Barriers to Injunctions in Patent Infringement Cases

The holders of standard-essential patents may have to commit to licensing the patents to others on fair and non-discriminatory terms.

The strategic use of patent rights to control competition or collect higher licensing fees has sparked a lively discussion in legal literature. Furthermore, (foreign) courts have issued interesting decisions on access to injunctions in patent infringement cases, where the patent holder is a non-practising entity, more commonly referred to as a patent troll.

Under section 57 of the Finnish Patents Act (550/1967) the court may grant an injunction in patent infringement cases and thereby forbid any person who infringes a patent from continuing or repeating the act. The main rule is that a permanent injunction will be issued when a patent infringement has been determined.

According to the Supreme Court decision (KKO:2003:127), a court may deny a request for a permanent injunction in exceptional circumstances, such as the absence of a likelihood of continued patent infringement.

Foreign case law and legal literature also address other circumstances that may lead to the denial of an injunction request. Much of the discussion focuses on patents that are essential for a standardised technology.

The holders of standard-essential patents may have to commit to licensing the patents to others on fair, reasonable and non-discriminatory terms, so-called FRAND terms.

Balancing Antitrust Rules

Strategic seeking and enforcing of patent rights has been discussed widely, both in the European Union and the United States, and it has been addressed slightly differently in the two.

In the EU, the discussion on strategic use of injunctions has largely focused on the EU antitrust legislation. Legal literature and case law in Europe suggests that the use of injunction measures may in some circumstances constitute an abuse of a dominant market position, contrary to Article 102 of the Treaty on the Functioning of the European Union (TFEU).

In the United States, decisions on injunctions, most notably the Supreme Court’s decision in eBay Inc. v MercExchange (LLC, 547 U.S. 2006), have mostly evolved around patent legislation.

European Case Law

Article 102 TFEU prohibits the abuse of a dominant market position, which may affect trade and prevent or restrict competition. The European Commission has stated that seeking injunctions based on standard-essential patents may constitute an abuse of a dominant market position if the holder of these patents has committed to licensing the patents on FRAND terms.

Standardisation bodies generally require FRAND commitments to prevent patent hold-ups and ensure that everyone has access to the standard.

In 2012, the Commission took the preliminary view that Samsung Electronics had abused its dominant market position in violation of Article 102 TFEU by seeking injunctive relief against Apple. According to the Commission’s interpretation, a rights holder seeking an injunction may violate competition rules, if the infringer is willing to enter into a license agreement on FRAND terms.

In a similar case, the Commission informed Motorola Mobility that by seeking and enforcing an injunction against Apple in Germany, based on its standard-essential patents, Motorola was abusing its dominant market position.

The Commission considered that a dominant holder of a standard-essential patent should not have recourse to injunctions that could be used to impose unjust licensing terms on the licensee. Commission’s decision in both the Samsung case and the Motorola case was announced on 29 April 2014.

German case law suggests that a permanent injunction may be denied when the use thereof would constitute an abuse of a dominant market position under Article 102 TFEU. In the Orange Book Standard case (2009), the Federal Court of Justice accepted the FRAND defence and stated that the injunction may be denied if the patent holder has abused its dominant market position.

The injunction request may be opposed if the potential infringer of a standardessential patent behaves as a licensee in good faith, by reporting the use of the patent and paying reasonable royalties to the patent holder.

The court stated three conditions for such a FRAND defence. The injunction may be denied if (i) the plaintiff has a dominant market position, (ii) the defendant has given a binding licensing commitment with generally acceptable terms, and (iii) the infringer has acted as if the offer had been accepted by having paid or secured royalty payments.

Later, the District Court of Düsseldorf had to interpret the requirements in the Orange Book case and requested the Court of Justice of the European Union (CJEU) to interpret Article 102 TFEU (Huawei Technologies C-170/13). As of writing, the CJEU’s decision has not been published.

US Case Law

Patent reform legislation regarding non-practising entities (NPEs) is currently widely debated in the United States. In the US, an injunction may be granted under section 283 of the Patent Act in accordance with the principles of equity on terms that the court deems reasonable. As in the EU, patent infringements usually lead to the granting of the injunction.

In the practise of the Federal Circuit an injunction was almost automatically granted if a patent was found to be infringed. In Richardson v. Suzuki Motor (1989), the Federal Circuit stated that when a patent infringement had been determined, it would be contrary to the patent holder’s right to property to deny his right to exclude others from using the patented invention. This practice was discussed later by the Supreme Court of the United States in the eBay case referred to above.

In eBay case, the Supreme Court stated clearly that a patent infringement does not automatically lead to an injunction, but that the decision must strike a balance between different interests.

The Court stated four criteria for a permanent injunction, and held that it is the plaintiff’s obligation to demonstrate that the criteria are met: (i) the plaintiff has suffered irreparable injury, (ii) remedies such as monetary damages, are inadequate to compensate for that injury, (iii) a remedy in equity is warranted considering the balance of hardships between the plaintiff and defendant, and (iv) that the public interest would not be disserved by a permanent injunction.

After the eBay case, court decisions on permanent injunctions have considered several factual circumstances, such as whether there is direct competition between the parties, what the status and licensing history of the defendant and the plaintiff is, and what value the protected invention has for the infringing product. Permanent injunctions are still the most common outcome, but a permanent injunction is no longer granted as a matter of course when a patent infringement has been determined.

Safeguards Against the Abuse

A permanent injunction may be denied in exceptional circumstances and the injunction decision must consider the individual circumstances in each case. The EU antitrust rules may prevent the granting of an injunction for the enforcement of stand-ard-essential patents. In the US, the injunction decision will have to consider the four factors established by the Supreme Court in the eBay case.

A permanent injunction is generally granted when a patent infringement has been found, but this is not an automatic outcome. This means that proving a patent infringement may no longer be the end of the road for the patent holder, thereby providing safeguards against the abuse of a dominant market position and abusive use of the threat of injunctions.

Tom Jansson
Associate
Hannes Snellman Attorneys Ltd
Helsinki

The article is based on the author’s Master’s Thesis ”Förutsättningarna för det slutliga förbudet vid patentintrång” (University of Helsinki, Faculty of Law, 2013).

Legislation

Consolidated version of the Treaty on the Functioning of the European Union (TFEU) – Article 102 (ex Article 82 TEC), Official Journal 115 , 09 May 2008 p. 89.

Finnish Patents Act (550/1967) available in English:
www.wipo.int/wipolex/en/

Case Law

United States – Supreme Court

Richardson v. Suzuki Motor (868 F.2d 1226 1989), February 16, 1989.

eBay Inc. v MercExchange (LLC, 547 U.S. 2006), May 15, 2006 http://www.supremecourt.gov/opinions/05pdf/05-130.pdf

EU

Finland – Supreme Court

Supreme Court’s decision KKO 2003:127, 18 December 2003 (available only in Finnish): http://www.finlex.fi/fi/oikeus/kko/kko/2003/20030127

Germany – Supreme Court

Orange Book Standard, May 6, 2009
http://www.bundesgerichtshof.de/ > Entscheidungen > Entscheidungen aus dem Jahr 2009 > Urteil des Kartellsenats vom 6.5.2009 – KZR 39/06

Commission’s competition website’s case register: http://ec.europa.eu/competition/index_en.html
Case n:o 39939 Samsung – Enforcement of UMTS standards essential patents