February 28, 2011
LES Insights
Authored by Raymond M. Gabriel, D. Brian Kacedon, and John C. Paul
For patent owners, the ability to obtain an injunction often provides a great deal of leverage in license negotiations. Historically, the grant of an injunction was seen as a foregone conclusion following a finding of infringement. But the Supreme Court's decision in eBay v. MercExchange altered that equation by making injunctions more difficult to obtain, particularly for non-practicing patent owners, who do not make and sell products covered by the patents. As a result, many patent owners have turned to the U.S. International Trade Commission ("ITC") as an alternative to U.S. District Courts for prosecuting infringement suits.
The ITC permits a patent owner to enforce its rights against an entity that imports allegedly infringing products in the United States. And like a U.S. District Court, the ITC also has the power to issue injunctions, called "exclusion orders," to stop infringing products from being imported into the U.S.
There was a question as to whether the standard for injunctive relief at the ITC is the same as that for a U.S. District Court. And in Spansion v. Int'l Trade Comm'n, Nos. 2009-1460, 1461, 1462, 1465 (Fed. Cir. Dec. 21, 2010),1 the Federal Circuit recently answered this question in the negative. Specifically, the court held that the statutes applicable to the ITC's grant of an exclusion order do not require the application of the same standard used by U.S. District Courts to enter injunctions. Moreover, while the ITC is required to consider certain "public interest" factors, those factors are not the same as those considered by a U.S. District Court.
Federal district courts have discretion to grant injunctive relief to patent owners in accordance with principles of equity. In eBay Inc. v. MercExchange, L.L.C., 547 U.S. 338, 391 (2006),the Supreme Court held that courts must apply the traditional four-part test for injunctive relief used in other areas of law. The test requires the patent owner to demonstrate: (1) that it has suffered an irreparable harm; (2) that remedies available at law are inadequate to compensate for that harm; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. A public interest factor commonly asserted by infringers to argue against issuing an injunction is the public trust in reliable patent laws and valid patents.
In contrast, the ITC test does not require a showing of the first factor, irreparable harm to the patent owner. Because the ITC cannot grant monetary relief, the ITC also does not consider the second factor. Moreover, the ITC, by statute, only considers four enumerated public interest factors: (1) the public health and welfare; (2) competitive conditions in the United States economy; (3) the production of like or directly competitive articles in the United States; and (4) United States consumers.
In Spansion, the patent owner, Tessera, Inc., filed a complaint in the ITC alleging that Spansion, Inc. and various other respondent companies infringed Tessera's patent rights through the importation and sale of certain semiconductor chips or products containing such chips. Tessera's patents cover semiconductor chip packages that accommodate movement caused by heating and cooling of semiconductors. This feature reduces the stress on the chips caused by cyclic heating and cooling, decreasing the occurrence of failure and improving the reliability of electrical devices containing the packages.
The presiding ITC judge held Tessera's patent claims invalid and not infringed. Unlike in a district court, the initial determination of an ITC judge may be reviewed by the full Commission before it can be appealed to the Federal Circuit. On review, the Commission reversed the judge's initial determination, finding the patent claims not invalid and infringed, and issued a limited exclusion order preventing the respondents from importing and selling infringing goods into the United States. The respondents appealed the Commission's findings and argued that the claims were indefinite, anticipated, and not infringed. The Federal Circuit upheld the Commission's decision, rejecting the respondents' arguments.
Spansion, on its own, had also appealed the Commission's grant of injunctive relief. Spansion argued that the Commission should have used the same four-factor test required by eBay. To that end, Spansion argued that the Commission should have considered that the PTO rejected some of the claims in a reexamination during the pendency of the ITC investigation and that Tessera, as a non-practicing licensor, could be made whole by monetary damages.
The Federal Circuit, however, rejected Spansion's argument and upheld the Commission's exclusion order, holding that eBay does not apply to ITC determinations. Specifically, the Federal Circuit found that the Commission only needed to consider the enumerated public interest factors in section 337, not the traditional four-factor test for injunctive relief. Because injunctive relief in the ITC and injunctive relief in district courts come from different statutes, the factors that must be considered are not the same. Section 283, governing injunctive relief in district courts, is based on equitable principles, while section 337 is based on the long-standing principle that importation is treated differently than domestic activity. Moreover, the enumerated factors in section 337 are intended to prevent deprivation of products vital to public health or welfare. Examples include energy efficient automobiles, basic scientific research, and hospital equipment.
For these reasons, the Federal Circuit held that the Commission did not err in giving the PTO reexamination limited weight. Such a proceeding is not an explicitly listed public interest factor and Tessara could still appeal the PTO reexamination decision. Moreover, even if deprivation of semiconductor packages was important to health or welfare, the public would not be deprived of semiconductor packages because Tessera's licensees could still produce chips.
The Federal Circuit also held that the legislative history was clear that irreparable harm was not a required showing for injunctive relief. When Congress amended section 337 to eliminate a monetary remedy, it explicitly removed the requirement to prove injury to the domestic market. For that reason, a patent owner that proves infringement in the ITC need not prove irreparable harm to get a permanent injunction. Moreover, without a monetary remedy, the patentee need not show that monetary damages would not make it whole.
Patent owners who wish to assert rights against manufacturers or distributors that either import infringing products or import infringing components to use in products should consider the benefits of filing a complaint in the ITC. This is especially important for non-practicing entities that do not make or sell products covered by the patents. There is a lower hurdle to receive injunctive relief because the patent owner need not show irreparable harm and the public interest inquiry is limited to four enumerated factors. The ITC has found the public interest outweighed the need for injunctive relief in only three patent investigations. For that reason, patent owners are more likely to obtain injunctive relief in the ITC, giving them more leverage for license negotiations with potential licensees and infringers.
1 The Spansion decision may be found at: http://www.cafc.uscourts.gov/images/stories/opinions-orders/09-1460.pdf.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
June 10-12, 2024
San Francisco
Lecture
Patent Protection for Software-Related Inventions in Europe and the USA Training Course
June 5, 2024
Hybrid
Workshop
Life Sciences Workshop: Updates and Key Trends in Pharmaceutical and Biotechnology IP Law
May 2, 2024
Cambridge
Due to international data regulations, we’ve updated our privacy policy. Click here to read our privacy policy in full.
We use cookies on this website to provide you with the best user experience. By accepting cookies, you agree to our use of cookies. Please note that if you opt not to accept or if you disable cookies, the “Your Finnegan” feature on this website will be disabled as well. For more information on how we use cookies, please see our Privacy Policy.
Finnegan is thrilled to announce the launch of our new blog, Ad Law Buzz, devoted solely to breaking news, developments, trends, and analysis in advertising law.