REVISITING INJUNCTIVE RELIEF: INTERPRETING EBAY IN HIGH-TECH INDUSTRIES WITH NON-PRACTICING PATENT HOLDERS
Correspondence: E-mail: vincenzo.denicolo{at}unibo.it
JEL: K20
The Supreme Court's 2006 eBay ruling marked a turning point in injunctive relief policy. Unfortunately, there seems to be considerable confusion about the implications of the decision. Some authors, concerned over patent holdup and excessive royalty rates, interpret the eBay decision as giving a green light to district courts to deny injunctive relief to "non-manufacturing patent owners." Using an error–cost framework, we examine the theory and evidence behind patent holdup concerns as they relate to injunctive relief policy. We find that the holdup theory justifying categorical limitations on injunctive relief rests upon overly narrow assumptions. As a result, categorical limitations are likely to result in substantial "false positives," where patent holders with no designs of patent holdup are nonetheless denied injunctive relief. Instead of advocating categories of denial, we argue that the majority opinion in eBay can and should be read as a return to a balancing test, where costs and benefits are weighed carefully before granting or denying a patent injunction.
* Professor of Economics, University of Bologna.
** Professor of Competition Law, Tilburg Law and Economics Center (TILEC); Partner, Howrey LLP. E-mail: GeradinD{at}howrey.com.
Economist, LECG Consulting. E-mail: alayne-farrar{at}lecg.com.
Economist, LECG Consulting; Research Fellow, CEMFI (Madrid) and CEPR (London). E-mail: jpadilla{at}lecg.com. The authors thank Luigi Franzoni, Ronald Mann, Robert Merges, and David Salant for helpful comments and suggestions, and thank Marina Danilevsky for research assistance. The authors are also grateful for helpful comments from conference audiences at Berkeley and the U.K. Office of Fair Trading. Financial support from Qualcomm is gratefully acknowledged. The ideas and opinions in this paper are exclusively our own.