<b>BREAKING NEWS:</b> High Court Hears eBay Patent Case

Two veterans of the Supreme Court bar argued forcefully ' and inconclusively ' On March 29 in a high-stakes dispute over how easy it should be for a patent holder to win an injunction against an infringer.

From the tenor of the questioning in eBay v. MercExchange, justices seemed closely divided over the issue, alternately sympathetic toward Sidley Austin's Carter Phillips, arguing his 49th case at the Court, and then toward his adversary, WilmerHale's Seth Waxman, appearing before the high court for the 47th time.

The case has drawn wide interest, with businesses lining up on both sides. Some companies, including Intel, are siding with eBay, expressing concern that the holder of a single patent that covers one of thousands of processes inside a product could bring down that product too easily by obtaining a paralyzing injunction. The recent patent dispute that almost crippled BlackBerry service is cited as a prime example.

Phillips represented eBay, arguing that injunctions should not be granted automatically and that instead, judges should have broad discretion to balance equities and to decide, in some cases, that money damages are a 'perfectly adequate' way to penalize infringers. Permanent injunctions, he said, represent a 'sword of Damocles' over companies that can be wielded by small patent holders or 'trolls' who do not even make direct use of the patent.

Waxman represented MercExchange, a small Virginia firm that sought an injunction against eBay. Both Court precedent and the will of Congress, he said, dictate that 'a final judgment of infringement yields an injunction in all but the rarest of cases.' He portrayed his client as a hardworking inventor, not a 'patent troll' or a 'promiscuous licenser' aiming to profit from his patent merely through litigation.

The dispute began in 2001, when MercExchange sued eBay for infringing its patent that enabled the 'Buy it Now' feature used on the popular online auction site. A jury in the Eastern District of Virginia awarded MercExchange $35 million for infringement, and the company promptly moved for a permanent injunction to prevent future infringement by eBay.

Under a 1908 precedent, Continental Paper Bag Co. v. Eastern Paper Bag Co., there is a legal presumption in favor of an injunction against the infringer. But the judge denied MercExchange's motion, finding that the company, which licenses but does not practice its patents, would not suffer irreparable harm without an injunction. The judge also ruled that 'growing concern' over business-method patents like those at issue cut against MercExchange's arguments.

But the U.S. Court of Appeals for the Federal Circuit rejected the District Court's reasoning and said that nothing in the case justified deviating from the rule in favor of an injunction.

Supporters of eBay argue that so-called trolls that hold or license relatively insignificant patents can hold a high-tech company hostage by threatening to seek an injunction and winning disproportionately high licensing fees in exchange.

But other companies, joined by the Bush administration, argue that the precedent should be upheld to give needed protection to valid patents. Assistant to the Solicitor General Jeffrey Minear told the justices Wednesday that infringement by itself 'normally is irreparable harm' and, therefore, should trigger an injunction against the infringer.

Chief Justice John Roberts Jr. seemed sympathetic at one point toward the 'garage inventor' who might need the weapon of an injunction to keep a big company from erasing his livelihood. But then he also voiced concern that an injunction could sweep too broadly, especially if it was aimed at protecting a hard-to-define business-process patent. Justice John Paul Stevens also seemed concerned about the breadth of injunctions against patent holders.

Justice Antonin Scalia appeared sympathetic toward MercExchange, suggesting it would be unusual for the government not to order an infringer to, in effect, give back the patent holder's property.

Justice Anthony Kennedy, apparently perplexed by the terminology, asked Phillips whether the word 'troll' in the patent context is 'the scary thing under the bridge, or is it the fishing technique?' Amid laughter, Phillips indicated it was the former.

One problem on the horizon for the case before the Court, noted several times by Roberts, is the fact that on review, the Patent and Trademark Office has invalidated all of MercExchange's patents involved in the case.

Waxman said that determination was not final and should not prevent the Court from ruling in the case.

Two veterans of the Supreme Court bar argued forcefully ' and inconclusively ' On March 29 in a high-stakes dispute over how easy it should be for a patent holder to win an injunction against an infringer.

From the tenor of the questioning in eBay v. MercExchange, justices seemed closely divided over the issue, alternately sympathetic toward Sidley Austin's Carter Phillips, arguing his 49th case at the Court, and then toward his adversary, WilmerHale's Seth Waxman, appearing before the high court for the 47th time.

The case has drawn wide interest, with businesses lining up on both sides. Some companies, including Intel, are siding with eBay, expressing concern that the holder of a single patent that covers one of thousands of processes inside a product could bring down that product too easily by obtaining a paralyzing injunction. The recent patent dispute that almost crippled BlackBerry service is cited as a prime example.

Phillips represented eBay, arguing that injunctions should not be granted automatically and that instead, judges should have broad discretion to balance equities and to decide, in some cases, that money damages are a 'perfectly adequate' way to penalize infringers. Permanent injunctions, he said, represent a 'sword of Damocles' over companies that can be wielded by small patent holders or 'trolls' who do not even make direct use of the patent.

Waxman represented MercExchange, a small Virginia firm that sought an injunction against eBay. Both Court precedent and the will of Congress, he said, dictate that 'a final judgment of infringement yields an injunction in all but the rarest of cases.' He portrayed his client as a hardworking inventor, not a 'patent troll' or a 'promiscuous licenser' aiming to profit from his patent merely through litigation.

The dispute began in 2001, when MercExchange sued eBay for infringing its patent that enabled the 'Buy it Now' feature used on the popular online auction site. A jury in the Eastern District of Virginia awarded MercExchange $35 million for infringement, and the company promptly moved for a permanent injunction to prevent future infringement by eBay.

Under a 1908 precedent, Continental Paper Bag Co. v. Eastern Paper Bag Co., there is a legal presumption in favor of an injunction against the infringer. But the judge denied MercExchange's motion, finding that the company, which licenses but does not practice its patents, would not suffer irreparable harm without an injunction. The judge also ruled that 'growing concern' over business-method patents like those at issue cut against MercExchange's arguments.

But the U.S. Court of Appeals for the Federal Circuit rejected the District Court's reasoning and said that nothing in the case justified deviating from the rule in favor of an injunction.

Supporters of eBay argue that so-called trolls that hold or license relatively insignificant patents can hold a high-tech company hostage by threatening to seek an injunction and winning disproportionately high licensing fees in exchange.

But other companies, joined by the Bush administration, argue that the precedent should be upheld to give needed protection to valid patents. Assistant to the Solicitor General Jeffrey Minear told the justices Wednesday that infringement by itself 'normally is irreparable harm' and, therefore, should trigger an injunction against the infringer.

Chief Justice John Roberts Jr. seemed sympathetic at one point toward the 'garage inventor' who might need the weapon of an injunction to keep a big company from erasing his livelihood. But then he also voiced concern that an injunction could sweep too broadly, especially if it was aimed at protecting a hard-to-define business-process patent. Justice John Paul Stevens also seemed concerned about the breadth of injunctions against patent holders.

Justice Antonin Scalia appeared sympathetic toward MercExchange, suggesting it would be unusual for the government not to order an infringer to, in effect, give back the patent holder's property.

Justice Anthony Kennedy, apparently perplexed by the terminology, asked Phillips whether the word 'troll' in the patent context is 'the scary thing under the bridge, or is it the fishing technique?' Amid laughter, Phillips indicated it was the former.

One problem on the horizon for the case before the Court, noted several times by Roberts, is the fact that on review, the Patent and Trademark Office has invalidated all of MercExchange's patents involved in the case.

Waxman said that determination was not final and should not prevent the Court from ruling in the case.