With eBay, (Supreme Court unanimously decided that) Injunctions should not automatically issue on a finding of patent infringement
So something changed about Injunctive Relief in Patent Cases with eBay
What is Injunction?
At the core is the belief that monetary damages cannot solve all problems
Rationale behind Injunctions – provide fairness for someone whose rights have been violated by restoring the “status quo ante” (the way things were before)
e.g. money is no benefit to you if someone continues to trespass your land
is a court order (equitable remedy).
Courts take this step when they are of the opinion that a payment of damages only is not good enough for a just settlement of the case
(equitable remedy – set of legal principles developed thru decisions of courts, rather than legislative statutes or executive action)
Injunctions can be permanent or temporary
eBay vs. MercExchange
MercExchange, a Virginia-based ecommerce company owned a business method patent (USP 5,845,265) to provide an Auction Service akin to eBay’s ‘Buy It Now’ feature – which enables users to buy an item for a set price without going thru the bidding process; >30% of eBay’s business
Months before eBay came up with its first prototype, MercExch had filed patents that covered the eBay idea.
In 2000, eBay initiated negotiations to outright purchase MercExchange’s online auction patent portfolio
eBay then abandons its efforts to purchase
Then MercExchange sued eBay for patent infringement (2001) for 3 of its patents
In a 2003 Virginia jury trial, it was found that eBay had willfully infringed MercExch’s patents, and awarded MercExch $35m, a figure that reduced to $5.5m
Following this verdict, MercExch sought an injunction – to prevent eBay from using MercExch’s IP but the judge declined citing Merc’s own lack of commercial activity in practicing the patents.
So MercExch apparently fit the description of a patent troll.
Initial Ruling - District Court
Denied this request
-- “No injunction” they said on the basis that MercExch does not itself practice the patented invention
Judge denies saying “If the court did enjoin the defendants here, the court would essentially be opening a Pandora’s box of new problems.
The fight continues …
2004 – 2005: eBay requests to have the patents reviewed for legitimacy (even though they had tried to buy them before!)
The US Court of Appeals for the Federal Circuit (court for all patent appeals)
“ For” the injunction,
stating that there was a “general rule” that it has applied for two decades, (similar to property owners having the right to deny anyone the use of their property)
This decision on March 16, 2005 reverses the original decision
So the two lower courts had opposite views
Supreme Court (2006)
overturned the Federal Circuit approval of the injunction saying that nothing in the Patent Act eliminated the traditional reliance on weighing the equitable factors considered in determining whether an injunction should be issued and set forth a 4-part test to determine if injunctive relief should be granted
Supreme Court (contd)
4 part test: A plaintiff must demonstrate -
Inadequacies of Remedies at Law
An equitable remedy is warranted considering the balance of hardships between the Plaintiff and Defendant
Public interest would not be disserved by entry of a permanent injunction
Neither the District Court nor US Court of Appeals applied these traditional principles
Injunctions will be more difficult to obtain
Permanent injunctions will no longer be automatic based on a finding of patent infringement
28 post eBay decisions from May 2006 – Sept 2007
Rate of denial for permanent injunctions prior to eBay was 16.1% and post eBay was 25.1%
eBay finally bought MercExchange’s patents for an unspecified sum, bringing the 8-year battle to an end.
eBay vs. MercExchange Opinions
No winners and losers in this case
Supreme Court did not really take sides
While eBay has won a reprieve (relieved from blame), the patent wars are far from over