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
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.
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
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
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