By Craig Beuerlein and Graham Dufault

The 2006 eBay Inc. v. MercExchange LLC decision (eBay) was a historic moment in U.S. patent policy. The eBay ruling establishes a precedent that decreases a small business’s financial burden when it must defend itself against a legal complaint that either asserts a weak patent or makes a dubious case for an injunction. The eBay decision accomplishes this by establishing more concrete guidelines on when issuing a temporary injunction is appropriate. The decision fundamentally recognizes that the grant of a patent is not an unencumbered constitutional right. Lawyers know that the right to exclude—vindicated in court by an injunction—is the central property interest among the many concepts that comprise property rights. But they also know that countervailing interests always temper the right to exclude others from using a person’s property, whether the property at issue is real, personal, or intellectual. A property system with no exceptions to the right to exclude does not appear to exist and would ignore the complexities of markets and social norms. Reasonable regulations exist for even natural inherent constitutional rights, like freedom of speech, where they meet other public policy considerations or the countervailing rights of other people. So, it is not surprising that Congress ultimately has the authority to determine the dimensions and character of the rights that accompany a patent. Congress essentially delegated that authority to the U.S. Patent and Trademark Office (USPTO), and the eBay decision underscores this idea.

The America Invents Act (AIA) built on the eBay decision, creating pathways for defendants to challenge a patent before a USPTO tribunal, including the inter partes review(IPR) process. Since Congress enacted the AIA, the IPR process faced several court challenges, including on constitutional grounds. However, the Supreme Court of the United States (SCOTUS) ruled in Oil States Energy Group LLC v. Greene’s Energy Group LLC,SAS Institute Inc. v. Iancu, and Cuozzo Speed Tech v. Lee that the IPR process is not only constitutional, but the results are also generally “final and non-appealable.”

With SCOTUS reaffirming that the IPR process is on solid constitutional ground, various interests are now asking Congress to weaken post-grant reviews, such as the IPR process, at USPTO. The Support Technology and Research for Our Nation’s Growth and Economic Resilience (STRONGER) Patents Act from the 115thCongress includes a wish list of reforms that, taken together, would completely defang the IPR process. Additionally, the STRONGER Patents Act would reverse the eBay decision and replace it with a statutory presumption that an injunction should be issued. Unfortunately, weakening IPRs and requiring courts to issue injunctions in all infringement cases would likely embolden the assertion of weaker patents, but also lawsuits involving valid patents where an injunction is an inappropriate remedy. The patent system is closer to equilibrium under the eBay rubric and with the availability of post-grant reviews like IPRs. That’s why the Trump administration is “not pursuing any legislative changes to the availability of injunctive relief, or to the post grant or inter partes review processes”(seepp. 15-16).

To understand how STRONGER Patents would upset the balance in patent litigation, we can look at the outcomes of patent infringement cases since eBay. The statistics around these cases show that patent owners pursue fewer injunctions, but their success rate is the same when they do seek them. This suggests that patent owners bring fewer lawsuits where the case for an injunction is weak. The corollary, of course, is that before eBay, patent owners sought more injunctions even when the issuance of the patent in question was suspect or where an injunction was the wrong remedy. Overall, the number of patent cases filed increased by 38 percent since the eBay ruling, but the number of preliminary and permanent injunctions sought decreased by 27 percent. Though the number of injunctions decreased, the rate of injunctions granted did not reduce significantly after the eBayruling. The percent of preliminary injunctions granted slid from 23 percent to 21 percent. The percent of permanent injunctions granted is at 83 and is virtually the pre-eBayruling percentage of 84. The actual rate of injunctions granted fell, but this is a result of the total number of injunctions sought dropping.

The IPR process is popular with many large tech companies, but its financial benefits extend beyond the biggest fish in Seattle and the Bay Area. IPRs offer a low-cost—and, more importantly, credible—pathway for challenging the validity of one or more claims in a patent. A complete IPR can cost in the low six-figure range compared to the millions of dollars required to take a typical patent case through a trial. Some App Association members faced threats from aggressive licensors and the presence of IPRs enables them to stave off assertions involving what they know to be low-quality patents, without actually having to use the IPR process.

Some App Association members faced threats from aggressive licensors and the presence of IPRs enables them to stave off assertions involving what they know to be low-quality patents, without actually having to use the IPR process.

The outcomes in patent cases since the eBay ruling evidence a more stable patent system. In its ruling, the Supreme Court laid the groundwork for limiting the number of injunctions in the lower courts by requiring district courts to apply a four-factor test. The decreased number of pursued injunctions and the IPR process lift a financial burden inflicted on many small companies. IPRs may still fall out of the financial reach of some businesses, but they offer leverage to companies faced with the possibility of challenging a weak patent in a federal court. Current precedent protects small companies while allowing a patent owner’s rights to be vindicated against those who infringe on them. The effects of reversing precedent set by SCOTUS would be devastating to an industry that relies on strong patents to grow and create American jobs.