The U.S. Supreme Court will use a lawsuit against Internet auctioneer eBay to consider whether companies found to have infringed patents...
The U.S. Supreme Court will use a lawsuit against Internet auctioneer eBay to consider whether companies found to have infringed patents should be ordered to change their products to avoid future violations.
The justices Monday agreed to hear eBay’s appeal of a ruling that would bar it from using patented technology owned by MercExchange, which already has won a $25 million award from eBay for past patent infringement.
The issue in the case has divided U.S. businesses, with a group that includes Google siding with eBay at the high court and a smaller group of companies taking MercExchange’s side. A decision in eBay’s favor would benefit Microsoft and the BlackBerry’s maker, Research In Motion, which are trying to ward off court rulings against their products.
A victory for eBay could “have broad ramifications for every industry,” said patent lawyer Stephen Maebius, a partner at Foley & Lardner in Washington, D.C.
The justices will review a decision by the U.S. Court of Appeals for the Federal Circuit that said trial judges, after finding a violation of patent rights, almost always should bar future infringements. The ruling reversed a trial judge who refused to restrict the software eBay uses for fixed-price purchases.
“That threat of an injunction is the biggest thing when you’re negotiating a settlement,” said David Schwartz, a patent-litigation lawyer at Wallenstein Wagner & Rockey in Chicago. “It can take a case that doesn’t even have much in damages into a ‘bet the company’ kind of thing.”
eBay argues that trial judges should have broad discretion to decide whether an order is warranted. The appeals court ruling would lead to “the issuance of unnecessary and unwise injunctions” and “compel a district court to close its eyes to potential hardship to the defendant,” the company said.
“We have believed all along that MercExchange — which does not practice its own patents and only exists to sue others — should not be entitled to an injunction,” eBay said.
The world’s largest Internet auctioneer said in an Oct. 25 regulatory filing it has changed its Web sites and some business practices “in a manner which we believe would avoid any further infringement” of a MercExchange patent. eBay nonetheless said it might be “forced to pay significant additional damages and licensing fees” if an order takes effect.
Shares of eBay fell $1.34 to $45.37 Monday.
MercExchange, urging the Supreme Court not to take up the case, said the Federal Circuit “has seamlessly applied the bedrock principles of patent law established by this court.”
The Virginia company’s lawyer, Scott Robertson of Hunton & Williams, said MercExchange “remains confident in its view that it will ultimately prevail in its struggle against this infringer.”
In agreeing to hear the case, the justices will consider whether to overturn a 1908 Supreme Court ruling that said patent owners have far-reaching rights to prevent others from using their inventions. The dispute comes as Congress is considering the broadest changes to U.S. patent law in more than 50 years.
“Patents are just like property, and the most important right is the right to exclude others,” Schwartz said.
The Federal Circuit upheld a jury finding that eBay’s fixed-price purchasing systems infringed a MercExchange patent, and the court revived another claim by MercExchange.
Fixed-price trading lets consumers buy items at a price set by the seller rather than risk being outbid. Such trading constituted 32 percent of the value of items sold on eBay during the quarter that ended Sept. 30, it has said.
eBay has support from America Online, Applied Materials, Chevron, Google, Cisco Systems, Shell Oil and Visa USA. All urged the Supreme Court to get involved, saying the Federal Circuit ruling will lead to “potentially huge windfalls for patent owners.”
Three other companies — Qualcomm, Tessera Technologies and Biogen Idec — are taking the opposite stance, saying the Federal Circuit simply applied long-established rules designed to protect patent holders.
“The viability of the wireless, semiconductor miniaturization and biotechnology industries depends in significant part on the maintenance of strong patent laws,” they argued.
Microsoft, the world’s biggest software maker, could be forced to make changes to its Internet Explorer if it can’t invalidate a patent owned by the University of California and licensed by closely held Eolas Technologies. Microsoft isn’t involved at the Supreme Court in the eBay case.
Research In Motion, maker of the BlackBerry e-mail pager, is facing a possible court block of its service in the U.S. after an appeals court upheld a finding of infringement won by NTP, a tiny patent-holding company in Virginia.
One issue is whether courts should order an injunction even when the patent holder isn’t using the invention. Neither Eolas nor NTP makes any products that compete with their respective litigation foes.
MercExchange has its own Web site and its founder, Thomas Woolston, owns a stake in eBay competitor UBid.
“If a patent owner isn’t practicing the invention himself, it’s always sounded somewhat unreasonable to say they are irreparably harmed” without an order barring future infringement, Maebius said. “Why isn’t money enough?”
eBay also is seeking to invalidate the MercExchange patents at the U.S. Patent and Trademark Office.