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Supreme Court Decision Update - eBay, Inc. v. MercExchange, L.L.C.

supreme1.jpgThe first of today’s four Supreme Court decisions is eBay, Inc. v. MercExchange, L.L.C. (PDF of the opinion), which is about the standard courts should use in deciding whether to grant injunctive relief to a plaintiff who wins in a case under the Patent Act.

QuizLaw Analysis: Believe it or not, the legal part of this is actually more boring then the sentence above makes it sound. What is interesting however, is that even though this was a unanimous decision, there are two concurring opinions, the second of which appears to have been written just to cat-fight a little with the first one. The Supremes are getting feisty.

You all know who eBay is and what they do. As for MercExchange, who they are is unimportant. What is important is that MercExchange holds a business method patent which covers using “an electronic market designed to facilitate the sale of goods between private individuals by establishing a central authority to promote trust among participants.” Sound a little like what eBay does? Yeah, MercExchange thought so too, and so it sued eBay (as well as Half.com, which is now a wholly owned subsidiary of eBay) for patent infringement. MercExchange won, as a jury found that its patent was valid and that eBay infringed it. MercExchange then asked the District Court for a permanent injunction, requiring eBay to stop using business methods that infringe the patent. The District Court declined to grant such an injunction. However, the Court of Appeals for the Federal Circuit reversed the District Court’s decision not to grant an injunction, relying on what it said was a general rule that courts should issue permanent injunctions against patent infringers unless there are exceptional circumstances.

The Supremes, in a unanimous decision written by Justice Thomas, overruled the Court of Appeals’ decision, finding that the “general rule” which it relied upon was “a major departure” from the way courts have always decided whether injunctions should be granted. Typically, court’s use a four-pronged test, looking at: (i) whether the plaintiff suffered an irreparable injury; (ii) whether there are legal remedies (such as money damages) which can adequately compensate the plaintiff; (iii) whether an injunction is called for when you compare the hardships suffered by the plaintiff (if there were no injunction) against the hardships suffered by the defendant (if there was an injunction); and (iv) whether a permanent injunction would go against public interest. This test, and these four factors, should be used in cases under the Patent Act, just as in other cases. Thus, the Supremes reversed the Court of Appeals. The Supremes also vacated the District’s Court’s decision, finding that it did not use this test either. So the District Court must decide the injunction issue again, using this analysis.

Chief Justice Roberts filed a concurring opinion, joined by Justices Scalia and Ginsburg. The purpose of this opinion was just to place extra emphasis on this fact: even though most courts, since the early 19th century, have granted injunctions after finding patent infringement, this does not mean that there’s a general rule that such injunctions should be issued. Instead, it is simply a nature of the patent context, i.e., that it is difficult to protect patent holders solely with money damages while an infringer continues to use the patented subject matter.

Justice Kennedy also filed a concurring opinion, joined by Justices Stevens, Souter and Breyer. This opinion was basically written to squibble with Chief Justice Roberts over how history should be applied in deciding cases like this.