Supreme Court To Hear eBay Patent-Infringement Appeal

In what's shaping up as a key case in the ongoing debate over patent reform, the U.S. Supreme Court has agreed to hear eBay's appeal of a patent-infringement case it lost in district court two years ago.

The high court Monday granted a petition to review a key aspect of the case, in which the district court ordered eBay to pay MercExchange, a small Virginia developer of E-commerce applications, $25 million in damages for violating a patent it holds for direct online buying (No. 5,845,265). A federal appeals court granted a stay on the case earlier this year while eBay sought to have it brought before the Supreme Court, which is expected to hear arguments in the spring.

The Supreme Court will review the appeals court's order that an injunction be issued preventing eBay from continuing to violate the patent with its "Buy It Now" feature. The injunction is on hold pending a Supreme Court ruling, but eBay has said it has rewritten its software so that it no longer infringes on MercExchange's patent.

The Supreme Court's decision could prove integral as Congress weighs options to overhaul the patent system, which has been under fire for being out of step with the times by granting too many patents to so-called "obvious" inventions that either cobble together existing technologies or that really are little more than automated business processes.

At issue is a long-standing legal tendency to issue injunctions to prevent future infringement of patents, a precedent established in a 1908 Supreme Court decision in the case of Continental Paper Bag Co. v. Eastern Paper Bag Co. The legal community now questions whether a patent for a description of an invention that doesn't actually exist yet should be protected by injunctions, says Stuart Meyer, a partner and patent specialist with Silicon Valley law firm Fenwick & West. Other countries, Meyer says, have patent laws that specify that if a patent-holder isn't putting an invention to use, someone should have the right to do so, particularly in cases where an invention enables a societal good.

A group of law professors that submitted a filing urging the Supreme Court to take the eBay case hopes the decision sets a new precedent giving courts more flexibility in determining when to issue patent-related injunctions. "The Federal Circuit has effectively made injunctions mandatory, even in cases where they serve no social purpose because the patentee doesn't participate in the market, but is just using the threat of injunctive relief to leverage a larger settlement," Mark Lemley, a Stanford University law professor who wrote the filing, wrote in an E-mail interview. "Hopefully the Court will restore balance to patent remedies, permitting injunctions in the ordinary case of patent infringement, but also considering whether an injunction is necessary in every case."

The Supreme Court's decision to hear the eBay case illustrates a growing awareness that preventing future infringement of a patent that hasn't yet yielded fruit may not be in the spirit of patent law. "Changes are afoot," Fenwick & West's Meyer says. Ironically, the case may actually prove to be moot if Congress opts to approve a patent-reform bill introduced earlier this year before the eBay decision is levied. If that occurs, patent reform could end up informing the Supreme Court's decisions, rather than vice versa.