Thursday, 2 June 2011

Only in America ... "Permanent Injunctions as Punitive Damages"

The Supreme Court tried many remedies,
but none had so great a punitive effect
as the permanent injunction
"Permanent Injunctions as Punitive Damages in Patent Infringement Cases" is the provocative title of a piece penned by Professor Paul J. Heald (University of Georgia Law School) and posted on the SSRN website here.  According to the abstrct:
"Although much ink has been spilled over the decision of the [US] Supreme Court in eBay v. Mercexchange to modify the test for equitable relief in patent cases and to nullify the long-standing [and erroneous, if equity is supposed to involve the exercise of judicial discretion -- JJP] presumption that victims of infringement are always entitled to permanent injunctions, an obvious point is never pursued: Injunctions in patent cases can function like punitive damages at common law. In cases where the infringer’s costs of switching to an alternative non-infringing technology are sufficiently high, patent "hold up" will occur, whereby the patentee will be able to negotiate a post-injunction license that exceeds the amount that would have been determined by an ex ante arms-length bargain (i.e., a reasonable royalty). Permanent injunctions that result in the recovery of an extra-compensatory bounty function like punitive damages and can be analyzed as such. This article examines the economic literature on punitive damages and identifies the limited set of circumstances where permanent injunctions are warranted.".
This piece will subsequently emerge as a chapter in an upcoming Cambridge University Press book, Intellectual Property and the Common Law. Meanwhile, if any discerning PatLit readers would like to cast a critical eye across this ingenious and controversial hypothesis, we'd all be pleased to know what they think.

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