PATENT AND CONTRIBUTION: BRINGING THE QUID PRO QUO INTO EBA Y V. MERCEXCHANGE

Yale Journal of Law and Technology Volume 11 Issue 1 Yale Journal of Law and Technology Article 10 2009 PATENT AND CONTRIBUTION: BRINGING THE QUID PRO QUO INTO EBA Y V. MERCEXCHANGE Elizabeth Pesses Follow this and additional works at: https://digitalcommons.law.yale.edu/yjolt Part of the Computer Law Commons, Intellectual Property Law Commons, and the Science and Technology Law Commons Recommended Citation Elizabeth Pesses, PATENT AND CONTRIBUTION: BRINGING THE QUID PRO QUO INTO EBA Y V. MERCEXCHANGE, 11 Yale J.L. & Tech (2009). Available at: https://digitalcommons.law.yale.edu/yjolt/vol11/iss1/10 This Article is brought to you for free and open access by Yale Law School Legal Scholarship Repository. It has been accepted for inclusion in Yale Journal of Law and Technology by an authorized editor of Yale Law School Legal Scholarship Repository. For more information, please contact . Pesses: PATENT AND CONTRIBUTION PATENT AND CONTRIBUTION: BRINGING THE QUID PRO Quo INTO EBA Y V. MERCEXCHANGE Elizabeth Pesses* 11 YALE J.L. & TECH. 309 (2009) ABSTRACT In eflay, Inc. v. MercExchange, L.L.C., the Supreme Court declared that an injunction granted to stop and prevent patent infringement is like any other injunction, and therefore should only issue after consideration of traditionalequitable factors. It is not yet clear whether this decision has truly changed existing patent law, but one thing is certain injunctions are no longer viewed as a guaranteedremedy for patent infringement. One potential effect of eBay on the world of technology is on the value of patents. Much of the discussion ofeBay has focused on the decision's effect on patent owners who do not practice their patent. Without the threat of a guaranteedpermanent injunction, these patent owners will have less bargaining power in licensing negotiations and might get less favorable licensing arrangements. This note discusses this potential change in patent value and its relation to one primary justificationfor patent law, the quid pro quo, which views the patent as an exchange between the inventor and the public: invention and disclosure in exchange for the right to exclude. In the post-eBay world, the fact that an injunction is no longer a guarantee may reduce the value of the right to exclude. This may create a disparity in the exchange the inventor may receive less value from the public in the form of a patent while the public receives more from the invention and disclosure through the denial of an injunction. This note argues that eBay need not conflict with the quid pro quo exchange, and that, although current decisions relying on the Supreme Court's opinion do not do so, courts can and should use eBay to better tailor the patent right to the value of the actual contributionof invention and disclosure. * J.D. Candidate 2010, Yale Law School. I would like to thank Professor Henry Smith for supervising this paper, and Karen Grohman for her helpful comments throughout this process. Published by Yale Law School Legal Scholarship Repository, 2009 1 Yale Journal of Law and Technology, Vol. 11 [2009], Iss. 1, Art. 10 11 Yale J.L. & Tech. 309 (2009) 2008-2009 TABLE OF CONTENTS I. Introduction............................................................................ 311 II. Background ........................................................................... A . D istrict Court ...................................................................... B. F ederal Circuit.................................................................... C. Suprem e Court .................................................................... 312 3 12 313 313 III. EBay and the Patent Troll: Justified Punishment or Unfair Targeting? .................................................................................. 315 A. EBay (Rightfully) Cracks Down on Patent Trolls............... 315 B. EBay Unfairly Harms the Value ofPatents to Non-Practicing En tities............................................................................. . . 31 7 IV. Bringing eBay into a Larger Context: The Entire Patent System ......................................................................................... 318 A. Incentive Justificationof PatentLaw .................................. 319 B. The Quid Pro Quo of Patent Law: The Patent as an Exchange ..................................................................... 3 20 V. EBay Inconsistently Affects the Quid Pro Quo .................. 323 A. Assessing the Original Contributionin a Patent Exchange324 B. The eBay FactorsCan Be Used To Support or Go Against the Q u id Pro Q uo .......................................................................... 32 7 C. Courts'Applicationof the eBay Test Affects the Patent Exchange Inconsistently.......................................................... 331 VI. Considering the Quid Pro Quo Under Equity .................. 336 A. The Exchange Between Patentee andPublic Is a Valid ConsiderationUnder Equity ................................................... 336 B. Equitable DoctrinesAllow a Court To Tailor the PatentRight To Conform to the Exchange ................................................... 340 VII. Fitting the Quid Pro Quo into the eBay Analysis ........... 344 A. The Quid Pro Quo in All Four Factors.............................. 345 B. Using Public Interest to Consider the Quid Pro Quo ......... 345 V III. C onclusion ........................................................................ https://digitalcommons.law.yale.edu/yjolt/vol11/iss1/10 348 2 Pesses: PATENT AND CONTRIBUTION PATENT AND CONTRIBUTION: BRINGING THE QUID PRO QUO INTO EBA Y V. MERCEXCHA NGE I. INTRODUCTION In 2006, the Supreme Court of the United States declared in eBay, Inc. v. MercExchange, L.L.C.,l that a permanent injunction for patent infringement should be granted only after weighing the same equitable considerations as injunctions in other areas of the law. In doing so, the Court overturned the Federal Circuit's decision, which followed the common treatment of injunctions almost as an automatic remedy for patent infringement. 2 EBay has, in all likelihood, changed the landscape of patent litigation and licensing by giving courts more discretion and power to deny injunctive relief. If an injunction is denied, a court grants in its place what it deems to be reasonable royalties to the patent owner, essentially creating an ex post licensing agreement. Thus, the owner is denied the absolute right to exclude, and a license is created not as a result of bargaining ex ante, but as a result of an adversarial judicial proceeding ex post. A denial of an injunction can and should be viewed as a reduction of the value of a patent. 3 Denying an injunction takes away the patent owner's option to keep others from using the patented invention, depriving the patent owner of a significant bargaining chip in licensing arrangements. Potential licensees might be encouraged to (...truncated)