eBay v. MercExchange
Supreme Court of the United States
Argued March 29, 2006 Decided May 15, 2006
Full case name: eBay Inc. and Half.com, v. MercExchange, L.L.C. Docket #: 05-130 Citations: 547 U.S. ___; 126 S. Ct. 1837; 164 L. Ed. 2d 641; 2006 U.S. LEXIS 3872; 74 U.S.L.W. 4248 Prior history: Summary judgment granted and denied in part to plaintiff and defendants, 271 F. Supp. 2d 789 (E.D. Va. 2002); motion to amend answer granted, motion to dismiss denied, 271 F. Supp. 2d 784 (E.D. Va. 2002); permanent injunction denied, judgment as a matter of law granted and denied in part, final judgment entered in part, 275 F. Supp. 2d 695 (E.D. Va. 2003); affirmed in part, reversed in part, vacated, 401 F.3d 1323 (Fed. Cir. 2005); rehearing denied, 2005 U.S. App. LEXIS 10220 (Fed. Cir. Apr. 26, 2006); cert. granted, 126 S. Ct. 733 (2005)
Holding
Lower courts erred in issuing a permanent injunction against eBay by failing to apply the four-factor test for disputes arising under the Patent Act. Federal Circuit Court of Appeals vacated and remanded.
Court membership
Chief Justice: John Roberts Associate Justices: John Paul Stevens, Antonin Scalia, Anthony Kennedy, David Souter, Clarence Thomas, Ruth Bader Ginsburg, Stephen Breyer, Samuel Alito
Case opinions
Majority by: Thomas Joined by: unanimous Concurrence by: Roberts Joined by: Scalia, Ginsburg Concurrence by: Kennedy Joined by: Stevens, Souter, Breyer Alito took no part in the consideration or decision of the case.
Laws applied
35 U.S.C. § 283

eBay Inc v. MercExchange, L.L.C. [1], 126 S. Ct. 183 (2006) is a case in which the Supreme Court of the United States unanimously determined that a federal court must weigh the four factors traditionally used to determing if an injunction should issue even where the that court had found infringement of a patent. Image File history File links Seal_of_the_United_States_Supreme_Court. ... The Supreme Court of the United States is the highest judicial body in the United States and leads the judicial branch of the United States federal government. ... The United States District Court for the Eastern District of Virginia is a United States district court seated in the following locations in Virginia: Alexandria Newport News Norfolk Richmond The people are represented in this court by the United States Attorney for the Eastern District of Virginia. ... The United States Court of Appeals for the Federal Circuit, or simply the Federal Circuit, was founded in 1982 to combine similar federal cases to a specialized appellate court. ... This law-related article does not cite its references or sources. ... John Glover Roberts, Jr. ... John Paul Stevens (born April 20, 1920) is an American jurist and the senior Associate Justice of the U.S. Supreme Court. ... Antonin Gregory Scalia (born March 11, 1936) is an American jurist on the Supreme Court of the United States who has been a prominent conservative and originalist voice of textualism in statutory interpretation and original meaning in constitutional interpretation. ... For other people of the same name, see Anthony Kennedy (disambiguation). ... David Hackett Souter (born September 17, 1939) has been an Associate Justice of the U.S. Supreme Court since 1990. ... Clarence Thomas (born June 23, 1948) is an American jurist and has been an Associate Justice of the Supreme Court of the United States since 1991. ... Ruth Joan Bader Ginsburg (born March 15, 1933) is a United States Supreme Court Justice. ... Stephen Gerald Breyer (born August 15, 1938) is an American attorney, political figure, and jurist. ... Samuel Anthony Alito, Jr. ... The United States Code (U.S.C.) is a compilation and codification of the general and permanent federal Law of the United States. ... // Case citation is the system used in common law countries such as the United States, England and Wales, Canada, New Zealand, Australia and India to uniquely identify the location of past court cases in special series of books called reporters. ... 2006 (MMVI) is a common year starting on Sunday of the Gregorian calendar. ... The Supreme Court of the United States is the highest judicial body in the United States and leads the judicial branch of the United States federal government. ... An injunction is an equitable remedy in the form of a court order that either prohibits or compels (restrains or enjoins) a party from continuing a particular activity. ... In law, a patent infringement occurs when the subject-matter claimed in a patent has been utilized by someone other than the rightholder, without the owners approval or in disagreement with the terms of use given by the owner. ...

