Corporate America celebrated when the international agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) went into effect Jan. 1, 1995. Many companies believed TRIPS would go a long way toward protecting their IP rights overseas. Patent owners were especially happy with a provision that requires countries to grant patent injunctions when requested. Many high-tech companies soon wished that provision had never made it into the treaty. Such a company is eBay.
Last week the US Supreme Court heard a case between eBay and MercExchange on an important question: should patent-owners in patent infringement cases be entitled, virtually “automatically” as eBay lawyers put it, to an injunction? Or should judges have discretion to decide what remedies fits the infringement, taking into account the harm caused and the larger public interest? Ebay was found by lower courts to have infringed two e-commerce patents owned by MercExchange, a small technology company. They concern the “buy it now” feature on its site, which allows users who do not want to take part in an auction to buy an item at a fixed price. A US District Court declined to issue an injunction and awarded MercExchange damages instead. The Federal Court of Appeals (CAFC, Washington) overturned this decision and ruled that patent holders had the right to an injunction barring exceptional circumstances.
The case has dramatically divided the patent community. Technology companies have supported Ebay’s case before the Supreme Court arguing that patent cases are stifling innovation. Pharmaceutical companies however have been arguing the opposite. In a brief to the court, they say limiting injunctions and weakening patent laws would drive up the cost of innovation.
The case has attracted large media attention not least because eBay spared no effort nor money to make its case. A record number of 37 amicus briefs were filed, ranging from IP practitioner groups, industry associations, numerous law professors (on either side of the arguments), IT and pharma & biotech companies and even representatives of what some would call “patent trolls”.
Financial Times editorial comments called upon the Supreme Court to “restore some sanity to the system” referring to the Blackberry case where an owner of a single patent, with no business of himself, almost shut down the successful Blackberry wireless email handheld business. Financial Times went as far as saying that the case could be “crucial to the future of US innovation: the near-automatic right to an injunction creates a severe imbalance of power within the patent system” by referring to patent trolls as a major problem in the US patent system (owners of patents that do not have any business other than to assert it against users of the patent to extract royalties). This is nothing but short of gross exaggeration and is certainly not true for all industries. In the pharmaceutical and biotech industry a patent protects the vast sums of that went into innovative R&D . New therapies are not introduced to patients until the often several hundred million dollar regulatory process has confirmed that a new chemotherapy or antibiotic is both effective and will not harm the patient. Absent an iron-clad exclusive right guaranteed by the patent, new drug development by the private sector would wither as the grant of a compulsory license would destroy the profit incentive so vital to induce pharmaceutical concerns to invest the vast sums needed for regulatory approval.
One would argue how come this is not a similar big issue in Europe? Most European patent laws are based on the understanding that the right to exclude others is the fundamental right of a patentee. An patent right provides its owner an exclusive right to an invention he made. If this invention for which a patent has been granted is being infringed, an injunction against the party infringing the patent owner’s exclusive right to manufacture and dispose of a patent is the only effective remedy to restore exclusivity. Exclusivity is what the party who innovated requires to earn back his R&D investment. An exclusive right would be meaningless without the right to exclude. Injunction and exclusivity go therefore hand in hand.
In most patent countries of the EU a court ordered injunction is granted unless specific circumstances are shown that do not justify an injunction, like public health. Many EU countries give the patent owner the choice either to go for an injunction per se, an injunction as well as an order to pay damages, or, alternatively, only for damages. Refusal to injunction amounts to a compulsory license, which can only be granted in exceptional circumstances, according to most current European patent laws. But that may chance. The current stream of hostilities to Intellectual property rights may spark a similar debate as in the US in the eBay case.
It is fair to say that the fierce eBay debate in the US will soon be mirrored in Europe where patent quality has been a recent issue as well (“trivial patents”). The consultation round initiated by the European Commission and closed on March 31 will show whether the current debate in the US will be followed by an equally fierce debate on patent quality and the effects of patents on innovation in Europe.
see on the eBay case: Severin de Wit, The Case eBay Inc. vs. MercExchange LLC, It’s Impact on NPEs and Patent Enforcement, in”IP Cases and Their Legacy” (2010)