Liability and Remedy Are Different Questions
FTO discussions sometimes collapse two questions into one: “If we infringe, will the court stop sales?” U.S. patent law does not make those questions identical. Infringement establishes liability; the remedy still requires its own analysis.
The Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), is the key modern authority for permanent injunctions in patent cases.
The Two Categorical Approaches the Court Rejected
The district court had been skeptical of a permanent injunction partly because MercExchange was willing to license its patent and did not itself practice the invention. The Federal Circuit moved in the opposite direction, describing a general rule under which a permanent injunction would issue once infringement and validity had been adjudged.
The Supreme Court rejected both categorical approaches. Patent owners who license rather than manufacture are not automatically disqualified from injunctions, and prevailing patentees are not automatically entitled to injunctions either.
The Four-Factor Test
A prevailing patent owner seeking a permanent injunction must satisfy the traditional equitable framework:
- it has suffered an irreparable injury;
- remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
- considering the balance of hardships between plaintiff and defendant, an equitable remedy is warranted; and
- the public interest would not be disserved by a permanent injunction.
No one factor automatically decides every patent case. The evidence depends on the parties, the market, the patented technology, available substitutes, competitive harm, licensing behavior, and the consequences of removing a product from the market.
An FTO can conclude that a patent presents material infringement exposure while separately concluding that the practical risk of a permanent injunction is lower—or higher—based on the market and equitable record.
Non-Practicing Patent Owners Are Not Subject to a Categorical Rule
The eBay concurrences are often cited in debates about non-practicing entities. Justice Kennedy noted that the nature of the patent and the economic function of the patent holder can affect the equitable calculus in some cases, particularly where an injunction is used primarily as leverage for excessive licensing fees. But the Court did not create a rule that licensing entities or non-practicing patentees can never obtain injunctions.
For FTO purposes, status labels such as “NPE” are therefore incomplete. The practical remedy analysis needs facts: Is the patent owner a direct competitor? Does it license broadly? Is there a close substitute? Would money compensate the harm? What effect would an injunction have on customers or the public?
What eBay Changes in a Business Risk Model
When management evaluates a patent, the consequences should be separated into several buckets:
- probability of literal or equivalent infringement;
- validity and enforceability risk;
- damages exposure for past acts;
- probability and operational impact of a permanent injunction;
- licensing leverage and settlement economics; and
- cost and timing of a design-around.
A patent covering a small replaceable feature may be legally strong but commercially manageable because a redesign can be deployed before an injunction becomes decisive. A patent covering the core product architecture may create a very different business problem, especially if the patent owner competes directly and can show market harm that money alone would not repair.
Permanent and Preliminary Injunctions Are Not the Same
eBay addressed permanent injunctive relief after a merits determination. Preliminary injunctions arise earlier and apply a related but distinct framework, including likelihood of success on the merits. A company should therefore not use eBay’s permanent-injunction holding as a complete answer to emergency relief risk at the beginning of litigation or in other forums such as the ITC.
Why This Belongs in an FTO Report
FTO is more useful when it explains not only whether a patent reads on the product, but what the plausible consequences are. That does not mean an FTO analyst can predict a future judge’s equitable decision with certainty. It means the report can flag factors that materially change remedy exposure and identify where business assumptions matter.
This is particularly important when management is deciding whether to launch, redesign, license, delay, or monitor. The “same” infringement risk can lead to different business decisions depending on the likely remedy and the company’s ability to respond.
The Practical Takeaway
eBay did not make injunctions rare by rule, and it did not eliminate patent owners’ right to seek them. It replaced categorical presumptions with equitable analysis. For companies conducting FTO, the implication is straightforward: infringement analysis is essential, but remedy analysis is a separate layer of risk.