By Doug Collins
Imagine you’re an inventor. After investing your life savings, and spending countless late nights refining your product, you’ve managed to turn your good idea into a thriving small business.
But then, a bigger company comes along, copies your design, and starts selling its own version of your product at a lower price.
In desperation, you turn to the courts — and your lawyers are able to convince a court that the larger corporation has indeed infringed your patent. Finally, justice is served, right?
Unfortunately, probably not. Because of disastrous court precedent, there’s a good chance the judge will allow the corporation to continue pirating your patented design, so long as it pays you some monetary damages. Now, your dream of turning your product into a household name will likely be impossible.
This isn’t fair; it isn’t right — you started your company to sell products, not to collect royalty checks. It’s time for Congress to stand up for inventors by setting the law straight.
The precedent in question started with a Supreme Court ruling in eBay Inc. v. MercExchange, L.L.C. The case concerned injunctions, which are court orders that compel a patent infringer to stop its infringing activities. The justices determined that injunctions were no longer the default solution to patent infringement, and that judges ought to have leeway to grant other remedies.
In the wake of Ebay, many judges turned to awarding monetary damages to patent owners, rather than imposing injunctions on patent infringers. These damages are usually based on what an infringing company would have paid had they licensed the patent from the patent owner.
While some payment is better than nothing, monetary damages frequently do not approximate the true value to a patent owner from commercializing, producing, and selling products that incorporate their hard-earned intellectual property.
Not every innovator wishes to create tangible products from their patents, of course. Some inventors choose to license their intellectual property to established companies, who in turn agree to pay ongoing royalties to the patent holder.
The problem is that the Ebay decision and lower court decisions following it have taken this choice out of inventors’ hands, establishing a system of forced patent licensing. And in deciding that injunctions are no longer the default response to patent infringement, the Supreme Court has actually made patent infringement more attractive to many large corporations.
To put a finer point on the perverse incentive described above, let us say an inventor does not wish to license her valuable IP, but instead hopes to build a business around it. Under our current forced licensing regime, a large company may decide to simply infringe the inventor’s patent, knowing full well a lawsuit is likely. Even if the court agrees patent infringement took place, it is quite likely the court awards monetary damages rather than impose an injunction.
In this case, the inventor has been deprived of the exclusive right to sell her own products free from a competitor using her technology. This usually drives the start-up out of business, killing the inventor’s American Dream, and enables the big corporations to get bigger at their expense. The modest licensing fee the inventor gets hardly makes up for the lost business opportunity.
Congress must act to right this wrong and restore injunctive relief as the presumptive solution to patent infringement.