Is It Time to Get Real About the Public Interest Factors?
Eighteen years ago this week, eBay, Inc. filed its petition for certiorari with the Supreme Court challenging a Federal Circuit decision that applied its "general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances."1 The Supreme Court opinion that issued almost a year later dramatically changed the way injunctions are handled in patent cases in federal district courts, holding that injunctions in patent cases are to be treated no differently than in other types of cases and are subject to the traditional four-factor test.
Following eBay, Inc. v. MercExchange LLC,2 the Federal Circuit in Spansion Inc. v. Int'l Trade Comm'n, held that the remedies in the International Trade Commission ("ITC" or "the Commission")—exclusion orders and cease and desist orders—are different creatures than injunctions in district court and, accordingly, are not subject to the Supreme Court's eBay decision.3 Ironically, the court that was formed to bring uniformity to patent law created a completely separate standard for injunctions in the ITC.
In the wake of the Spansion decision, many commentators predicted a coming wave of non-practicing entity ("NPE") litigation that would swamp the ITC. It has been almost twenty years since eBay, and although many of those doom-and-gloom predictions have proven to have been overblown, the fact remains that well-funded NPEs do regularly appear in the ITC attempting to take advantage of its sledgehammer remedies.
The most commonly-cited reason for why the ITC remains an attractive forum for companies, including certain types of NPEs, is Section 337(d)(1)'s mandate that the Commission "shall direct that the articles concerned, imported by any person violating the provision of this section, be excluded from entry into the United States" if a violation is found. This seemingly-inescapable interpretation was reinforced by the Federal Circuit in Spansion, which relied on this statutory language to find eBay inapplicable to ITC proceedings.4
The prevailing sentiment that the Commission will issue exclusion and cease and desist orders automatically upon the finding of a violation is technically incorrect. Section 337 states in four separate places that no remedies should issue unless they are consistent with the public interest.5 But even though technically incorrect, this sentiment accurately represents the reality of ITC practice, which is that the Commission will invariably issue both types of orders except in circumstances so rare that they are barely worth mentioning.6
The public interest factors that the Commission is obligated to consider are:
the effect of such [remedy] upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers...7
These factors are not inconsistent with the four-factor equity
test traditionally applied to injunctions, which the Supreme Court
mandated for injunctions in patent cases in district court:
(1) that it has suffered an irreparable injury; (2) that remedies
available at law are inadequate to compensate for that injury; (3)
that considering the balance of hardships between the plaintiff and
defendant, a remedy in equity is warranted; and (4) that the public
interest would not be disserved by a permanent
injunction.8
In nearly twenty years of application, the eBay test has proven very useful in balancing competing interests. Trial courts throughout the country have employed eBay's flexibility to engage with issues involving NPEs of various types, standard essential patents, patent hold-up, royalty stacking, attempted monopolization, the availability of redesigns, the relative importance of an infringed patent to the accused product and downstream products, and more. These are all issues that affect "public health and welfare," "competitive conditions in the United States economy," the availability of "like or directly competitive articles," and "United States consumers," which is why the ITC can and should also engage with such issues.
While exclusion orders are different than injunctions—they are orders to another government agency (United States Customs and Border Protection) to take certain actions with respect to certain products, they are based on in rem jurisdiction, which means they do not invoke the same due process requirements—Section 337 explicitly states that they are subject to the exact same public interest considerations as cease and desist orders (which are injunctions).9 Moreover, the fact that the Commission operates under its own statutory scheme—a major basis for the Spansion opinion—does not necessarily make it incompatible with eBay. Copyright law, for example, has its own governing statutes,10 including for the issuance of injunctions, and yet has been brought in line with eBay.11
Of course, the Commission is obligated to follow Federal Circuit law; but it is also obligated to follow its governing statute. Without explicitly adopting eBay or contradicting Spansion, and even without the ability to award monetary relief, the Commission could give greater consideration to the public interest factors in exercising its "broad discretion in selecting the form, scope, and extent of the remedy."12 For example, aside from outright denying relief (which the Commission could elect to do in the public interest under the right circumstances), the Commission could also opt to delay the enforcement of Commission orders, stay relief pending Federal Circuit appeal or USPTO review, ease the standard for considering design-arounds, or limit the extent to which remedial orders can reach downstream products.
Conclusion
The eBay test gives district courts the flexibility to apply a well-balanced consideration of competing interests before imposing heavy-handed injunctions. The Commission has the statutory mechanism (and obligation) to do the same through the public interest factors, but has instead exercised steadfast apathy towards them. This approach has resulted in all-or-nothing outcomes from the Commission: complainants either get no relief or they get the full power of exclusion and cease and desist orders. The Commission should consider giving the public interest factors more consideration and exercising its discretion to fashion remedies on a case-by-case basis.
Footnotes
1. MercExchange LLC v. eBay, Inc., 401 F.3d 1323, 1339 (Fed. Cir. 2005).
2. eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006).
3. Spansion, Inc. v. Int'l Trade Comm'n, 629 F.3d 1331, 1358-59 (Fed. Cir. 2010), cert. denied, 565 U.S. 1058 (2011).
4. Id. at 1358-60.
5. 19 U.S.C. § 1337(d)(1), (e)(1), (f)(1), and (g)(1)(E).
6. Certain Automatic Crankpin Grinders, Inv. No. 337-TA-60, Comm'n Determination and Order (Dec. 17, 1979); Certain Inclined-Field Acceleration Tubes and Components Thereof, Inv. No. 337-TA-67, Comm'n Action and Order (Dec. 29, 1980); Certain Fluidized Supporting Apparatus, Inv. No. 337-TA-182/188, Comm'n Memo. Op. (Oct. 5, 1984); see also Certain Baseband Processors Chips and Chipsets, Transmitter and Receiver (Radio) Chips, Power Control Chips and Products Containing Same, including Cellular Telephone Headsets, Inv. No. 337-TA-543, Comm'n Op. at 152-54 (Jun. 19, 2007) (grandfathering exception for certain products); Certain Microfluidic Devices, Inv. No. 337-TA-1068, Comm'n Op. (Jan. 10, 2020) (exception for products imported for use in certain ongoing medical research).
7. E.g. 19 U.S.C. § 1337(d)(1).
8. eBay, 547 U.S. at 391.
9. Compare 19 U.S.C. § 1337(d)(1) with (f)(1).
10. See 17 U.S.C. § 101, et seq.
11. See Salinger v. Colting, 607 F.3d 68, 77-78 (2d Cir. 2010) ("We hold today that eBay applies with equal force (a) to preliminary injunctions (b) that are issued for alleged copyright infringement. First, nothing in the text or the logic of eBay suggests that its rule is limited to patent cases. On the contrary, eBay strongly indicates that the traditional principles of equity it employed are the presumptive standard for injunctions in any context.") (emphasis added).
12. Viscofan S.A. v. Int'l Trade Comm'n, 787 F.2d 544, 548 (Fed. Cir. 1986).
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