eBay argued to the Supreme Court 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.

In an amicus brief, the United States government stated that, "although the Court of Appeals did not invoke the traditional four-factor test, it correctly recognized that the District Court had improperly relied on inappropriate considerations, which amounted to an abuse of discretion, and the court of appeals therefore properly reversed the District Court's denial of MercExchange's request for an injunction."

A key factor in the case before the Supreme Court is whether it should overrule its 1908 decision that a federal court may grant a patentee an injunction even if that patentee does not practice its own invention, decided in the "Continental Paper Bag Co. v. Eastern Paper Bag Co." case.

It appears the high-tech industry generally supports eBay's stance, and the pharmaceutical industry generally supports MercExchange's stance. An article in the San Jose Mercury News newspaper stated, "If eBay prevails, pharmaceutical companies might find it harder to persuade courts to halt infringements of their patents. Tech companies, on the other hand, worry that a tougher stance on injunctions would require them to modify their products because of companies or individuals who file opportunistic patent suits." (http://www.mercurynews.com/mld/mercurynews/13281956.htm)

 Argument in Support of eBay
eBay supporters believe the Appeals Court has created an "automatic injunction rule" that goes beyond the Patent Act, which allows district courts to use their discretion in granting injunctions in patent cases. Supporters express concern that the specifics of this case would have ramifications outside of this case that would harm many companies.

The threat of an injunction causes manufacturers to settle with patent holders because, "Defendants are paying holdup money to avoid the threat of injunctive relief," according to an amici brief filed by 35 intellectual property professors filed in support of eBay's petition to the Supreme Court.

The Business Software Alliance and other high-tech associations stated in their amici brief that "Technology products typically consist of hundreds or thousands of patented components...." They state, "Because an injunction will issue automatically upon a finding of infringement - even if the claim relates to only an insignificant part of the product - the target of the claim is forced to pay an extortionate settlement in order to preserve its business."

Argument in Support of MercExchange
Susman Godfrey LLP's amicus brief filed in support of MercExchange said some companies, like Intel, Micron and IBM, recognize the importance of injunctive relief - so long as they are the ones seeking it. If a key factor in whether to grant an injunction against a patent infringer is whether the patentee makes a product, it would diminish the incentive to innovate and amount to a "Heads, I win; tails, you lose" system and would create institutionalized unfairness, according to Susman Godfrey.

"Some amici,...would have this Court create a balancing test that turns on factors that correspond to their operations, thereby enabling themselves to obtain injunctive relief while making it more difficult for independent investors to obtain injunctions against them."

A Wall Street Journal editorial by Alan Murray on March 22, 2006, said "patent trolls" are getting a bad rap. Most U.S. research universities fit the definition of a patent troll. "Does anyone think Stanford University deserves less patent protection than, say, Microsoft, because it doesn't make or sell product?" he asks. Murray says the problem "isn't companies that don't commercialize their own patents. Rather, it is bad patents. In part, that happens because the Patent and trademark Office is understaffed and overwhelmed." (http://online.wsj.com/article/SB114298577458004598.html)

A Washington Post column, "Big Firms Caught with their Patents Down," by Steven Pearlstein states, "The high-tech industry is full of companies that boast entire business units dedicated to licensing their patent portfolios. It is pure hypocrisy for the industry to argue that this is somehow illegitimate when done by small inventors." (http://digbig.com/4gxap)

Index to Briefs
Dennis Crouch, a patent attorney with McDonnell Boehnen Hulbert & Berghoff LLP, has been following the case and has compiled a summary with links to briefs on his blog at: http://patentlaw.typepad.com/patent/2006/03/ebay_v_mercexch.html

 
The eBay Patent Wars: Timeline

 The Key Patents

'176 - Method and Apparatus for Using Software Search Agents to Locate Items in Electronic Markets. (Affects Half.com.)

'265 - Consignment Nodes. (Fixed-price patent).

'051 - Method and apparatus for conducting person-to-person online auctions. (Auction patent.)

MercExchange patent portfolio: http://www.mercexchange.com/solutions.htm

In early 2002, less than 20 percent of eBay's Gross Merchandise Sales were generated by Buy It Now listings, and that number reached 34 percent by the end of 2005. eBay introduced seller fees for using the Buy It Now feature in 2002.

The Buy It Now feature increases the velocity of trading on eBay since buyers do not have to wait for auctions to end in order to make a purchase. The BIN feature has been increasingly important as eBay has shifted from mostly collectibles to mostly "practicals" on its site. In 1999, collectibles made up 60 percent of eBay's Gross Merchandise Sales. by 2003, it made up only 13 percent of Gross Merchandise Sales. Consumers shopping for practicals, such as consumer electronics items, DVDs and components, are less patient than consumers hunting for collectibles.

