Supreme Court faces patent questions in eBay appeal

Auction giant eBay and networking-systems developer MercExchange are scheduled to appear before the justices on March 29 to present arguments related to a long-running dispute. In 2003, a federal jury found eBay guilty of willfully infringing on two MercExchange patents related to its "Buy It Now" feature, which lets shoppers purchase items without participating in an auction, and ordered it to pay $25 million in damages.

The high court won't be dealing with the facts of the case. Instead, it will be addressing a broader question: Under what circumstances is it appropriate for a court to issue a permanent injunction--that is, a prohibition against using the patents in question--against an entity found guilty of patent infringement?

That question is likely one that's running through U.S. District Judge James Spencer's mind as he continues to weigh whether to issue an injunction against Research in Motion's BlackBerry, which was found guilty of infringing on patents held by holding company NTP.

In eBay's case, the U.S. Appeals Court for the Federal Circuit, which handles the bulk of the nation's patent appeals, decided eBay should be subject to an injunction. It held that a permanent injunction must follow all judgments of infringement unless such a decision would "frustrate an important public need," such as protecting public health. RIM in its latest court appearance built much of its argument against an injunction on testimonials that its mobile e-mail device, a favorite among certain doctors and emergency workers, fit that description.

But eBay and associations of high-tech companies argue that the circuit court's reading is far too narrow, creating what they characterize as "automatic" injunctions and threatening the well-being of their patent-dependent industry. They say that the Federal Circuit's ruling contradicts patent law, which says a judge "may"--not "shall"--issue an injunction after weighing not only the public interest but three additional factors, including whether the patent owner would face "irreparable injury" without an injunction in place.

"We think that you need to look at that bigger picture; we think you need to look at the full range of fairness factors and the judge needs to have that discretion," said Emery Simon, counselor to the Business Software Alliance, whose members include such industry giants as Apple Computer, Cisco Systems, Microsoft and IBM. Simon participated in a lively roundtable discussion with patent lawyers and reporters in Washington, D.C., on Friday morning.

With the average high-tech gadget composed of potentially hundreds of patents, such "automatic" injunctions could be disastrous, he said. Instead, he suggested, why not rely on settlements or damage awards to remedy such situations?

"People can be made whole with money," he said. "We think injunction, which is an outright pulling (of a product) off the market, is too powerful, too overwhelming of a tool."

But powerful companies must not belittle the importance of injunctions to their up-and-coming rivals, argued Stephen Maebius, a partner with the firm Foley & Larder in Washington, D.C. "When small companies are trying to get a new product into the market and fend off competition from a larger rival, they may be relying on the power of injunction without actually seeking one to equalize their position in the marketplace," he said.

William Rooklidge, a patent attorney in Irvine, Calif., and former president of the American Intellectual Property Law Association, noted that the Federal Circuit's holding in the eBay appeal should not be interpreted as the end-all of injunction rulings. The same court has issued broader opinions on the matter in the past, he said.

"The public interest in preserving eBay's 'Buy It Now' feature doesn't seem to loom particularly large," he said, "but the issue that it presents is extremely important...the extent to which the district courts and the appellate courts should be applying discretion and considering the full panoply of equitable factors."