Man Without Qualities

Monday, May 15, 2006

Supreme Court: 2; Lessig, The Federal Circuit And IP Alarmists: 0

One of the more fatuous pseudo-visionary arguments offered up by opponents of the Bono Act and strong copyright and patent protection generally - especially by Professor Lawrence Lessig - is the prospect that such rights may "abort the revolution" that would otherwise bestow great wealth and blessings from intellectual property advancement and use. Perhaps the most classic example proffered by such alarmists is the prospect that a small possibly infringing copyrighted image in, say, a major movie might lead to a court enjoining distribution of the movie, or fear that such an injunction might be issued. Similar exaggerated concern is sometimes expressed over the possibility that incorporation of minor or obscure patented technology into large technology systems might lead to injunctions of the entire systems - as was recently threatened in connection with the famous Blackberry case. Of course, there the infringing technology was neither minor nor obscure (although the "infringed" patents may have been invalid). The alarmist prospect is, in turn, supported by a supposedly near-automatic right of intellectual property owners to obtain injunctions prohibiting infringing uses.

I have pointed out in the past that there is no such near-automatic right to such an injunction, despite the preposterous insistence to the contrary by some people who really ought to know a lot better, including the United States Court of Appeals for the Federal Circuit. Despite the obvious paralytic potential identified by the intellectual property alarmists as noted above, in spite of fairly clear contrary Supreme Court policy to the contrary, and in defiance of the changing nature of intellectual property rights and their uses in the economy generally, the Court Appeals for the Federal Circuit recently articulated its "general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances." 401 F. 3d 1323, 1339 (2005). This decision - it is hard to imagine a more bone headed approach in this area of the law - has now been reversed by a 9-to-zero vote of the United States Supreme Court:
According to well-established principles of equity a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law such as monetary damages, are inadequate to compensate for that injury; (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. ... These familiar principles apply with equal force to disputes arising under the Patent Act.
It should be clear that application of these classic equitable factors essentially eliminates the realistic threat that minor infringements might lead to the "abortive" major injunctions, as feared by Lessig and his alarmists: Such major injunctions based on minor infractions contemplated by the alarmists would neither correctly weigh the balance of hardships between the plaintiff and defendant nor serve the public interest. In most such cases, monetary damages are completely appropriate. Moreover, the Court was at pains to point out that the same rules apply in connection with copyright injunctions:
This approach is consistent with our treatment of injunctions under the Copyright Act. Like a patent owner, a copyright holder possesses "the right to exclude others from using his property." Fox Film Corp. v. Doyal, 286 U. S. 123, 127 (1932); see also id., at 127, 128 ("A copy-right, like a patent, is at once the equivalent given by the public for benefits bestowed by the genius and meditations and skill of individuals, and the incentive to further efforts for the same important objects” (internal quotation marks omitted)). Like the Patent Act, the Copyright Act provides that courts "may" grant injunctive relief "on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." 17 U. S. C. §502(a). And as in our decision today, this Court has consistently rejected invitations to replace traditional equitable considerations with a rule that an injunction automatically follows a determination that a copyright has been infringed.
Justice Kennedy's concurrence makes explicit that courts are not to ignore the changing nature and scope of federal intellectual property rights or the role of such rights in the economy, as the intellectual property rights alarmists fear and the Federal Circuit was all too willing to deliver. The Kennedy concurrence points out explicitly what is already clear, if implicit, in Justice Thomas's opinion:

In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. See FTC, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, ch. 3, pp. 38–39 (Oct. 2003), available at (as visited May 11, 2006, and available in Clerk of Court’s case file). For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. See ibid. When the patented invention is but a small component of the product the companies seek to produce and threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.

The equitable discretion over injunctions, granted the Patent Act, is well suited to allow courts to adapt to the rapid technological and legal developments in the patent system. For these reasons it should be recognized that district courts must determine whether past practice fits the circumstances of the cases before them.

Will this Supreme Court decision silence the alarmists? Almost certainly not: They have a vision to defend. But the decision should be enough to convince any level headed observer that the threat of an "aborted revolution" can be addressed and avoided by practical application of well established equitable principles. No major changes in federal intellectual property rights are needed on this count at this time.

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