The RESTORE Patents Act Uniquely Handicaps American Innovation

In 2007 the United States led the world in 60 out of 64 technologies critical to our economic and national security.  However, warning signs emerged when it was reported that China accounted for 48% of global Artificial Intelligence (AI) startup funding in 2017, surpassing the U.S., which held 38%.  By March 2023, China had taken the lead in 37 critical technologies.  By August 2024, just eighteen months later, that number had surged to 57.

While the U.S. government emphasizes China’s theft of intellectual property, China can steal its way to parity, but theft does not account for China’s rapid ascension to global technology leader. The simple truth is that China is innovating faster than the United States. A critical factor causing this economic and national security crisis is the relative strength of each country’s patent system.

For over 200 years, the U.S. patent system drove America to lead the world in virtually every technological revolution, from potash processing to smartphones.  But the Supreme Court’s 2006 ruling in eBay Inc. v. MercExchange, L.L.C. (eBay) hobbled U.S. innovation in ways no other country hobbles themselves.  eBay made injunctions for patent infringement very difficult to obtain.  But injunctions are common in other countries.  For example, the Unified Patent Court in Europe and courts in China routinely grant injunctions.

eBay launched a chain reaction that brought broad revisions to U.S. legal and regulatory framework further reducing the strength of U.S. patent rights. Today, U.S. patent rights cannot be reasonably be defended.  Patents that cannot be reasonably defended are worthless as collateral, deterring early-stage investors from funding new ventures.  This has led to a marked decline in investment in U.S. startups, particularly those focused on developing critical next-generation technologies, with a significant portion of this investment redirected to China.

Recognizing the implications to economic and national security caused by eBay, the Realizing Engineering Science and Technology Opportunities by Restoring Exclusive Patent Rights Act of 2025 (RESTORE) was introduced in the Senate and House.

Proponents of RESTORE claim it restores injunctions, but it does no such thing.  In fact, RESTORE codifies the most damaging parts of eBay, the eBay Factors.  If made law, U.S. innovation will remain handicapped, and China will extend its lead.

Historical Context: The Law of Injunctions Before eBay

An injunction is the very essence of a personal property right. Injunctions issued against adjudged infringers on a valid patent predate the country and are codified in our founding documents.  The Constitution constructs a patent as nothing but an “exclusive Right.”  The key component of the associated bundle of private property rights is the right to exclude.  Following suit, Congress codified that a patent “shall have the attributes of personal property.” 

Adam Mossoff, Professor of Law at Antonin Scalia Law School, George Mason University, recently published a paper entitled “Injunctions for Patent Infringement: Historical Equity Practice Between 1790 – 1882”.  In it, Mossoff presents the law on injunctions prior to eBay as: “In the 899 opinions in Federal Cases by federal courts sitting in equity in lawsuits filed between 1790 and 1880, no judge applied a four-factor test for issuing an injunction, either for a permanent or a preliminary injunction. […] Courts awarded permanent injunctions in 91% of the cases in which the defendant was found to infringe a patent that it failed to invalidate. Courts granted these injunctions by applying the same legal doctrines they applied when redressing continuing trespasses of real property, protecting patents as much as they protected real estate and other property interests.”

For more than 200 years prior to eBay, injunctions were regularly issued upon the finding of infringement of a valid patent. This incentivized responsible corporate behavior by encouraging companies to acquire startups and patents rather than risk litigation; license patents instead of infringing upon them; design around existing patents to develop alternative solutions; and form partnerships with inventors to foster innovation. Injunctions not only spurred innovation but also acted as an anti-monopoly mechanism, enabling new entrants to challenge dominant incumbents, which increased market competition.

Early-stage investment fuels American innovation. Without it, a startup does not start up, and its inventions die in the cradle. Patents are often the sole collateral available to attract that critical first investment.

The value of a market created by a patented invention significantly exceeds the costs of patent infringement. This incentivizes theft of patented inventions. Standing against rampant infringement, injunctions prevent infringers from making, using, offering to sell, or selling patented inventions without authorization. Injunctions keep infringers at bay long enough for the startup to establish a toe hold in the market strong enough to compete after the patent expires.

But if the startup fails, patents are also a backstop to value. Investors can enforce patents against the infringers who stole the invention, flooded the market, and ran the startup out of business. Or they can sell the patents to someone else who does. These entities specialize in licensing and enforcement and are often referred to as non-practicing entities (NPE).

eBay’s Radical Change to the Law of Injunctions

eBay marked a radical departure from established law and precedent, effectively rewriting the law on injunctive relief. It made it nearly impossible for startups, entrepreneurs, and inventors to secure injunctions.

