Feds oppose eBay in Supreme Court case

In a 43-page brief filed Friday, the U.S. Department of Justice's Office of Solicitor General sided with MercExchange, the Virginia-based patent-holding company that sued eBay for infringing on patents tied to its "Buy It Now" feature.

In 2003, a federal jury found eBay guilty of willfully infringing on two MercExchange patents related to that feature, which allows shoppers to purchase items without participating in an auction, and ordered it to pay $25 million in damages. That court, however, decided against issuing an injunction--that is, forcing a company to stop using a patent in question. It cited several factors, including what it deemed a "growing concern" from the public over key aspects of the patent system.

The U.S. Appeals Court for the Federal Circuit reversed that ruling, deciding that eBay should be subject to an injunction--and correctly so, the government wrote in its brief. The injunction was put on hold pending eBay's next round of appeals.

The government in its brief--which also counted support from the U.S. Patent and Trademark Office--argued that the court handling eBay's appeal did not stick to a "general rule," as critics have suggested, but instead used ample "discretion" in issuing an injunction.

The government said no special exemptions should be made in cases involving companies like MercExchange that do not make products using their patents but instead simply license them--a practice that in some cases has earned companies the disparaging title of "patent troll." The government said a 1908 high court decision correctly established that injunctions can occur even if the patent holder itself has "'unreasonably' failed to practice its own invention."

The Supreme Court will begin taking up the general merits of that ruling on March 29, when it is scheduled to hear arguments from both companies. The central question it faces could have wide repercussions: If patent infringement has been determined, under what circumstances is it appropriate for a court to issue an injunction?

eBay has argued that the appeals court's reading is far too narrow. It said the court's decision 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, leads to nearly "automatic" injunctions that could disproportionately threaten a company's well-being. A number of patent-dependent high-tech companies and trade associations have also filed briefs in support of eBay's position.