Supreme Court Backs e-Bay In Patent Injunction Case

by Glen Shapiro, LawAndTax-News.com, New York

17 May 2006

In an eagerly-awaited ruling concerning injunctions in patent cases, the Supreme Court unanimously reversed an Appeal Court decision and gave judges greater flexibility in deciding whether to issue injunctions.

In eBay v. MercExchange, a Virginia District Court ruled in 2003 that with its 'Buy It Now' function, eBay had infringed upon a patent for direct online buying held by MarcExchange founder and former CIA engineer, Tom Woolston. Federal Judge Jermone Friedman also stated that that auction portal had violated a patent held by Mr Woolston for searching the internet for merchandise from other vendors, but dismissed a violation claim regarding the entire online auction process, arguing that MercExchange had not made an effective case.

However, the district court declined to issue an injunction against eBay, finding that MercExchange’s willingness to license, failure to practice the patents itself and comments to the media regarding its intent to enforce patent rights all weighed against any presumption that it would suffer irreparable harm without an injunction.

In March, 2005, the appeals court upheld the earlier ruling on the direct buy patent, and recommended an injunction to prevent eBay from using it, meaning that the firm would either have to remove the 'Buy It Now' function, create a substantially different version, or license the technology from MercExchange. In its March 2005 ruling, the Federal Circuit outlined its views regarding injunctions: "The general rule is that a permanent injunction will issue once infringement and validity have been adjudged." The court concluded that "the district court did not provide any persuasive reason to believe this case is sufficiently exceptional to justify the denial of a permanent injunction."

The Supreme Court has set aside the appeals court decision and says judges have leeway on whether or not to impose injunctions. The Court's opinion, by Justice Clarence Thomas, directs judges to weigh a variety of factors when considering injunctive remedies for patent infringement.

The Court had received a number of amicus curiae briefs, including from the Pharmaceutical Research and Manufacturers of America, the Patent and Trademark Office, and a group of technology companies including Time Warner and Amazon.

The Supreme Court had indicated when it granted eBay's appeal that it would specifically try to decide whether the current standard for patent injunctions should be changed or, at a minimum, clarified.

The Pharmaceutical Research and Manufacturers of America and the Patent and Trademark Office wanted the Court to keep the general rule that injunctive relief will be granted against patent infringers absent exceptional circumstances, while the technology companies say that the current rules on injunctions invite abuse of the system.

eBay had asked the Supreme Court to re-instate the traditional 'four factor' test for injunctive relief for patent infringement after the Court of Appeals for the Federal Circuit said that infringement should normally result in an injunction.

In the four-factor test, said eBay's petition to the Supreme Court, the court should consider (i) irreparable harm from not issuing an injunction; (ii) whether an adequate remedy exists in law (damages); (iii) whether the injunction would be in the public interest; and (iv) whether a balance of hardships would tip in the plaintiff’s favor.

eBay asked the Court to decide "whether the Federal Circuit erred in setting forth a general rule in patent cases that a district court must, absent exceptional circumstances, issue a permanent injunction after a finding of infringement."

However, the TRIPs Agreement requires that countries offer the remedy of injunctions to patent owners suffering infringement, and the Appeal Court's ruling was consistent with TRIPs. Commentators were therefore surprised when the Supreme Court agreed to hear the petition, and they will be even more surprised now that the Court has come down on the side of the technology companies.

Recommended