Background of the case

Online auction site eBay used practices for which MercExchange owned a business method patent, U.S. Patent 5,845,265, and for which MercExchange had offered to license the patent to eBay. Failing to reach an agreement, MercExchange sued eBay for patent infringement and prevailed in a jury trial. Following the verdict, MercExchange sought an injunction to prevent eBay's continued use of the business method, but the District Court denied the request. The United States Court of Appeals for the Federal Circuit reversed the District Court, stating that there was a "general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances." eBay Inc. ... Business-method patents are among the most controversial forms of legal protection for some Internet companies. ... In law, a patent infringement occurs when the subject-matter claimed in a patent has been utilized by someone other than the rightholder, without the owners approval or in disagreement with the terms of use given by the owner. ... A jury trial is a trial in which the judge of the facts, as opposed to the judge of the law, is a jury, made up of citizens who are usually randomly selected and are generally not legal professionals. ... An injunction is an equitable remedy in the form of a court order that either prohibits or compels (restrains or enjoins) a party from continuing a particular activity. ... The United States Court of Appeals for the Federal Circuit, or simply the Federal Circuit, was founded in 1982 to combine similar federal cases to a specialized appellate court. ...

Opinion of the Court

The Supreme Court overturned the Federal Circuit, holding that nothing in the Patent Act eliminated the traditional reliance on weighing the equitable factors considered in determining whether an injunction should issue. A Patent Act is a countrys legislation that controls the use of patents. ...

"That test requires a plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. The decision to grant or deny such relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion."

Concurring opinions

While all eight justices (Justice Alito did not participate) joined the opinion penned by Justice Thomas which stated that there should be no general rule as to when an injunction should issue in a patent case, there were two concurring opinions with three and four justices respectively, setting out suggested guidelines for granting injunctions. Samuel Anthony Alito, Jr. ... Clarence Thomas (born June 23, 1948) is an American jurist and has been an Associate Justice of the Supreme Court of the United States since 1991. ...

Chief Justice Roberts wrote a concurring opinion, joined by Justices Scalia and Ginsburg, pointing out that from "at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases." John G. Roberts, Jr. ... Antonin Gregory Scalia (born March 11, 1936) is an American jurist on the Supreme Court of the United States who has been a prominent conservative and originalist voice of textualism in statutory interpretation and original meaning in constitutional interpretation. ... Ruth Joan Bader Ginsburg (born March 15, 1933) is a United States Supreme Court Justice. ...

On the other hand, Justice Kennedy, joined by Justices Stevens, Souter and Breyer, wrote in a separate concurring opinion: For other people of the same name, see Anthony Kennedy (disambiguation). ... John Paul Stevens (born April 20, 1920) is an American jurist and the senior Associate Justice of the U.S. Supreme Court. ... David Hackett Souter (born September 17, 1939) has been an Associate Justice of the U.S. Supreme Court since 1990. ... Stephen Gerald Breyer (born August 15, 1938) is an American attorney, political figure, and jurist. ...

"In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. ... For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. ... When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test." [2]

Thus, the Roberts opinion would seem to lean more heavily in favor of granting an injunction, while the Kennedy opinion expresses more skepticism, particularly where the validity of the patent has also been challenged and remains unsettled.

Further reading

• Steven J. Frank, Patent Injunctions: Is There Life After eBay v. MercExchange?, Corporate Dealmaker Forum blog, May 24, 2006

• J. Matthew Buchanan, Is eBay a Gauntlet?, Promote the Progress patent law and policy blog, June 9, 2006. Excerpt: Did the Supreme Court throw down the gauntlet, i.e., issue a challenge, to Congress in its eBay v. MercExchange decision? Did the Court, in essence, challenge Congress to clarify its exercise of the Patent Power?

• J. Matthew Buchanan, eBay v. MercExchange - from a patent troll's perspective, Promote the Progress patent law and policy blog, May 23, 2006 (a tongue-in-cheek look at the case from the viewpoint of a patent troll).

• J. Matthew Buchanan, eBay v. MercExchange - from an infringer's perspective, Promote the Progress patent law and policy blog, June 20, 2006 (a tongue-in-cheek look at the case from the viewpoint of a manufacturer who might be infringing a patent or two).