TELECOM Digest OnLine - Sorted: U.S. Supreme Court to Hear Landmark eBay Patent Case

U.S. Supreme Court to Hear Landmark eBay Patent Case

Peter Kaplan (
Tue, 28 Mar 2006 10:32:35 -0600

By Peter Kaplan

The U.S. Supreme Court on Wednesday will hear arguments in a patent
case involving online auctioneer eBay Inc. that is part of a wider
struggle between the software and pharmaceutical industries over the
future of the U.S. patent system.

Lawyers for eBay and small e-commerce company MercExchange will square
off over whether eBay should be barred from using its popular "Buy it
Now" feature, which infringes on two MercExchange patents.

The case is being closely watched to see if the high court will scale
back the right of patent holders to get an injunction barring
infringers from using their technologies.

Software companies complain they can be held to ransom by owners of
questionable patents while drugmakers oppose any weakening of patent
rights, which they say would chill their investment in new medicines.

Patent experts said that, depending on how the high court rules, the
case could have a profound impact on the way the courts treat
intellectual property in the United States.

"Any time we talk about altering injunctions we really are talking
about altering the fundamental balance of power," said Steve Maebius,
a patent lawyer with the firm Foley & Lardner.

The arguments come on the heels of a recent court fight by a small
patent-holding company seeking an injunction to shut down of Research
In Motion Ltd.'s popular BlackBerry wireless e-mail devices.

RIM settled the case after a judge made it clear that he would impose
an injunction.

At issue in the current case is a decision by a federal court of
appeals upholding an injunction imposed on eBay at the request of

EBay was found to have infringed on two e-commerce patents that
MercExchange said were key to eBay's "Buy it Now" feature, which
handles fixed-price sales. But a U.S. District Court refused to issue
an injunction and awarded MercExchange a small amount of damages

The U.S. Court of Appeals for the Federal Circuit, which hears most
patent case appeals in the U.S. courts, reversed the decision, citing
legal doctrine that gives patent holders the right to an injunction
"absent exceptional circumstances."

Hopeful the Supreme Court will overturn the doctrine, some of the
largest U.S. software companies have filed friend-of-the-court briefs
supporting eBay.

"Money that could go to productive investments is instead diverted to
legal fees and settlement payments. The costs of these practices are
less innovation or a slower rate of innovation and higher costs for
consumers," a group of computer technology companies wrote in a
friend-of-the-court brief.

EBay has argued that federal judges should have more discretion to
deny an injunction and instead issue a monetary award to the patent

But drug makers oppose watering down the rights of patent
holders. They say the right to an injunction is at the core of the
U.S. intellectual property system, much like a landowner's right to
evict trespassers.

"Limiting the availability of an injunction after a judge or jury have
found a patent to be valid and infringed would severely undermine the
patent system and drive up the cost of innovation," the industry trade
group Pharmaceutical Research and Manufacturers of America said in a
friend-of-the-court brief filed with the Supreme Court.

The prospect of change also provoked opposition from a group of U.S.
inventors, who said in their court brief that large companies want to
support intellectual property rights "only for themselves and
companies like theirs."

Separately from the Supreme Court case, the software industry has
pressed a campaign on Capitol Hill to weed out illegitimate patents
and rein in the power of patent holders.

Lobbying efforts center on legislation being drafted by Rep. Lamar
Smith, a Republican from Texas who chairs a key House
subcommittee. Smith introduced a patent reform bill last year to
modernize and overhaul patent laws and help the Patent and Trademark
Office do a better job vetting new patents.

Smith's bill originally included a provision making it more difficult
to get an injunction, but it was removed from the bill after running
into opposition from drugmakers and others.

Smith is expected to introduce a similar bill soon and has been trying to
find a compromise on several matters that would be acceptable to the
software and pharmaceutical industries, lobbyists said.

The Supreme Court is expected to issue its ruling in the eBay case in
several months.

Copyright 2006 Reuters Limited.

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