MercExchange v. eBay: Injunction Denied

TomWoolstonMercExchange v. EBay (E.D.Va 2007)

For the second time, Judge Friedman (E.D. Va.) has denied MercExchange’s request for permanent injunctive relief.  Judge Friedman notes that injunctive relief is only available when a plaintiff is suffering current irreparable harm that threatens future irreparable harm. In other words, past injury is not a variable in the injunction calculus — willful or not, what’s done is done and cannot be fixed by an injunction.

No Presumption: As a starting point, the Court found that willful infringement of a patent creates no presumption of irreparable harm.

Irreparable Harm: Although the Court agreed that MercExchange has suffered harm do to the infringement — the harm is not irreparable.  This finding is based on MercExchange’s “consistent course of seeking to maximize the money it can obtain from licensing its patents to market participants.” In particular, after the trial, MercExchange licensed its patents to UBid. (Note: post-trial activity alters decision — focusing on eBay’s media reports).

Suspect Patents = No Injunction?: As a secondary factor, the Court continued its assertion that the potential suspect nature of the MercExchange patents also leads to a denial of injunctive relief:

Furthermore, KSR reveals the Supreme Court’s reservations regarding patents similar to the ’265 patent, the PTO twice issued interim actions rejecting all claims in the ’265 patent as obvious prior to the issuance of KSR.

Monopolist <> Injunction: Finally, the court rejected MercExchange’s argument that eBay’s de facto monopoly position necessarily leads to entry of a permanent injunction.

Injunction Denied

Notes:

  • EBay’s motion for stay pending reexamination was also denied.
  • There is more to this opinion. Including a further discussion of public interest…

31 thoughts on “MercExchange v. eBay: Injunction Denied

  1. 31

    Dear Lionel,
    I’d like to think about it some more, but, off hand, I don’t think the law you suggest is in keeping with either the letter or flowery spirit of the Constitution.

    However, lacking the law you suggest, may I take your comment to mean that you now agree that Judge Friedman’s rulings, both before and after the USSC’s Merc v ebay ruling, were unconstitutional?

    I also look forward to your possible thoughts on my penultimate comment.

  2. 29

    Just an Ordinary Inventor.

    Wow. Could you be a little more flowery in your language. Yes. I am familiar with the Constitution having read it several times. When I was in Law school, if I had not been going for patent law, I might have gone into Constitutional law.

    You are correct in that the Constitution gives Congress strong Commerce clause powers, per The Us Supreme Court’s interpretation of that clause beginning with Marshall’s court.

    Your response actually made me think of an easier way to reduce the number of injunctions that are issued. Simply have Congress pass a federal law reciting when and how injunctions should be applied in Federal cases. As long as they can establish a tie, even a tenuous one, to interstate commerce, such a law would be upheld as Constitutional. It’s only when Congress forgets to dot their i’s and cross their t’s that they get in trouble with cases like Lopez

  3. 28

    Question:
    Based on the Supremacy Clause, is any court in the United States obligated to correct sua sponte “any Thing” it deems unconstitutional insofar as the particular “any Thing” is related to a given matter which is before it?, (assuming Constitution issued have not been raised by either litigant).

    I would think so, YES:
    Because, under these specified circumstances, what rational or logic could there be for any court to perpetuate any ruling or “any Thing” that it deems unconstitutional?, but, what do I know?, I’m Joi.

    * * * * *
    The Constitution, Article VI, Clause 2, the Supremacy Clause:
    This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.

    In relevant regard, Joi’s interpretation:
    This Constitution, and all Laws of the United States consistent therewith, shall be the supreme Law of the Land; and all Judges in all courts in the United States shall be bound thereby, despite any Thing that says different.*
    * Note: The Supremacy Clause in effect includes a boilerplate Severability clause.

  4. 27

    Dear Lionel,
    The Constitution is not as silent as one might think. Remarkably, the Framers did such a masterful job, there is no need for amendment to Article I, §8, Clause 8.

    Dear stepback,
    I mostly agree with you. As it has been since 1787, the “exclusion” to which you refer is not and has not been absolute.
    I do not quite see your meaning regarding the 4 factors – those factors may be fine for some other purposes, but they can only pertain to Article I, §8, Clause 8 by Constitutional Amendment. But, as shown below, such amendment is unnecessary.

    * * * * *
    With the exception (within specified limits) of “the exclusive Right” (the Constitutional limits of “the exclusive Right” are discussed below) Congress has Constitutional discretion to administer to, or not to administer to, Article I, §8, Clause 8, and it for the most part has rightly done so (35 USC 283 is a mistake).

    For example, Congress has legislated parameters for Utility patents, Design patents, Trademarks, Service marks and Copyrights including specifying various lengths of Time for the grant of “the exclusive Right.”

    Further and notably, within the Constitution itself, one finds authority for Congress to exercise its Power to moderate “the exclusive Right” under certain Constitutionally certified circumstances:
    (A) To regulate Commerce,
    (B) provide for the common defense, and to
    (C) promote the general Welfare.

    Article I, §8, Clause 3: “The Congress shall have Power … To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;”
    Thus, in its body of antitrust statutes, Congress imposes certain limits when exercising a patent’s “exclusive Rights” in order to regulate Commerce.

    The Preamble:
    “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

    Eminent domain power, when exercised over a patent’s “exclusive Rights” for national security and defense, is absolutely consistent with the Preamble, i.e., to “provide for the common defence.” Thus, military appropriations bills in peacetime and wartime routinely include allocations for patent royalties.

