[Ip-health] Compulsory licensing of patents under ebay decision

Thu Mar 22 11:59:36 2007

Where a court denies an injunction, every act of infringement after
the judgment would probably produce a new set of facts for res
judicata purposes, and would not be collaterally estopped either.
But knowing this, courts will grant prospective damages awards for
the infringement that happens after the judgment.

For example, in one of the first post-eBay cases to deny an
injunction -- z4 Techs., Inc. v. Microsoft Corp., 434 F. Supp. 2d 437
(ED Tex 2006) -- the court refused to issue an injunction because it
found no irreparable harm, since z4 (the plaintiff) didn't compete in
the same market as Microsoft.  (This is apparently typical of one way
that district courts are using eBay - to essentially refuse
injunctions to patent trolls, who just want a licensing fee but who
aren't trying to produce a competing product).

In denying the injunction, the court said:

"Calculating the appropriate royalty rate for any future infringement
based on the sale of the older Microsoft products should not be too
indefinite or difficult. Such future damages will not be based on
injuries that are difficult to measure such as the loss of market
share or damage to brand name recognition and good will, but will be
based on a reasonable royalty for each of the infringing products
sold by Microsoft. This calculation can be made based on the same
reasonable royalty calculation used by the jury at trial and by
referring to Microsoft's internal records showing the number of sales
for the infringing copies of software during the time period."

The court then ordered Microsoft to provide it with regular updates
on future sales of the infringing product, and ordered the parties to
create a new lawsuit that just addressed future damages so that it
could deal efficiently w/ that part of the judgment.

In other words, the effect of a denial of injunction under eBay will
be just like a compulsory license - there will be prospective damages
awarded for continuing infringement (at which point res judicata or
collateral estoppel really would apply, so no relitigation
possible).  Its like a royalty, but court determined, monitored, and
enforced.

ak

On Mar 21, 2007, at 1:33 PM, michael.davis@law.csuohio.edu wrote:

