eBay Inc. v. MercExchange, L.L.C.
547 U.S. 388 (2006)

  • MercExchange owned a business method patent for "an electronic market designed to facilitate the sale of goods between private individuals by establishing a central authority to promote trust among participants."
    • MercExchange was a one-man operation that did not have the intention or the capability to market products related to his patent.
  • MercExchange tried to get eBay (who operated such a market) to enter a licensing agreement. When negotiations failed, MercExchange sued eBay for infringement.
  • The Trial Court found for MercExchange. MercExchange appealed.
    • The Trial Court found that eBay willfully infringed MercExchange's patent.
    • The Court found that an award of damages was appropriate.
    • The Court did not find that an injunction was warranted.
      • The Court found that if a 'patent troll' like MercExchange collected patents without any real attempt to use them (aka a non-practicing entity), then there should be a categorical exemption against an injunction.
  • The Appellate Court reversed. eBay appealed.
    • The Appellate Court found that there was a general rule that, based on 35 U.S.C. 283, courts should issue permanent injunctions against patent infringement absent exceptional circumstances.
      • The Federal Circuit had never, not once, failed to enjoin an infringer.
  • The US Supreme Court vacated and remanded.
    • The US Supreme Court found that historically there is a four-factor test for determining if a permanent injunction is warranted. The plaintiff must show:
      • That they have suffered an irreparable injury,
      • That damages or other remedies under the law are inadequate,
      • That considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted, and
      • The public interest would not be disserved by a permanent injunction.
    • The Court found that since a patent is a form of property, the four-factor test would be consistent with how injunctions are issued in property law.
    • The Court remanded back to the Trial Court to apply the four-factor test.
  • In a concurring opinion it was argued that injunction was the historical and standard remedy for infringement, and that when the courts look at the four-factors, in most cases they should find that an injunction is warranted.
  • In another concurring opinion it was argued that injunction is a pretty big stick that patent trolls could use to basically extort money from people who actually want to use the patent in ways that benefit society. Therefore courts should be less likely to enforce injunctions.
    • Historically, most patentees got their patent because they wanted to develop and market the invention themselves. But recently there has been the rise of the "patent troll," who only obtains patents to license them to others. Patent law should change from the historical standard to match this new patent reality.