As I discussed in Patent Progress back in July, the RESTORE Act, introduced in July by Senators Chris Coons and Tom Cotton, would bring back automatic injunctions to U.S. district courts. RESTORE is a solution no one is asking for, that claims to address a problem that doesn’t actually exist. The bill, which would overturn the Supreme Court’s landmark decision in eBay v. MercExchange, will make U.S. courts even more attractive targets for patent trolls looking to extort American businesses.
The unanimous eBay decision reaffirmed that the robust four-factor test for injunctive relief that applies elsewhere in American law is also the correct test for patent cases. In order to obtain an injunction, patent holders must prove that 1) they have suffered irreparable injury, 2) that monetary damages alone are insufficient, 3) that the balance of hardships favors injunctive relief, and 4) that the public interest would not be harmed by a permanent injunction. Only if a plaintiff can satisfy all four elements will an injunction issue, ensuring that such powerful legal remedies are only granted when truly warranted. The first and final provisions are essential as they limit the ability of non-practicing entities (NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More) to use the threat of injunctions to extract settlements from businesses that actually produce goods and contribute meaningfully to our country’s economic growth. NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More can’t show irreparable injury, because all they want is money for their patents.
This test has proven effective. Because of eBay, NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More know it will be harder to justify an injunction against a real American producer, as doing so would clearly violate the public interest and because their harms are completely reparable by the money damages they would be entitled to if their patents are infringed. As a result, in district courtrooms nationwide, injunctions requested and granted by NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More are down significantly in the nearly 20 years since the decision.
Unfortunately, RESTORE would create a presumption of irreparable harm even if the patent owner’s business model is taking money for their patents. By doing so, the RESTORE Act would return the situation to the pre-eBay world where injunctions issued essentially automatically, making civil courtrooms just another venue where the profit-seeking of patent trolls takes precedence over the welfare of American consumers and companies. We see this playing out already at the International Trade Commission (ITCInternational Trade Commission), which is mandated by law to consider the public interest before issuing exclusion orders, but which rarely invokes this authority. Exclusion orders prohibit imports of infringing products from entering the U.S., and much like injunctions, can pose a serious financial burden on businesses.
Because the agency hasn’t refrained from issuing an exclusion orderAn order issued by the U.S. ITC as a result of a 337 action, excluding from entry into the United States goods found to infringe a U.S. patent. for the sake of the public interest in around 40 years, it has become a favorable venue for NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More looking to profit at the expense of American manufacturers. According to the ITC’s own data, one-third of all Section 337 exclusion investigations brought to the ITCInternational Trade Commission are brought by NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More. (And the ITCInternational Trade Commission might be under-estimating, as my own reviews of their data have shown that they missed some NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More.) With risks this high, manufacturers accused in these cases are frequently forced to submit to excessive settlements to avoid the possibility of being barred from U.S. markets.
In contrast, U.S. district courts have a more thorough, balanced approach. They carefully evaluate the consequences of injunctions on consumers – and the broader U.S. economy – alongside the necessity of injunctive relief over money damages before deciding whether to grant injunctive relief. This helps mitigate the risk of patent trolls asserting weak patents to receive large payouts. District courts play a crucial role in stemming the rampant abuse of the American legal system by entities that contribute nothing to our economy.
The RESTORE Act, however, threatens to dismantle this safeguard. By creating a presumption of irreparable harm, the bill would effectively overturn eBay and eliminate the four-factor test that currently prevents NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More from exploiting the district courts. The presumption of harm RESTORE creates will streamline NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More ability to obtain injunctions to the detriment of the American public.
Patent trolls are driving a significant increase in lawsuits, with recent data indicating that they targeted 508 defendants in patent campaigns during the second quarter of 2024 – a 19% increase compared to the same period in 2023. And their impact is substantial. For example, according to Harvard Business Review, patent trolls cost defendants at least $29 billion in direct, out-of-pocket costs each year. As Patent Progress readers may recall, many of these businesses, like Mycroft AI, are start-ups that fail to recover. Meanwhile, those that do survive end up having to reduce their spending on research and development considerably. Indeed, one study found companies that settle or lose in court to NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More spend an average of $160 million less on R&D over the two following years.
The consequences of the RESTORE Act are grave and far-reaching. If the legislation is enacted, American businesses will be left defenseless to constant attacks by patent trolls. With the litigation environment so badly tilted against them, companies will become wary of developing new products out of fear of one misguided verdict that could hamstring their operations indefinitely.
We must protect our manufacturers by rejecting the RESTORE Act and reorienting intellectual property law around the public interest, whether in civil courtrooms or at the ITCInternational Trade Commission. Similar proposals in prior sessions of Congress have stalled because they are a solution in search of a problem. That trend needs to remain unchanged. Our country’s prosperity, innovation economy, and the integrity of our legal system hang in the balance.
