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Mon Dec 12 2005 22:48:33

eBay Patent Case Has Lawyers Watching

By: Ina Steiner

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Patent attorney Dennis Crouch writes an interesting post about the eBay - MercExchange patent case on his blog, and brings up the question of how the court would decide on damages for ongoing infringement. (Link.)

He says, "It is unclear at this point what a damages calculation would be in a case where a permanent injunction is denied ­ probably most importantly is whether a patentee will be allowed treble damages for the ongoing infringement."

It's my understanding that the damages calculation would be determined by the District Court, which has said, "Moreover, the court notes that if the defendants (eBay) continue to infringe the plaintiff's (MercExchange) patents, the court will be more inclined to award enhanced damages for any post-verdict infringement."

Having said that, it's important to note how difficult the judge said it would be to determine if eBay continued to infringe based upon "design workarounds" they create.

There's been talk by MercExchange about compulsory licensing. Its lawyer, Scott Robertson of Hunton & Williams, said, "The bottom line is whether we will be able to obtain a permanent injunction on eBay's buy-it now operations or whether the court will force a compulsory license."

I did a search on Google and found that compulsory license are usually granted in cases involving public health or in cases of anti-competitive practices. I came across the World Trade Organization discussions on Intellectual Property. In a FAQ, they ask, "What is the basic patent right?" and answer, "Patents provide the patent owner with the legal means to prevent others from making, using, or selling the new invention for a limited period of time, subject to a number of exceptions." (Link.)

This concept is why the general rule is to issue injunctions in patent infringement cases, and the Continental Paper Bag case said it doesn't matter whether the patent holder practices his or her invention. Now the Supreme Court is looking at that case. (Could the court's ruling have international implications?)

The Supreme Court told eBay and MercExchange in its order, "In addition to the Question presented by the petition, the parties are directed to brief and argue the following Question: "Whether this Court should reconsider its precedents, including Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 (1908), on when it is appropriate to grant an injunction against a patent infringer."

In an article published Monday by Gregory A. Castanias and Susan M. Gerber, attorneys from Jones Day, the authors say, "The specific question before the Court in Continental Pager Bag was whether a patentee was entitled to injunctive relief when the patentee itself failed to make use of the patented invention. The accused infringer had argued that the patentee was not entitled to the equitable remedy of injunctive relief because it had failed to make embodiments of the invention available to the public. The Supreme Court rejected this argument and affirmed the lower court's injunction." (Link.)

As Castanias and Gerber note, the Supreme Court "lingered" over whether to hear the eBay case. ("The Court itself lingered over its decision to grant certiorari for a month, considering and reconsidering the petition at four separate conferences from October 28 to November 23.")

The case raises many questions. If patent holders can't enjoin infringers, do they have any leverage in getting companies to license their patents? And in the case of eBay, if an injunction is not granted, will they be made to license the patents (if they are still infringing)?

BTW, amicus briefs in support of the petitioners will be due on January 12, 2006, and amicus briefs in support of the respondents will be due on February 16, 2006. Expect to see briefs filed on both sides. For some, it will be over genuine concern over the ramifications of the court's ruling. For others, it will be a way to get their name in the papers.




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