In eBay, the Supreme Court mandated two distinct elements.  It mandated 1) the application of a four-factor test (eBay Factors) to determine whether an injunction against an adjudged infringer is warranted, and 2) a shift in burden, requiring patent owners to prove that their case satisfies the eBay Factors.

The eBay Factors

The eBay Factors requires a patent owner to demonstrate: 1) irreparable harm – that the patent holder has suffered an irreparable injury; 2) inadequacy of legal remedies – that monetary damages alone are insufficient to compensate for the injury; 3) balance of hardships – that the balance of hardships favors the patent holder over the infringer; and 4) public interest – that the public interest would not be harmed by the issuance of an injunction.

In practice, the eBay Factors create a significant hurdle for inventors and investors attempting to bring their inventions to market (startups). If an established corporation floods the market with infringing products, it can drive a startup out of business. Once out of business, it has no product on the market, so it cannot pass eBay Factors because it is not irreparably harmed by a loss of market share; thus, monetary damages will make the patent owner whole.  

As previously stated, the value of a market created by a patented invention far exceeds the cost of infringement. The eBay Factors, therefore, incentivize massive predatory infringement. Without a reasonable threat of an injunction, large multinational corporations—including Chinese state-controlled entities—engage in predatory infringement with little fear of consequences.

eBay v. MercExchange Precipitated the Decline of U.S. Innovation

eBay, by encouraging predatory infringement, brought on a precipitous decline in the U.S. innovation. After eBay, many startups went out of business, and others could not attract their first investment. These patent owners either sued infringers or sold them to NPEs who sued. This brought an increase in patent litigation by patent owners without commercial products.

Predatory infringers invested tens of millions of dollars in a false narrative that these patent owners were cartoon creatures called “patent trolls” that threatened American innovation. Congress, the courts, and the administration accepted this fairy tale as truth and radically weakened every aspect of patent protection over the next 15 years.

The all-of-government effort to stop “patent trolls” changed nearly every aspect of patent protection, including the scope of prior art, the determination of invention priority, venue selection for litigation, the interpretation of patent claims, error correction procedures, disclosure standards, damages calculations, the application of the mental step and abstract idea doctrines, patent invalidation processes, and numerous other facets of patent law.

Securing a patent has become difficult, and once obtained, patents are vulnerable to be invalidated at kill rates as high as 84%.  The cost of patent litigation has escalated, and damages awarded have been minimized or, in some cases, eliminated. Patent owners are often left with financial liabilities rather than the protection they sought.  For inventors and startups, patents are practically unenforceable.

Investors took note and moved their early-stage investments to other countries like the EU and China, which strengthened their patent systems.

This chilling effect on investment is particularly pronounced in critical fields listed in 55 of 64 technologies where China now leads the world. These technologies include artificial intelligence, cybersecurity, fintech, quantum computing and many other technologies with significant military and economic significance. Without effective patent protection, U.S. startups in these fields struggle to secure funding, ceding technological leadership to foreign competitors.

RESTORE Fails to Fully Address eBay

RESTORE fixes one element of eBay’s damage and codifies the other. RESTORE introduces a rebuttable presumption in favor of injunctions, but it does not abrogate the eBay and it effectively codifies the eBay Factors.

The bill’s operative language states: “If, in a case under this title, the court enters a final judgment finding infringement of a right secured by patent, the patent owner shall be entitled to a rebuttable presumption that the court should grant a permanent injunction with respect to that infringing conduct.”

This reverses the burden on the patent owner imposed by eBay to prove the eBay Factors. However, because RESTORE does not explicitly overturn the eBay Factors, courts will likely continue applying them as standard equitable defenses, effectively codifying the eBay Factors.

RESTORE Must Be Amended

To fully restore the U.S patent system to its pre-eBay status quo and realign U.S. patent law with international standards, RESTORE must be amended to explicitly eliminate the eBay Factors.

Without proper amendments, RESTORE will fail to provide the level of patent protection necessary to reclaim U.S. leadership in innovation and American innovation will remain handicapped in ways no other country handicaps their own innovation engines.

For a more detailed explanation of how RESTORE codifies the eBay Factors and how it can be amended to accomplish that, see here.