International ramifications of the case:
Patent expert Harold C. Wegner, a partner at Foley & Lardner and professor at George Washington University Law School, says eBay's petition to the Supreme Court is in conflict with TRIPS, the Trade Related Aspects of Intellectual Property. In his article, "Injunctive Relief: A Charming Betsy Boomerang," Wegner talks more about this and the problems in the patent system.

http://www.ipfrontline.com/downloads/NJTIP.pdf

U.S. District Judge Jerome B. Friedman
Presided over 5-week trial MercExchange v. eBay in April - May 2003.

Tom Woolston, Founder of MercExchange
Born in Michigan, Tom Woolston was raised in Ohio. When he was 18, he enlisted in the Air Force. When he got out of the service, he started going to evening school at the University of Maryland, studying computer science, then transferring to George Washington University in Washington, D.C., where he studied electrical engineering. Later Woolston went on to get a law degree. He worked at the Central Intelligence Agency, National Security Agency, and practiced law at Hunton & Williams, Howrey & Simon and Fish & Richardson PC.

Pierre Omidyar, Founder and Chairman of the Board, eBay
Born in Paris in 1967 and moved to Washington DC at the age of 6. Pierre Omidyar graduated from Tufts University in 1988 with a Bachelor of Science in computer science. When Omidyar launched eBay as a hobby, his "day job" was conducting developer relations for General Magic. Prior to General Magic, he co-founded Ink Development Corp., which was renamed eShop and acquired by Microsoft, making him a millionaire in his twenties. His career began in the software engineering business as a developer for Claris, a subsidiary of Apple Computer, where he worked on consumer applications. Omidyar is CEO of Omidyar Network, a mission-based investment group he established with his wife, Pam, in June 2004. In addition to his roles with eBay and Omidyar Network, Omidyar serves as a Trustee of Tufts University and Santa Fe Institute, and a Director of Meetup Inc.

Meg Whitman, President and CEO, eBay Inc.
Raised on Long Island, New York, Meg Whitman received a Bachelor of Economics from Princeton University in 1977 and a Master of Business Administration from Harvard Business School. Joined eBay March 1998. Prior to eBay, Whitman was general manager of Hasbro Inc.'s Preschool Division, responsible for global management and marketing of Playskool and Mr. Potato Head. From 1995 to 1997, Whitman was president and chief executive officer of Florists Transworld Delivery (FTD). Before FTD, she served as president of the Stride Rite Corporation's Stride Rite Division. Whitman spent 1989 to 1992 at the Walt Disney Company, highlighted by her work as senior vice president of marketing for the Disney Consumer Products Division. Whitman also worked for eight years at Bain & Company’s San Francisco office where she was a vice president. Whitman began her career at Procter & Gamble in Cincinnati where she worked in brand management from 1979 to 1981. Whitman is on the Board of Directors of Procter & Gamble and DreamWorks Animation

Michael Jacobson, Senior Vice President and General Counsel, eBay
Earned a Bachelor of Arts in Economics, Magna Cum Laude, in 1975 from Harvard College and a law degree from Stanford University in 1981. Joined eBay in 1998. Responsibilities include overseeing eBay's legal department, its risk management program, and its policy group. He is responsible for interactions with content regulators, law enforcement, contracts, SEC compliance, and other legal matters. Prior to eBay, Jacobson was a partner with Cooley Godward LLP where he was recognized as an expert in securities law. His responsibilities included corporate and securities transactions, including mergers and acquisition transactions, public offerings, and venture capital financing.

Key MercExchange Lawyers

Scott L. Robertson, Hunton & Williams LLP

Jennifer A. Albert, Hunton & Williams LLP

Brian M. Buroker, Hunton & Williams LLP

Gregory N. Stillman, Hunton & Williams LLP

David M. Young, Hunton & Williams LLP

Seth Waxman, WilmerHale

Key eBay Lawyers

Jay Monahan, eBay Inc.

Jeffrey G. Randall, Skadden, Arps, Slate, Meagher & Flom LLP

Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.

Timothy S. Teter and Lori Ploeger, Cooley Godward LLP

Allan M. Soobert, Skadden, Arps, Slate, Meagher & Flom LLP

Carter G. Phillips, Sidley Austin Brown & Wood LLP

"The Perfect Store: Inside eBay," by Adam Cohen
http://digbig.com/4gwqn