PATENT AND CONTRIBUTION: BRINGING THE QUID PRO QUO INTO EBA Y V. MERCEXCHANGE

ABSTRACT In eBay, Inc. v. MercExchange, L.L.C., the Supreme Court declared that an injunction granted to stop and prevent patent infringement is like any other injunction, and therefore should only issue after consideration of traditional equitable factors. It is not yet clear whether this decision has truly changed existing patent law, but one thing is certain--injunctions are no longer viewed as a guaranteed remedy for patent infringement. One potential effect of eBay on the worm of technology is on the value of patents. Much of the discussion of eBay has focused on the decision's effect on patent owners who do not practice their patent. Without the threat of a guaranteed permanent injunction, these patent owners will have less bargaining power in licensing negotiations and might get less favorable licensing arrangements. This note discusses this potential change in patent value and its relation to one primary justification for patent law, the quid pro quo, which views the patent as an exchange between the inventor and the public: invention and disclosure in exchange for the right to exclude. In the post-eBay world, the fact that an injunction is no longer a guarantee may reduce the value of the right to exclude. This may create a disparity in the exchange--the inventor may receive less value from the public in the form of a patent while the public receives more from the invention and disclosure through the denial of an injunction. This note argues that eBay need not conflict with the quid pro quo exchange, and that, although current decisions relying on the Supreme Court's opinion do not do so, courts can and should use eBay to better tailor the patent right to the value of the actual contribution of invention and disclosure. TABLE OF CONTENTS I. Introduction II. Background A. District Court B. Federal Circuit C. Supreme Court III. EBay and the Patent Troll: Justified Punishment or Unfair Targeting? A. EBay (Rightfully) Cracks Down on Patent Trolls B. EBay Unfairly Harms the Value of Patents to Non-Practicing Entities IV. Bringing eBay into a Larger Context: The Entire Patent System A. Incentive Justification of Patent Law B. The Quid Pro Quo of Patent Law." The Patent as an Exchange V. EBay Inconsistently Affects the Quid Pro Quo A. Assessing the Original Contribution in a Patent Exchange B. The eBay Factors Can Be Used To Support or Go Against the Quid Pro Quo C. Courts' Application of the eBay Test Affects the Patent Exchange Inconsistently VI. Considering the Quid Pro Quo Under Equity A. The Exchange Between Patentee and Public Is a Valid Consideration Under Equity B. Equitable Doctrines Allow a Court To Tailor the Patent Right To Conform to the Exchange VII. Fitting the Quid Pro Quo into the eBay Analysis A. The Quid Pro Quo in All Four Factors B. Using Public Interest to Consider the Quid Pro Quo VIII. Conclusion I. INTRODUCTION In 2006, the Supreme Court of the United States declared in eBay, Inc. v. MercExchange, L.L.C., (1) that a permanent injunction for patent infringement should be granted only after weighing the same equitable considerations as injunctions in other areas of the law. In doing so, the Court overturned the Federal Circuit's decision, which followed the common treatment of injunctions almost as an automatic remedy for patent infringement. (2) EBay has, in all likelihood, changed the landscape of patent litigation and licensing by giving courts more discretion and power to deny injunctive relief. If an injunction is denied, a court grants in its place what it deems to be reasonable royalties to the patent owner, essentially creating an ex post licensing agreement. Thus, the owner is denied the absolute right to exclude, and a license is created not as a result of bargaining ex ante, but as a result of an adversarial judicial proceeding ex post. …