Friday, June 02, 2006

Legal Academics on eBay v. MercExchange: voodoo math reprised?

Of eBay v. MercExchange, a May 15 post at uchicagolaw contained the text: So a unanimous opinion, but a 2-3-4 division (only Justice Alito didn’t join a concurring opinion). But Justice Alito didn't vote at all [Alito took no part in the consideration or decision of the case, and it was Justice Thomas who didn't join a concurring opinion. It does remind one of the legal academics flocking to the 97% patent grant rate voodoo math, cited by eBay in its brief to the Supreme Court.

Elsewhere in the uchicagolaw text:

The Chief Justice, joined by Justices Scalia and Ginsburg (can I put an exclamation point there?), wrote a concurring opinion. The Chief Justice notes that the historical practice has been to grant injunctive relief on a finding of patent infringement “in the vast majority of patent cases.” Why? The “difficulty of protecting a right to exclude through monetary remedies.” [IPBiz: no exclamation point needed if you review her concurring opinion in Hilton Davis, cited in Festo. The CAFC and CJ Roberts were talking (empirically) about past results in permanent injunction cases.]

uchicagolaw: But, says Justice Kennedy, this isn’t your father’s patent system (well, he doesn’t exactly that: “the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike other cases”). Justice Kennedy points to patent trolls (not using that phrase)—people who acquire patents to assert them—and to the rise of business method patents, which he criticizes for their “potential vagueness and suspect validity.” [IPBiz: Snore. Check out the Selden patent litigations.]

Henry Su commented:

Justice Kennedy's concurrence troubles me greatly as certain statements, if interpreted as guidance for the lower courts, invite mischief. First, the notion that certain (unsavory) patentees might leverage their statutory right to exclude and the threat of a permanent injunction in order "to charge exorbitant [license] fees" does not square with the long-held view in refusal to deal cases that a patentee is free to offer its invention for sale or license at any price it wishes, low or high. See, e.g., Schor v. Abbott Labs., 378 F. Supp. 2d 850, 860 (N.D. Ill. 2005) (holding no violation of the Sherman Act for increasing the price of a patented anti-retroviral drug, even if it raises the price in a secondary market for drug combinations involving the patented product).
Second, Justice Kennedy casts an askance view at so-called "business method" patents, even though the Court took a pass on that issue over seven years ago in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 525 U.S. 1093 (1999).
Third, concerns of "potential vagueness and suspect validity," while clearly relevant to the likelihood of success on the merits prong of a preliminary injunction motion, should not have any place under the Court's four-factor test for permanent injunctions. In particular, if a jury has found that a patent is valid and infringed, then those findings of fact must control the trial court's disposition of the equitable claims for relief. It would contravene the Seventh Amendment guarantee for a trial court to revisit anew the validity of the patent-in-suit in deciding whether to enter a permanent injunction.

IPBiz notes that none of the legal academics posting to uchicagolaw commented on the Supreme Court's cutting the legs out from the rationale of the district court for NOT granting a permanent injunction. In effect, all the Supreme Court said was no more "permanent injunction absent exceptional circumstances;" however, the analysis by the CAFC of the four factors was fine. End result of this case: MercExchange still gets the injunction, if the case goes that far. Future impact: See end result.

IPBiz notes the following relevant text from eBay v. MercExchange, 126 S. Ct. 1837; 164 L. Ed. 2d 641 (2006):

Neither the District Court nor the Court of Appeals below fairly
applied these traditional equitable principles in deciding respondent's motion
for a permanent injunction. Although the District Court recited the
traditional four-factor test, 275 F. Supp. 2d, at 711, it appeared to adopt certain
expansive principles suggesting that injunctive relief could not issue
in a broad swath of cases. Most notably, it concluded that a "plaintiff's
willingness to license its patents" and "its lack of commercial activity in
practicing the patents" would be sufficient to establish that the patent holder would
not suffer irreparable harm if an injunction did not issue. Id., at 712.

But traditional equitable principles do not permit such broad
classifications. For example, some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than
undertake efforts to secure the financing necessary to bring their
works to market themselves. Such patent holders may be able to satisfy the
traditional four-factor test, and we see no basis for categorically denying them
the opportunity to do so. To the extent that the District Court adopted
such a categorical rule, then, its analysis cannot be squared with the
principles of equity adopted by Congress. The court's categorical rule is also in
tension with Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405,
422-430, 28 S. Ct. 748, 52 L. Ed. 1122, 1908 Dec. Comm'r Pat. 594 (1908), which
rejected the contention that a court of equity has no jurisdiction to grant
injunctive relief to a patent holder who has unreasonably declined to use the patent.


We hold only that the decision whether to grant or deny injunctive
relief rests within the equitable discretion of the district courts,
and that such discretion must [p. 648] be exercised consistent with
traditional principles of equity, in patent disputes no less than in other cases
governed by such standards.

As an aside, IPBiz notes that the ONLY mention of Continental Paper in the entire decision is that referenced in the above text. The idea presented in the Los Angeles Times that the Supreme Court "disagreed with" Continental Paper in eBay v. MercExchange is not supported by any facts and, in the end, is truly bizarre. It is as if the Los Angeles Times fabricated its own version of eBay v. MercExchange.


Post a Comment

<< Home