Monday, November 28, 2005

Supreme Court grants cert in MercExchange v. eBay

The U.S. Supreme Court has agreed to hear eBay's appeal of a decision in its patent-infringement case with MercExchange.

The Supreme Court on Nov. 28, 2005 granted a cert petition to review the original decision, in which the district court ordered eBay to pay MercExchange, a small Virginia developer of E-commerce applications, $25 million in damages for violating a patent it holds for direct online buying (U.S. No. 5,845,265).

From InformationWeek:

In addition to seeking an overturn of the damages awarded to MercExchange, eBay is questioning the appeals court's recommendation that an injunction be issued preventing eBay from continuing to violate the patent with its "Buy It Now" feature. The Supreme Court's decision on the injunction matter could prove integral as Congress weighs options to overhaul the patent system, which has been under fire for being out of step with the times by granting too many patents to so-called "obvious" inventions that either cobble together existing technologies or that really are little more than automated business processes.

At issue is an increasingly outdated legal tendency to issue injunctions to prevent future infringement of patents, a precedent established in a 1908 Supreme Court decision in the case of Continental Paper Bag Co. v. Eastern Paper Bag Co. The legal community now questions whether a patent for a description of an invention that doesn't actually exist yet should be protected by injunctions, says Stuart Meyer, a partner and patent specialist with Silicon Valley law firm Fenwick & West. Other countries, Meyer says, have patent laws that specify that if a patent-holder isn't putting an invention to use, someone should have the right to do so, particularly in cases where an invention enables a societal good.

A group of law professors that submitted a filing urging the Supreme Court to take the eBay case hopes the decision sets a new precedent giving courts more flexibility in determining when to issue patent-related injunctions. "The Federal Circuit has effectively made injunctions mandatory, even in cases where they serve no social purpose because the patentee doesn't participate in the market, but is just using the threat of injunctive relief to leverage a larger settlement," Mark Lemley, a Stanford University law professor who wrote the filing, wrote in an E-mail interview. "Hopefully the Court will restore balance to patent remedies, permitting injunctions in the ordinary case of patent infringement, but also considering whether an injunction is necessary in every case."

InformationWeek also states: Ironically, the case may actually prove to be moot if Congress opts to approve a patent-reform bill introduced earlier this year before the eBay decision is levied. If that occurs, patent reform could end up informing the Supreme Court's decisions, rather than vice versa.

At the rate H.R. 2795 is dragging along, the Supreme Court decision might come out first, although it also true that recent Court decisions (Merck v Integra; MGM v Grokster) have been extremely limited in scope.

From the New York Times:

A brief filed by America Online, Google and several other companies described the circuit court's rule on injunctions as "a powerful club" that invites "abusive patent litigation."


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