The Impact Of eBAY On Intellectual Property Litigation

Wednesday, September 24, 2014 - 12:33

The Editor interviews Allan Gabriel, Member of Dykema Gossett PLLC’s Los Angeles office and director of its national intellectual property department.

 

Editor: Please describe your practice area.

Gabriel: I’ve been practicing law for almost forty years. The primary focus of my practice is intellectual property litigation, which I’ve handled for almost that entire period. These cases involve patents, trademarks, copyrights, trade secrets, right of publicity, and false advertising. I’ve represented entrepreneurs as well as major corporations as plaintiffs or defendants in state and federal trial and appellate courts.

Editor: Tell us about the status of injunctions in IP cases after the U.S. Supreme Court decision in eBAY.

Gabriel: The fallout from the U.S. Supreme Court decision in eBAY has been significant. In that case, the Supreme Court rejected the presumption of irreparable injury in patent cases, which in the past had almost routinely supported the issuance of injunctions. It determined that an injunction should be granted only if the circumstances satisfied the traditional four-part test of irreparable injury, inadequacy of other remedies, balance of the hardships, and that the public interest would be served.

Let’s look at a very current situation such as Apple v. Samsung. In the Northern District of California, Apple prevailed on some of its intellectual property claims against Samsung. The trial judge decided that it was not an appropriate case for a permanent injunction, which would prohibit the sale of products that infringed.

The question becomes in that circumstance, what happens? The patent statute itself says that one of the remedies available is a going-forward post-trial royalty. Samsung would then be put to the choice of having a court determine what the royalty would be or changing its products.

Some judges have been creative with respect to remedies. For example, Judge Davis in the Eastern District of Texas denied an injunction after there was infringement. He decided that, rather than deal with the royalty issue in a vacuum, it would be appropriate to have a going-forward royalty to be determined in a second trial.

Relief in copyright cases is different because liability for infringement is based on access by a defendant to a plaintiff’s copyrighted work and the fact that whatever was generated as a result of that access was substantially similar. The presumption of irreparable injury was based upon the fact that copyright plaintiffs have almost always been able to demonstrate irreparable harm from continuing infringement. Courts have been averse to creating a forced license to permit an infringer to continue to use and pay damages, instead of ending infringing conduct altogether. Since eBAY, some courts still have been amenable to issuing permanent injunctions and not really digging that deeply into the analysis of whether there is irreparable injury, finding in essence that if infringement occurred and there’s a threat of continuing violations, the plaintiff was entitled to an injunction. Injunctive relief has more often than not been granted in copyright cases. There aren’t many cases that address what happens if you don’t get an injunction.

The trademark situation is also different. What’s interesting about trademark cases prior to eBAY is that irreparable injury was presumed anytime there was proof of infringement. The reason is that if somebody else uses the trademark, the public believes it comes from the owner of the trademark. In effect, the owner has lost control of its reputation.

There are a number of opinions of appellate courts that address the question of whether eBAY applies to trademark cases. Some go so far as to say that they’re ignoring eBAY and that there’s really no change in the law as it relates to trademark cases. They take the position that trademark law is different from patent law because it relates to protection of reputation, and that a presumption of irreparable harm is implicit in any trademark infringement.

However, other appellate and district courts have determined that eBAY applies to trademark law. In late 2013, the Ninth Circuit decided, in a case involving a preliminary injunction, that eBAY applies in trademark cases, saying that there is no longer a presumption of irreparable injury and that it must be shown to obtain a preliminary injunction. This means you no longer have a presumption. How does that play out in the real world? Let’s take the Ninth Circuit, which is where I am in California. In late 2013, in a case involving whether a preliminary injunction should issue in a dispute over the trademark “the Platters,” the Ninth Circuit decided that eBAY applies in trademark cases. It therefore said that you no longer have a presumption of irreparable injury. In fact, the court said it had actually decided this issue earlier (which is not really clear), but in this case in 2013, the court indicated that in order to obtain a permanent injunction in a trademark case, actual irreparable injury must be demonstrated.

