Unenjoined Infringement and Compulsory Licensing

Abstract

After the U.S. Supreme Court’s 2006 decision in eBay v. MercExchange, federal courts have denied a substantial number of requests for permanent injunctions following a finding of patent infringement. Without an injunction, an infringing party may continue to practice the infringed patent subject, in most cases, to the payment of a court-approved ongoing royalty. Courts and scholars have debated whether unenjoined infringement and the payment of an ongoing royalty therewith constitutes a judicial compulsory license or something else. In order to assess the manner in which courts view unenjoined infringement, we identified seventy-seven post-eBay cases in which patent infringement was found but a permanent injunction was denied. In each case we analyzed the language used by the court in establishing the right of the infringer to continue to operate under the infringed patent(s) and its obligation to compensate the patent holder. This language, as well as the surrounding transactional and litigation context, suggests that at least some federal district courts have, both tacitly and expressly, been granting compulsory patent licenses upon the denial of permanent injunctions, and that the Federal Circuit, in some cases, agrees with this characterization.

In order to remove any lingering uncertainty, we recommend that the Federal Circuit acknowledge that a district court that declines to enjoin the infringement of a valid and enforceable patent, and concurrently orders the infringer to compensate the patent holder for acts of future unenjoined infringement, has authorized a compulsory license of the patent. Such an acknowledgement would better align the realities of unenjoined infringement with existing doctrines of patent exhaustion and transfer and encourage courts to focus greater attention on the non-royalty aspects of such licenses, which are currently missing key terms such as license scope, field of use, duration and termination. It would also inform U.S. foreign policy regarding compulsory licensing by other countries.

Keywords: patent, license, compulsory license, injunction, unenjoined infringement, ongoing royalty