> AS long as the facts and the parties remain the same, relitigation is
> difficult. But since this is an equitable matter, as long as there
> is any
> change, the parties can always argue that the injunction is no longer
> appropriate and can have the case reopened. And, especially because
> it is
> equity, change is almost inevitable, including time itself.
>
> MD
>
>> Collateral Estoppel bars relitigation of any issue that was
>> essential to
>> the original judgment, and Res Judicata bars claims that arise out of
>> the same event from the original claim. For a claim to be barred
>> under
>> Res Judicata it must arise from a common nucleus of operative fact as
>> the original claim (related to original claim in time, space origin,
>> motivation ect=85), the original claim must have been decided on the
>> merits in its final judgment, and the parties must either be the
>> same as
>> in the original action or must be in privity, with a mutuality of
>> interest, and a significant degree of control over the first case.
>>
>> In Ebay Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837 (2006), the
>> Supreme Court upheld the district courts finding of infringement and
>> affirmed the awarded damages. The main question presented to the
>> district court was whether or not the District court was justified in
>> not ordering permanent injunctive to the plaintiff. The Supreme Court
>> upheld the district courts decision that the following four part
>> test of
>> general equitable principles must be met before a permanent
>> injunction
>> can be granted; (1) irreparable injury, (2) inadequacy of remedies at
>> law, (3) balance of hardships favoring party seeking injunction,
>> and (4)
>> public interest. This is a generally applicable test for permanent
>> injunctive relief that applies to all disputes arising under the
>> patent
>> act. Furthermore, the Supreme Court held that even in successful
>> infringement actions, =93a patent holder=92s willingness to license its
>> patents and lack of commercial activity in practicing patents do not
>> preclude permanent injunction=94. Id.
>>
>> To answer your question, although this is a =93permanent flow of
>> infringing acts by the same infringing defendant=94, the plaintiff
>> would
>> be barred from bringing any new claim of patent infringement
>> against the
>> defendant because the claim of infringement was already decided on
>> its
>> merits. However, if the claim arose out of a new form of
>> infringement,
>> on a different patent, ect=85, then they would have to argue against a
>> common nucleus of operative fact test to bring the new claim. In
>> other
>> words, because the infringing actions are likely to have been
>> related to
>> the original infringement in method and motivation, it is unlikely
>> that
>> the new claim will pass the test for Res Judicata. Furthermore,
>> even if
>> the test was passed and a new claim was brought, plaintiff would be
>> barred by Collateral Estoppel from relitigating any issue that was
>> finally decided and essential to the original judgment.
>>
>> However, I am still in law school so I could very well be wrong in my
>> analysis, so I would recommend consulting a licensed attorney.
>>
>> Anne
>>
>> Franklin Pierce Law Center
>> J.D./M.I.P. Candidate 2009
>>
>>>>> "Luis Villarroel Villalon" <luis.villarroel@mineduc.cl> 03/21/07
>> 12:08 PM >>>
>>
>>
>> Interestingly, this principle of equity as a requirement for
>> permanent
>> injunctions also applies to copyright cases, therefore this indirect
>> granting of compulsory licensing  apply to cases of copyright
>> infringement. But, because the application of statutory damages to
>> copyright infringement, the price for this type of  "compulsory
>> license"
>> might get  really high.
>>
>> My related  question is, whether on US law, the plaintif could sue
>> again
>> and again, based on the permanent flow of infringing acts by the same
>> infringing defendant
>>
>> LUIS VILLARROEL
>>
>>
>> -----Mensaje original-----
>> De: ip-health-admin@lists.essential.org
>> [mailto:ip-health-admin@lists.essential.org] En nombre de James
>> Packard
>> Love
>> Enviado el: Mi=E9rcoles, 21 de Marzo de 2007 11:46
>> Para: Ip-health
>> Asunto: [Ip-health] Compulsory licensing of patents under ebay
>> decision
>>
>> --
>> [ Picked text/plain from multipart/alternative ]
>> This is one current list of cases where courts have denied Permanent
>> Injunctions, under the recent eBay Supreme Court decision.
>>
>> http://www.thefireofgenius.com/injunctions
>>
>> On May 15, 2006, the Supreme Court issued its decision in eBay Inc.
>> v. MercExchange, LLC, 126 S. Ct. 1837. In eBay, the Supreme Courests
>> within the equitable discretion of the district courts, and
>> that such discretion must be exercised consistent with traditional
>> principles of equity, in patent disputes no less than in other cases
>> governed by such standards."
>>
>> Permanent Injunctions denied:
>> ----
>>      * z4 Techs. v. Microsoft Corp., 434 F.Supp.2d 437 (E.D. Tex.
>> June 14, 2006) (Davis, J.)
>>
>>      * Finisar Corp. v. DirecTV Group, No. 1:05-CV-264 (E.D. Tex.
>> July 6, 2006) (Clark, J.) (described on Michael Smith's blog about
>> E.D. Texas proceedings).
>>
>>      * Paice LLC v. Toyota Motor Corp., No. 2:04-CV-211, 2006 WL
>> 2385139 (E.D. Tex. Aug. 16, 2006) (Folsom, J.)
>>
>>      * Voda v. Cordis Corp., No. CIV-03-1512, 2006 WL 2570614 (W.D.
>> Okla. Sept. 5, 2006)
>>
>>      * Monsanto Co. v. Scruggs, 459 F.3d 1328 (Fed. Cir. 2006) (trial
>> court's permanent injunction order vacated, and the case remanded,
>> for complete analysis under the eBay test)
>>
>>      * Sundance, Inc. v. DeMonte Fabricating Ltd., No. 02-73543, 2007
>> WL 37742 (E.D. Mich. Jan. 4, 2007)
>>
>>      * IMX, Inc. v. LendingTree, LLC, No. 03-1067, 2007 WL 62697 (D.
>> Del. Jan. 10, 2007) (due in part to patentee's failure to supplement
>> the record after eBay, motion for permanent injunction "denied
>> without prejudice to renew subsequent to any appeal by the parties
>> relating to issue of infringement, validity, or wilfulness")
>>
>>
>> ----------------------------------------------
>> James Packard Love
>> Knowledge Ecology International
>> http://www.keionline.org
>> james.love@keionline.org
>> Washington, DC +1.202.332.2670
>>
>> "If everyone thinks the same: No one thinks." Bill Walton"
>>
>>
>>
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>
>
> Mickey Davis
> _________________________________
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