Some cases have held that a prospective reasonable royalty is not an available remedy under the federal trademark statue.  Others suggest a reasonable royalty would make sense if there is infringement found but there is an insufficient showing to support injunctive relief.       

Editor: How did the U.S. Supreme Court’s eBAY decision impact prior patent law?

Gabriel: Under prior law, there was a presumption of irreparable injury if there was patent infringement. If irreparable injury harm is presumed, an injunction ordinarily would issue. The Supreme Court rejected this presumption in eBAY. Subsequently, the Supreme Court said that it can be “likely” irreparable injury if not an actual irreparable injury. The new test makes it harder to get injunctions. That’s the bottom line.

Editor: Are patent trolls affected by eBay?

Gabriel: That’s an interesting issue. It’s very difficult post- eBAY for patent trolls to get injunctions because they would have to show they met each of the four traditional injunctive relief criteria articulated in eBAY. But, you don’t have to have a commercial product to be a patent plaintiff. If I’m an inventor, I can come up with a new idea and patent it, and I don’t have to commercialize it – I could just sit on it. A troll can’t say, well, my sales are being harmed or it’s in the public interest to have the infringer enjoined. What trolls are looking for is money, but they have lost some leverage, the threat of an injunction. Therefore, money may only be forthcoming after a long and expensive legal battle.

Editor: How can a plaintiff increase the likelihood of obtaining a permanent injunction?

Gabriel: One thing to keep in mind from the get-go is that at trial you’ve got to present evidence of actual, irreparable harm as opposed to simply talking generalities, such as because somebody else is using our trademark, we have lost control of our reputation.

Editor: What about the ITC?

Gabriel: In addition to to patent cases the ITC can hear trademark as well as trade secrets cases. The basis for an injunction remedy in the ITC is different. There are no damages, so cases that get litigated in the ITC do not involve an award of money. The remedy it provides is to block importation into the U.S. of infringing products. The tests for qualifying for this remedy are somewhat different. You have to show you have a real domestic industry because the rationale of relief from the ITC is protection of domestic industry. Obviously, generally trolls are not qualified to be plaintiffs in ITC cases.

After you establish the prerequisites by showing infringement and domestic injury, you don’t need to get into the eBAY analysis of why an injunction should issue. However, even after an administrative law judge determines there should be an exclusion order, the President has a right to reject that determination. That happened for perhaps the first time under President Obama. In other words, somebody won only to have the victory snatched away by the President of the United States.

Editor: What happens in patent, trademark or copyright cases if the court refuses to grant a permanent injunction after a verdict of infringement?

Gabriel: In a patent case in which the plaintiff does not qualify for an injunction using the four-factor test, in the eBAY case there’s a remedy that’s recognized and available, which is a reasonable, prospective royalty imposed by a district court. If Samsung wants to continue to infringe an Apple patent and Apple is unable to qualify for an injunction under eBAY, Apple’s remedy is to seek a court-imposed royalty. In the case of copyrights, it’s not really clear what would happen, and there aren’t really cases that address that issue. In the copyright world, injunctions were almost always automatic. There are cases now that seem to ignore the eBAY test. In trademark cases, if an injunction is denied, unlike in patent law, there is no provision in the statute for a royalty going forward. Potentially, the only remedy would seem to be suing again. Let’s say during the trial there was testimony and evidence involving infringing sales through December 31, 2013, and let’s say there was a trial in mid-2014. The plaintiff wins and gets an award of damages with no injunction. The sales continue. Potentially, there could be some kind of adjudication post-verdict – but a jury would have to determine damages, so that is unlikely – or there could be a second lawsuit. If the damages were awarded through December 31, 2013, in 2015 the trademark plaintiff could file another lawsuit against the same defendant and correctly note it’s the same product and there has already been a determination of infringement. However, you would probably need a new jury trial on damages because maybe the costs and obviously the sales have changed.

To circle back, the eBAY decision has changed a whole arena of litigation in the intellectual property universe because eBAY has undone a pretty well­recognized and established set of rules and precedents that governed the availability of injunctive relief in intellectual property cases.  Time will tell precisely how courts apply eBay to patent, trademark and copyright cases.

Please email the interviewee at agabriel@dykema.com with questions about this interview.