Did eBay Irreparably Injure Trademark Law?

Mark A. Lemley*

In eBay v. MercExchange,¹ the Supreme Court held that patent owners were not automatically entitled to an injunction when they won their cases. Relying on the patent statute, which provides that courts “may grant injunctions in accordance with the principles of equity,”² the Court held that courts should consider four traditional equitable factors on a case-by-case basis before deciding whether to grant an injunction.³ Copyright courts quickly followed suit, applying the same four-factor test.⁴ More recently, three circuits have held that the same four factors govern the grant of trademark injunctions,⁵ pointing to statutory language similar to that in the patent and copyright statutes.⁶

A number of scholars have questioned the eBay result, either as a matter of history⁷ or on policy grounds.⁸ That is not my intent here. The conclusion that injunctions are not automatic seems an unexceptional reading of the relevant statutes. Even accepting the criticism that the Court cobbled together the four-factor test, which wasn’t well-established as a separate test, it certainly seems to capture the factors courts in equity cases have used in the past in deciding whether to grant injunctions in various areas of law.⁹ And the results in patent cases have been salutary as a policy matter, allowing courts to deny injunctions to non-practicing entities that sought injunctions only to hold up defendants while still granting injunctions to those who need it.¹⁰ I think that eBay was a good—indeed, great—development in patent and copyright law.

Trademark, however, is different. The purposes of trademark law—and whom it benefits—should lead us to treat trademark injunctions differently than patent and copyright injunctions. Further, trademark courts have misinterpreted eBay, treating each of the four factors as a requirement rather than a consideration. That is a particular problem in trademark law, where proof of future injury can be elusive. And perhaps most remarkably, courts have expanded eBay in trademark cases at the same time they have denied damages relief, with the result that trademark owners can and do win their case only to receive no remedy at all.¹¹ The result is a very real risk that courts will hurt rather than help consumers by allowing confusion to continue.

eBay is about the application of equity. Trademark cases should take account of the true equities of trademark cases, not simply cement the eBay factors into a rule. Doing so will not mean that trademark owners always win injunctions, but it should make it more common, at least in the core cases in which confusion is a real risk. And doing so will remain true to the core insight of eBay, which is that context matters.

Continue reading in the print edition . . .

© 2017 Mark A. Lemley. Individuals and nonprofit institutions may reproduce and distribute copies of this Article in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision in the copyright notice.

*William H. Neukom Professor, Stanford Law School; partner, Durie Tangri LLP. Thanks to David Bernstein, Graeme Dinwoodie, Andrew Gilden, Paul Goldstein, Rose Hagan, Tim Holbrook, Peter Karol, Sandy Rierson, Rebecca Tushnet, and participants at a conference at Notre Dame Law School for comments on an earlier draft.

1 eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

2 35 U.S.C. § 283 (2012).

3 eBay, 547 U.S. at 391.

4 See, e.g., Perfect 10, Inc. v. Google, Inc., 653 F.3d 976 (9th Cir. 2011); Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010). 17 U.S.C. § 502(a) (2012) provides that a court “may . . . grant injunctions . . . on such terms as it may deem reasonable.”

5 See infra Part I.

6 15 U.S.C. § 1116(a) (2012) provides that a court “shall have power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable.”

7 See, e.g., Eric R. Claeys, The Conceptual Relation Between IP Rights and Infringement Remedies, 22 Geo. Mason L. Rev. 825 (2015); Mark P. Gergen et al., The Supreme Court’s Accidental Revolution? The Test for Permanent Injunctions, 112 Colum. L. Rev. 203 (2012).

8 See, e.g., John M. Golden, “Patent Trolls” and Patent Remedies, 85 Tex. L. Rev. 2111 (2007).

9 For a general discussion of those factors, see Douglas Laycock, Modern American Remedies (4th ed. 2010). Gergen et al. point out that the four-factor test traditionally applied to preliminary, not permanent, injunctions, see Gergen et al., supra note 7, at 208–09, but many of the same factors in the preliminary injunction test have long been considered relevant in deciding whether to grant permanent injunctions as well.

10 See, e.g., Dan L. Burk & Mark A. Lemley, The Patent Crisis and How the Courts Can Solve It 138–39 (2009) (describing eBay as a successful example of industry-specific policy levers); Colleen V. Chien & Mark A. Lemley, Patent Holdup, the ITC, and the Public Interest, 98 Cornell L. Rev. 1, 10–11 (2012) (showing that practicing entities usually win injunctions after eBay, but that non-practicing entities rarely do); Christopher B. Seaman, Permanent Injunctions in Patent Litigation After eBay: An Empirical Study, 101 Iowa L. Rev. 1949, 1949 (2016) (finding that “operating companies who compete against an infringer still obtain permanent injunctions in the vast majority of cases . . . . In contrast, non-competitors and other non-practicing entities are generally denied injunctive relief.”); cf. Christopher B. Seaman, Ongoing Royalties in Patent Cases After eBay: An Empirical Assessment and Proposed Framework, 23 Tex. Intell. Prop. L.J. 203 (2015) (documenting what happens when injunctions are denied).

11 See infra note 82 and accompanying text.