EBay has asked the Court to review the question of
whether an injunction should always be imposed in cases where one
party is found to infringe the patent of another.
At present, US courts may impose an injunction when
infringement is proved – but have often taken the view that they
must impose an injunction. The rule of the Federal Circuit
is that an injunction should follow a finding of infringement
unless there are "special circumstances".
EBay argues that patent holder MercExchange does not make use of
its own patents and exists only to sue others. It says MercExchange
should therefore not be entitled to an injunction, and a damages
award should suffice. MercExchange denies the claims about its own
business model; but regardless of the facts, the issue raised by
eBay has divided the business community.
Oracle, Microsoft and Intel have supported eBay, filing a joint
brief that argues that courts must have discretion to grant or
refuse injunctions in patent disputes. The patent may relate to
only a tiny part of a company's product or service, they point out;
injunctions can be a disproportionate remedy. They say the
injunction rule "has transformed patents into a powerful tool for
litigation abuse".
The recent battle between BlackBerry-maker Research In Motion
and patent-holder NTP Inc. put the issue in focus.
Following a patent infringement ruling, an injunction looked
likely that would have closed the BlackBerry service for millions
of US users; yet NTP makes no rival product and the validity of its
patents had already been questioned by the US Patent Office. The
risk was averted when RIM agreed to pay $612 million to NTP.
Critics see such payments as ransom money.
MercExchange and its supporters, including the Department of
Justice, General Electric and Proctor & Gamble, argue that too
much discretion will chill innovation and drive up costs. They
believe that the ability to exclude others from using a patented
invention is one of the fundamental reasons for patenting that
invention.
A ruling is not expected for several months.
Background
The dispute between eBay and MercExchange has been running since
October 2001, and hinges on an auction site patent application that
was filed a few months before eBay was launched in 1995.
It relates to the 'Buy It Now' service on the eBay site, which
deals with fixed-price sales, and a facility to search other online
auction houses. In May 2003, a jury decided that these services did
infringe on the patents, and ordered the online auction leader to
pay $35 million in damages.
The case then went back to the trial judge, who had the option
of increasing the damages awarded – up to three times the existing
award – and issuing a permanent injunction against the company,
preventing eBay from using the patented technology.
In the end he did neither, and in August 2004 he reduced the
award to $29.5 million and refused to grant an injunction.
EBay appealed, and in March 2005 the US Court of Appeals for the
Federal Circuit found that the comparison shopping patent was
invalid. It reduced the damages imposed on eBay to $25 million. But
it imposed an injunction on the firm, finding that, unless there
were exceptional circumstances, a district court should issue a
permanent injunction after a finding of infringement. The
injunction was stayed pending the appeal to the Supreme Court.
EBay has previously reported that it changed its 'Buy It Now'
service after the ruling in 2003 to avoid future infringement, so
the Supreme Court's decision on the injunction may not affect the
operation of its business.
