Different Rules for Different Owners: Does a Non-Competing Patentee have a Right to Exclude? A Study of Post-eBay Cases

Courts have traditionally granted injunctive relief ‘automatically’ upon finding infringement of valid patents on the basis that it is the essence of the patent right to exclude others. But the U.S. Supreme Court signalled a change in 2006 when they vacated the Federal Court’s order granting injunction against eBay for willfully infringing valid patents of MercExchange. The ruling comes at a time when the debate on what have pejoratively been called ‘patent trolls’ have taken centre stage. This paper examines the issues connected to patent trolls and analyses cases post-eBay to study the effect that eBay has had on patent infringement litigation. The analysis shows that the economic status of the patentee and the nature of the patent itself can adversely affect the exclusive rights granted by the patent. This is because non-competing patentees and a patent which covers only a small component of the overall product are less likely to obtain an injunctive relief. Denial of injunctive relief results in judicially-instituted compulsory licensing of patents which dramatically scales down the bargaining power of the patentee during licensing fee negotiations. Wrongly being adjudged a ‘troll’ can have dramatic effects on the incentive for investment and innovation. Consequently, the paper argues that acceptance of the concept of patent ‘troll’ is likely to result in more harm to innovation that otherwise.