    If an independent inventor discovered and patented a vaccine for Anthrax, but refused to license or manufacture it for anti-American religious reasons, eminent domain could absolutely and reasonably be asserted to “promote the general Welfare.”

    Thus, with regard to Article I, §8, Clause 8, without any amendment whatsoever, the Constitution was masterfully conceived, and it is amply adequately to this very day.

    Most regrettably, today’s Supreme Court Justices cannot hold a candle to the Framers of our Constitution. It tears at one’s heart.

  5. 26

    “Why should the considerations for patent injunctions be different from other injunctions?”

    Lionel,

    Good question.
    And here’s the answer.
    Because other injunctions are not backed up by a Constitutional requirement for exclusivity.

    BTW- I do agree with you that the exclusion cannot be absolute. However, unlike other injunction situations, the general rule should be that injunctions are routinely granted and that only in the exceptional case (weighed by the 4 factors) is an injunction withheld. Failure by a district court judge to articulate the exceptional reasons should be deemed a clear error in and abuse of judicial discretion.

  6. 25

    Ordinary:

    But the “Re-Framers” of our Constitution (a.k.a. “Re-Formers”) do intend such a result:

    What’s yours is mine.
    What’s mine is mine.

    “Exclusive” means the unpleasant consequences do not apply to ME. Membership in the Fairness Club has its Privileges you know.

  7. 24

    Just Another Ordinary Inventor. I understand what you are saying. The language does strongly suggest an absolute right to an injunction and to that extent, I believe we do need a Constitutional amendment.

    However, I am not certain the straightforward interpretation you apply is necessary. Also, an absolute right to an injunction is not a required interpretation of the clause. It simply says the author shall be given an exclusive right, it does not address specifically what should happen if that right is violated.

    For example, the Constitution is silent on the ability of the federal government to infringe or suppress certain patents for National Security reasons, but they do when it comes to applications with military applications. I don’t recall a Constitutional Amendment giving them that right.

    I look at it from a basic fairness perspective. An absolute right by the patent holder to receive an injunction does not appear to be just process.

    Whys should the considerations for patent injunctions be different from other injunctions? And no one is saying they should not be biased in favor of the patent holder, but that should not stop a court from considering all the factors in a case.

  8. 23

    Dear Lionel Hutz,

    With all due respect, I think you miss the point, or perhaps I misunderstand your comment.

    The promotion of “Progress” for “We the People” referred to in Article I, Section 8, Clause 8 is accomplished by enticing an Inventor to:
    (A) Publish his Discovery, and
    (B) put his Discovery in the public domain AFTER his “exclusive Right” expires.

    When the Framers of the Constitution wrote Article I, Section 8, Clause 8, they had every expectation that Inventors, and Inventors alone, would set the price for their Discoveries during the term of the “the exclusive Right”, the length of which term, of course, is set by Congress.

    Please bear this in mind: Other than the supreme Constitutional obligation to abide the “the exclusive Right”, it is up to Congress to define the other parameters concerning Article I, Section 8, Clause 8.

    “[T]he exclusive Right” is what the Framers specified, and “the exclusive Right” is what the Framers meant to give Inventors for their Discoveries during a Congressionally determined term of “the exclusive Right.”

    The Framers never intended to allow a judge or anyone else to interfere with an Inventor setting the price for a license to his Discovery, or with an Inventor’s choice not to license his Discovery, or with an Inventor setting the price if he elects to commercialize his Discovery, during the Congressionally determined term of “the exclusive Right.”

    If one were to take into account “the needs of society and the convicted infringer”, as you seem to suggest, every time a valid patent is found infringed at trial, it would subject the pricing and licensing of an Inventor’s Discovery during the Congressionally determined term of “the exclusive Right” to the discretion of the district judge and or jury. Clearly, that is not what the Framers meant by specifying and giving “the exclusive Right” to an Inventor for his Discovery for a limited Time which is to be set by Congress.

    These Constitutional, Congressional and Economic truths are self-evident.

    Footnote: The capitalized words are capitalized in Article I, Section 8, Clause 8.

  9. 22

    Patentdood wrote “I have an extremely difficult time thinking an injunction is not appropriate when infringement is WILLFUL (emphasis added), found so by a jury, and affirmed by the Federal Circuit.”

    The problem with this statement is that the CAFC has rather liberally found willfulness in many cases where it’s clear there was no willful intent. If it is determined that an idea was outright stolen (uncommon if not outright rare) then an injunction is definitely warranted. However, the vast majority of infringers are innocent infringers and the needs of society and the convicted infringer need to be taken into account as well as the needs of the inventor.

  10. 21

    Mr. “patentdood”:

    I was tempted to compare an infringer to your first paragraph’s trespasser – I understand that in some states, you can shoot dead a trespasser. Of course, in all states, I think you may shoot a trespasser if necessary to prevent serious bodily injury or irreparable harm, but not for solely for the purpose of expelling him. In fact, I think it may be OK to shoot anybody anytime to prevent serious bodily injury or irreparable harm. But I digress.

    I had second thoughts, even at this late hour, because shooting an infringer might be considered by some moderates to be bad form, maybe even beyond the patent pale — maybe, but maybe not by all.

    Treble damages, plus attorneys’ fees, yes, that’s the Constitutionally permissible Congressional statute’s ticket.
    Let the punishment fit the crime, even at this late time.

    Question: Is it a tort to plain infringe?, and is it a crime to willfully infringe?

  11. 20

    Mr. