Revisiting Injunctive Relief: Interpreting eBay in High-Tech Industries with Non-Practicing Patent Holders

Posted by D. Daniel Sokol

Vincenzo Denicolò (University of Bologna - Department of Economics), Damien Geradin (Tilberg University Law and Economics Center), Anne Layne-Farrar (LECG), and A. Jorge Padilla (LECG) take on competition issues in the patent context in Revisiting Injunctive Relief: Interpreting eBay in High-Tech Industries with Non-Practicing Patent Holders.

ABSTRACT: The Supreme Court's 2006 eBay ruling marked a turning point in injunctive relief policy. Unfortunately, there seems to be considerable confusion about the implications of the decision. Some authors, concerned over patent holdup and excessive royalty rates, interpret the eBay decision as giving a green light to district courts to deny injunctive relief to non-manufacturing patent owners. Using an error cost framework, we examine the theory and evidence behind patent holdup concerns as they relate to injunctive relief policy. We find that the holdup theory justifying categorical limitations on injunctive relief rests upon overly narrow assumptions. As a result, categorical limitations are likely to result in substantial false positives, where patent holders with no designs of patent holdup are nonetheless denied injunctive relief. Instead of advocating categories of denial, we argue that the majority opinion in eBay can and should be read as a return to a balancing test, where costs and benefits are weighed carefully before granting or denying a patent injunction.