The Court indicated that injunctive relief under the Patent Act, as currently written, is no different than injunctive relief in other areas of law and flatly rejected categorical rules that nearly automatically award or deny such relief.  In slapping the collective wrist of the Court of Appeals for the Federal Circuit, the Supreme Court expressly empowered district courts by reminding everyone that “[t]he decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion.”

Specifically, the Court held that “the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with the traditional principles of equity, in patent disputes no less than in other cases governed by such standards.”

In essence, the Court announced a refocusing of the injunctive relief standard in patent law…a shift away from the spurious general rule established by the Federal Circuit and a refocusing on the traditional four-factor test that is common to many areas of law.

So now what? After all the hype…where do we go from here?

First — we go to the individual district courts.

By rejecting the general rule of the Federal Circuit that “courts will issue permanent injunctions against patent infringement absent exceptional circumstances,” the Supreme Court has removed individual district court judges out from under the thumb of the Federal Circuit and its seemingly oppressive general rule.  Trial court judges are now free, and indeed empowered, to fully consider the traditional four-factor test for awarding injunctive relief…a test with which these judges are familiar from other areas of law.

What will the district courts do with the four-factor test?  On this question, the concurring opinions in eBay are certainly the most interesting.  There is a divide in the Supreme Court relating to the role of history – specifically, the long-standing history of awarding injunctive relief in the vast majority of patent suits upon a finding of infringement.  Chief Justice Roberts, with whom Justices Scalia and Ginsburg agree, believes that this history should play a role in the application of the four-factor test, noting that “a page of history is worth a volume of logic.”  Justice Kennedy, with whom Justices Stevens, Souter, and Breyer agree, sees a different, more limited role for this history, noting that “[t]he lesson of the historical practice…is most helpful and instructive when the circumstances of a case bear substantial parallels to litigation the courts have confronted before.”  (emphasis added)

Importantly, Justice Kennedy and his comrades note that the four-factor test might not be satisfied with certain types of patents and/or certain types of patent holders, such as business method patents, patents covering “a small component of the product the [infringer] seeks to produce,” and firms that use patents “not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.”  These Justices seem to believe that the long-standing history of awarding injunctive relief in patent infringement suits should play a limited role, if any role at all, in certain modern patent scenarios.

We may one day see the Kennedy concurrence as a beginning of an end. The patent trolls may be set to die a slow death as district court law develops on the application of the traditional four-factor test, particularly in the areas of business method and component patents. The most egregious trolls – those that buy patents and seek only to license them – backed by the threat of an injunction – may have a terribly difficult road ahead.

Second — we go to Congress. Maybe.

In determining whether the traditional four-factor test is proper in patent law, the Court noted that “nothing in the Patent Act indicates that Congress intended such a departure [from the long tradition of equity practice]” and that such a major departure “should not be lightly implied.”  Congress certainly has the power to force a departure from the four-factor test, such as by injecting specific factors that must be considered during an analysis by a district court judge (e.g., the “extent to which the patentee makes use of the technology claimed by the patent,” which has been included in versions of Representative Berman’s patent reform bill introduced in prior sessions of Congress).

Will the software/high-technology sector try to advance an explicit reworking of the Patent Act in Congress or instead choose to focus on developing a favorable body of district court law?  The more likely outcome is a strategy that pursues both avenues concurrently.

So what does eBay mean from a patent policy perspective?

eBay is a hollow-victory for patent holders who seek only to license their patentsSome view eBay as a victory for the patent trolls, focusing on the language of Justice Thomas noting that some patent holders that opt not to “bring their works to market themselves….may be able to satisfy the traditional four-factor test.”  Yes…this is a victory for all patent holders who themselves do not commercialize their inventions.  The Supreme Court has recognized that they can be deserving of injunctive relief and that a categorical rule denying them such relief cannot stand under the Patent Act as currently written.

I see this as a hollow victory, however.  With the discretion being placed in the hands of the individual district courts, the victory brings major questions for non-commercializing patent holders, particularly the most egregious of the so-called patent trolls.  Many district court judges may find the language of the Kennedy concurrence as opportunity to deny equitable relief to such patent owners. It’s important to note that the “abuse of discretion” standard of review in this area certainly grants a wide swath of latitude in applying the test.

So the battle over the standard for awarding injunctive relief in patent cases has shifted once again.  It has shifted to the district courts for sure, and may have shifted back to Congress, too.

This proposed reform of the patent law has so far received little to no attention.  The Patent Act of 2005, as introduced by Representative Lamar Smith, doesn’t address the topic, nor do either of the draft replacement bills.  There has been little, if any, debate on the issue in the various hearings held in the House and Senate.

Has the issue been dropped from the reform agenda?

No chance.  While Congress doesn’t appear too interested in tackling this subject, the Supreme Court is currently considering whether it should do so.

KSR International v. Teleflex, currently on petition for certiorari, involves a challenge to the Federal Circuit’s long-standing “teaching-suggestion-motivation” test for obviousness.  Many, including twenty-four law professors and several corporations, view the current test for obviousness as a hurdle that is too easy to overcome and have filed amicus briefs supporting the petition.

The issue in the case sounds strangely similar to the FTC recommendation.

What’s likely to happen?  At this point, no one knows, but the Solicitor General may hold the key.  The Court asked the Solicitor to file a brief expressing the views of the federal government on whether the petition should be granted (i.e., on whether the obviousness standard should be reviewed).  Some people believe the Court is likely to follow the recommendation made in the forthcoming brief, making it perhaps the most anticipated patent-related amicus brief in some time.  No word yet as to when we can expect to see the views of the government, but the best guesstimate (i.e., Hal Wegner), believes that a March or April hearing is possible if the Solicitor files the brief by early December.

If the petition for certiorari is denied, don’t look for the case to simply disappear.  Indeed, the most interesting angle on this case may just be the aftermath of such a denial.  It seems likely that patent reform lobbying efforts would venture down new paths if the Supreme Court elects not to weigh in on the issue.