eBay Inc., et al. v. MercExchange LLC

The Supreme Court's May 15 decision in eBay Inc., et al. v. MercExchange LLC (eBay) is already a landmark in patent law. The unanimous Court rejected the general rule, previously applied by the Court of Appeals for the Federal Circuit, that a permanent injunction will issue against patent infringement absent exceptional circumstances. Instead, the Supreme Court held that, consistent with the 'long tradition of equity practice,' a patent holder must satisfy a four-prong test:

1. That it has suffered irreparable injury;
2. That remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
3. That, considering the balance of hardships between the patent holder and patent infringer, a remedy in equity is warranted; and
4. That the public interest would not be disserved by a permanent injunction.

The eBay decision will likely have a significant impact on patent licensing and patent litigation, because the patent holder no longer can assert the significant threat of essentially automatic injunctive relief upon a finding of infringement. Indeed, the first ruling from a trial court employing the eBay framework shows that the decision may lead to surprising results. On June 14, Microsoft persuaded a district court to deny an injunction in a case where Microsoft had been held liable for willful infringement of patents owned by a small software company.