to fix the perceived problems with trolls could be bad for anyone like him who holds many patents but does not actually build his own products, leaving that instead to deeper-pocketed companies through licensing arrangements.

 

Kamen has stated, “I had learned from all the experts that a troll, which is a bad thing, is somebody who’s abusing the patent system, and someone who abuses the patent system is somebody who never actually makes their own products.”  “I would sit there thinking, ‘Hmm, that sounds awful, that describes me.'”

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