EcommerceBytes-NewsFlash, Number 1279 - May 15, 2006     0 of 7

Supreme Court: No Injunction in eBay Case, Back to District Court

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The Supreme Court vacated a U.S. Appeals Court decision that favored MercExchange's request for an injunction against eBay's Buy It Now feature and has sent the case back to the District Court. The case arose out of a patent lawsuit against eBay in which a jury found eBay to be infringing MercExchange patents.

The high court agreed with eBay that the Appeals Court did not consider the four factors traditionally considered in deciding whether to issue an injunction: irreparable injury; inadequacy of legal remedies; balancing of parties' hardships; and whether an injunction would adversely affect the public interest.

However, it stated that the District Court had not fairly applied the traditional equitable principles either. It disagreed with the District Court when it concluded that a "plaintiff's willingness to license its patents" and "its lack of commercial activity in practicing the patents" would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue.

The high court said "some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves. Such patent holders may be able to satisfy the traditional four-factor test, and we see no basis for categorically denying them the opportunity to do so."

The unanimous decision, delivered by Justice Thomas, stated, "Like the Patent Act, the Copyright Act provides that courts "may" grant injunctive relief "on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." And as in our decision today, this Court has consistently rejected invitations to replace traditional equitable considerations with a rule that an injunction automatically follows a determination that a copyright has been infringed."

Two concurring opinions were filed, one by Roberts in which Scalia and Ginsburg joined, and another by Kennedy in which Stevens, Souter and Breyer joined.

Because the Supreme Court concluded that neither court had correctly applied the traditional four-factor framework that governs the award of injunctive relief, it vacated the judgment of the Court of Appeals, so that the District Court "may apply that framework in the first instance."

"In doing so, we take no position on whether permanent injunctive relief should or should not issue in this particular case, or indeed in any number of other disputes arising under the Patent Act. We hold only that the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards."

The District Court will have to, among other things, decide if eBay continues to infringe MercExchange patents.


About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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