Saturday, March 11, 2006

FedGov sides with MercExchange in eBay case at Supreme Court

The federal Office of the Solicitor General said in a brief filed with the Supreme Court that eBay willfully infringed on patents held by Great Falls-based MercExchange LLC and should be enjoined from using its "Buy It Now" feature, which allows users to buy goods at fixed prices rather than compete in auctions. The solicitor general's brief disputed eBay's claim that the appellate court applied a "nearly automatic" injunction instead of allowing the district court to exercise discretion. It also said the district court erred in accepting eBay's argument that because MercExchange was willing to license its patent, it would not suffer irreparable harm if eBay continued to operate the technology. [from Washington Post]

Given that the Supreme Court sides with the Solicitor General more than 50% of the time, the probability of success for eBay is less than 50%. The Supreme Court might tinker with the words "absent exceptional circumstances" [in clearly what was NOT a nearly automatic injunction], but look for eBay to lose. Of the briefing on Continental Paper, expect the Supreme Court to re-affirm the holding that a patentee can get an injunction, even if it does not make the product.

*UPDATE on March 30. After oral arguments, Harold Wegner seemed to concur:
"Based upon the limited comments of the chief justice and Justice Scalia, I'm now expecting there will be little if any change to the injunctive relief law," said Harold Wegner, a patent lawyer with Foley & Lardner LLP.*

Whether anyone will comment on the incorrect statements in the eBay brief about patent grant rate [see IPBiz on 27 Jan 2006 remains to be seen.

from AuctionBytes :

In its brief, the government stated that, "although the Court of Appeals did not invoke the traditional four-factor test, it correctly recognized that the District Court had improperly relied on inappropriate considerations, which amounted to an abuse of discretion, and the court of appeals therefore properly reversed the District Court's denial of MercExchange's request for an injunction." The government then addressed each of those four factors in its brief.

The government also addressed other areas, including the issue of the public's "growing concern" over business-method patents and the issue of whether MercExchange's willingness to license its patents should be a factor in denying its request for an injunction against eBay.

A key factor in the case before the Supreme Court is whether it should overrule its 1908 decision that a federal court may grant a patentee an injunction even if that patentee fails to practice its own invention, decided in the "Continental Paper Bag Co. v. Eastern Paper Bag Co." case. The government stated, "there is no warrant for this Court to overrule its decision" made in the Continental Paper Bag case.

The eBay v. MercExchange case has garnered much attention, with briefs filed by companies, legal scholars and professors and trade associations.


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