By Dale Campbell

Last week, the United States Supreme Court heard eBay’s appeal of the Federal Circuit Court of Appeals’ decision issuing a permanent injunction against eBay, which prevents eBay from utilizing the technology involved with its “Buy It Now” purchasing method. The case involves an action brought by MercExchange against eBay alleging that eBay’s “Buy It Now” purchasing method infringes upon three patents held by MercExchange. “Buy It Now” allows an individual to purchase an auction item at a fixed price, rather than through the bidding process. At trial, eBay was found to have infringed two of the three patents alleged in the complaint and ordered to pay monetary damages. The trial court refused to impose a permanent injunction prohibiting eBay’s use of the “Buy It Now” technology. Both parties appealed to the Federal Circuit

The Federal Circuit reversed the District Court, finding that the District Court erred in refusing to issue the permanent injunction. “[T]he general rule is that a permanent injunction will issue once infringement and validity have been adjudged.” (MercExchange v. eBay, 401 F.3d 1323, 1338, citing Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1246-47 (Fed. Cir. 1989).)

The Federal Circuit acknowledged that, in rare circumstances, the Court has discretion to deny injunctive relief, but found that the four reasons cited by the District Court as means for denying injunctive relief were insufficient. The Federal Circuit rejected the District Court’s reasoning that public concern over the growth of business method patents, which caused Congress to introduce legislation eliminating the presumption of validity of such patents, was sufficient for denying injunctive relief. The Federal Circuit found that this general policy concern was not adequate to deny issuance of the permanent injunction.

The District Court also expressed concern that issuance of the injunction would only generate additional contentious litigation while eBay attempted to design around the allegedly infringed patents. The District Court did not want to monitor the injunction through a series of repeated motions for contempt, which would take up an inordinate amount of money and judicial resources. The Federal Circuit rejected this concern, indicating the District Court had the obligation to address any issues of contempt necessary to enforce the injunction.

Similarly, the Federal Circuit rejected the District Court’s finding that MercExchange’s expressed pre-litigation willingness to license the invention, as well as its failure to bring a motion for preliminary injunction, weighed against the issuance of a permanent injunction. The Federal Circuit found that neither ground was sufficient for denying injunctive relief. Once MercExchange’s property rights in the invention were reaffirmed by the finding of infringement, MercExchange was entitled to protect those rights, including the right to exclude others from its use. The Federal Circuit rejected the District Court’s rationale that a permanent injunction was not warranted when MercExchange had no present intent or ability to compete in the marketplace against potential infringers. The District Court’s decision acknowledged a growing trend, whereby parties known as “patent trolls” acquire patent rights only to lie in wait for the sole purpose of bringing infringement claims.

The United States Supreme Court granted certiorari to review the issue of when issuing a permanent injunction is appropriate in the context of a patent infringement case. Moreover, the Supreme Court also directed the parties to brief and argue the question of whether the Supreme Court should reconsider prior holdings, including Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 (1908), which establish that a patent holder may obtain a permanent injunction even if the patent holder does not use the patent for commercial gain.

eBay argues on appeal that there should be no presumption in favor of an injunction upon a finding of infringement and validity. Instead, eBay argues that the well-known four factor test set forth in Weinberger v. Romero-Arsello, 456 U.S. 305 (1982) should apply to issuing injunctions with respect to patent claims. The four-factor test is: will the plaintiff will be irreparably harmed if an injunction is not issued; does the plaintiff have other adequate legal remedies; is the injunction in the public interest; and does the balance of hardships between the plaintiff and defendant favor the plaintiff.

Arguments before the U. S. Supreme Court involved questions central to the fundamental property concept of patent rights. Justice Roberts is reported to have probed the issue of whether the Court should consider the fact that the United States Patent and Trademark Office has reexamined the MercExchange patent and has issued preliminary findings rejecting MercExchange’s patent claims. MercExchange’s counsel argued that to permit reexamination after fully litigating the issues would allow large corporate infringers to manipulate the process. The Supreme Court’s willingness to reconsider its precedent beginning with Continental Paper Bag goes to the very heart of intellectual property rights. As held in Continental Paper Bag, if the inventor discovered something of value, it is the inventor’s absolute property. According to the Court: “The inventor is one who has discovered something of value. It is his absolute property. He may withhold the knowledge of it from the public, and he may insist upon all the advantages and benefits which the statute promises to him who discloses to the public his invention.” This debate will undoubtedly spur action on the previously introduced bill, which would allow permanent injunctions only if the patent holder can prove it would suffer irreparable harm. It certainly should be difficult to establish irreparable harm if the patent holder is not using the invention in commerce.

Dale is a partner at Weintraub Genshlea Chediak Tobin & Tobin. He is trial lawyer and serves as the head of the firm’s Litigation Department. Dale is also a member of the firm’s Intellectual Property section. Dale has a broad range of litigation experience in all areas of business, intellectual property and real estate litigation. He has tried over forty jury trials to conclusion and has had numerous court trials and binding arbitrations since his admission to practice law