EBay scores patent victory in court

EBay scores patent victory in court

Supreme Court ruling sparks patent litigation reform

The US Supreme Court has ruled in favour of eBay in a long-running patent feud with MercExchange.

The ruling overthrows a prior judgement that required US judges to issue a permanent injunction against any party found infringing a patent.

Instead of the default injunction, the Supreme Court now relies on a four-factor test to determine whether it should issue such an injunction. A plaintiff now has to demonstrate the following:

That the plaintiff has suffered "irreparable injury"
That legal remedies such as fines and monetary compensations are inadequate
That a remedy in equity is warranted considering the hardships between the plaintiff and the defendant
That a permanent injunction would not disserve public interest
A jury in 2003 found eBay guilty of violating a patent owned by MercExchange and ordered the auction giant to pay $25m in damages. The court decided against imposing an injunction at the time, which was later overruled.

The patent covers a technology in which a website acts as an intermediary between buyers and sellers which MercExchange claims to be the case with eBay's 'Buy it now' feature.

MercExchange does not operate a business but exists solely to generate revenues from its patent portfolio.

EBay's infringement of its patent does not therefore cause any harm to the company's business, while an injunction would have a great impact on the auction site.

The case has strong similarities to Research In Motion's battle with NTP, in which the BlackBerry maker was forced to pay $612.5m to settle the lawsuit and purchase a licence for a patent that is likely to be invalidated.

About $500m of that sum was attributed to the risk of a permanent injunction being issued, which would have forced RIM to shut down its service in North America.

"This decision may indicate a real shift in patent law and the strength of an individual patent," patent attorney Dennis Crouch commented on his blog.

"Based on this decision, it is now clear that the value of a patent does depend upon the identity of the owner.

"For instance, an industry competitor will be able to show irreparable injury much more easily than would a university or individual inventor who has no plans to manufacture a product."

Because a competitor will be able to make more money from enforcing a patent, Crouch predicted that patent holding companies and universities will increase patent transfer and licence deals.