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Patent Injunctions After eBay: The Bidding Is Open on Who Really Benefits

By William R. Overend
July 27, 2006

When faced with the threat of a crippling injunction, many businesses would rather pay for a patent license than spend millions litigating an uncertain result. This simple principle lies at the heart of what has been called the 'licensing-by-litigation' model, and has led to numerous battles over patent rights.

The battle lines have become particularly acute in cases involving companies that do not make or sell products, but claim patent rights to core technologies used throughout an industry. Such companies often threaten permanent injunctive relief against accused infringers as a tactic for negotiating higher fees for patent licenses. To the extent their chances of actually obtaining an injunction are diminished, so are their chances of securing a license through threats of litigation.

In an eagerly awaited decision, the U.S. Supreme Court recently addressed these issues in eBay, Inc. v. MercExchange, L.L.C., __ U.S. __, 126 S.Ct. 1837 (2006). In a unanimous opinion, the Court held that permanent injunctive relief in patent cases is not nearly automatic (as the Federal Circuit had held), but is discretionary, determined by using the same four-factor test applied in any other case.

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