In eBay v. MercExchange, a unanimous Supreme Court announced that a new four-factor test should be employed by district courts in determining whether to award an injunction or damages to an aggrieved party whose intellectual property has been infringed. In the context of permanent injunctions in patent cases, district courts have distorted the four-factor test resulting in a “market competition requirement.” Under the new market competition requirement, success at obtaining an injunction is contingent upon a party demonstrating that it is a market competitor. After consistent application in the first twenty-five district court cases post-eBay, the market competition requirement is becoming an entrenched doctrine. However, the divergent legal standards used by district courts turning on market competition contravenes the Supreme Court’s holding that courts should not apply the four-factor test in a manner that makes the injunctive remedy unavailable based on broad classifications. The market competition requirement may solve some of the problems resulting from holdup by so-called “patent trolls,” but at a cost potentially too high to bear. The market competition requirement may insulate inefficient markets from meaningful competition and decrease incentives to innovate for individual self-made inventors, who drive a large segment of patenting activity. Because the market competition requirement is without foundational support from eBay and is of questionable utility in incentivizing innovation, its continued use is a cause for serious concern.
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