Last summer J.D. Salinger sued the author/publisher of the book entitled “60 Years Later Coming Through the Rye” for copyright infringement. Salinger claimed that the book was a sequel to his famous book entitled “Catcher in the Rye” and therefore it was an infringing derivative work. Salinger sought and the district court granted a preliminary injunction barring publication of the book. On appeal, the U.S. Court of Appeal for the Second Circuit vacated the preliminary injunction on April 30, 2010 and remanded the case to the district court.
Interestingly, the Second Circuit agreed with the district court that Salinger is likely to ultimately prevail in his lawsuit because the book is probably an infringing work which is not protected by the fair use exception to copyright infringement. However, the Second Circuit remanded because it held that the test used by the district court to decide whether to issue a preliminary injunction was no longer the proper test to use in light of the 2006 Supreme Court decision in eBay v. MercExchange, 547 U.S. 388.
In eBay the Supreme Court overruled longstanding precedent and held that a patentee is not entitled to a permanent injunction against a patent infringer. The Court said that “the decision to grant or deny [permanent] injunctive relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion.” Additionally the court held that a patent owner seeking a permanent injunction as a remedy for patent infringement must establish the following:
(1) that it has suffered irreparable injury;
(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
(3) that, considering the balance of hardships between plaintiff and defendant, a remedy in equity is warranted; and
(4) that the public interest would not be disserved by a permanent injunction.
Although the eBay decision dealt with a remedy for patent infringement the broad language of the decision has led other federal courts to apply the same factors with regard to whether a permanent injunction should be allowed for numerous other causes of action under federal law.
In the Salinger case the Second Circuit held that the eBay factors were not limited to patent cases nor were the factors limited to a determination of whether a permanent injunction should be the remedy after a trial on the merits has found infringement. The Second Circuit held that the eBay factors apply with regard to determining whether a court should issue a preliminary injunction in a copyright infringement action.
Ultimately, I think is very likely the book at issue in the Salinger case will be found to infringe Salinger’s copyright in his work “Catcher in the Rye.” A more subtle and interesting issue raised by the eBay case and its subsequent expanded application in the Salinger case is the movement away from applying a property rule for interference with property rights. Courts typically utilize a liability rule (i.e. monetary damages) or a property rule (injunctive relief) as a remedy. Traditionally, breach of contract actions for example, almost always result in an award of monetary damages under a liability rule. Historically, interference with property rights usually results in injunctive relief under a property rule. For example, if an adjacent landowner engages in conduct that substantially interferes with the use and enjoyment of my land such that it is adjudged a nuisance the usual remedy is a permanent injunction barring the conduct that creates the nuisance. Likewise, under a property rule a landowner has historically been entitled to a permanent injunction against a trespasser without regard to whether any damage resulted from the trespass. The mere invasion or interference with a property owner’s most basic property right – the right to exclude – has generally been adequate injury for a court to award an injunction under a property rule. Historically, courts applied this approach – prior to the eBay decision – to actions for patent and copyright infringement since both patents and copyrights are unquestionably property.
Judicial opinions such as eBay and Salinger, in my opinion, represent a movement away from the traditional distinction between property and liability rules with regard to remedies for infringement of intellectual property. These cases seem to represent a shift in the law such that violations of intellectual property rights may only entitle the owner of intellectual property to monetary damages under a liability rule. Such a result essentially reduces the value of intellectual property rights because the owner no longer is entitled to the right to exclude others from using his or her property. A third party may now be able to make a monetary calculation whether to infringe based on the economic cost of such infringement. And, the property owner will have to be content with damages because he or she may be unable to prevent such unauthorized third party use.
For example, assume in the Salinger case that copyright infringement is found after a trial on the merits and it is upheld on appeal. Under an expansive application of the eBay case publication of the book “60 Years Later Coming Through the Rye” may not be enjoined. Instead, publication may be allowed subject to payment of royalties – essentially a compulsory license – to the owner of Salinger’s copyright. This change in the economic value of property may or may not be a good thing. However, whether it should occur should be the result of thoughtful debate and input by scholars, legislatures, the judiciary and the public.
Unfortunately, the Supreme Court made a significant change in the law in the eBay case with little discussion or explanation. The eBay opinion is extremely brief and contains a very cursory analysis. This is unfortunate for a decision which seems to have made a significant and fundamental shift in the way property rights are viewed.
For a critical examination of the eBay decision see The Supreme Court Engages in Judicial Activism in Interpreting Patent Law in eBay v. MercExchange, LLC.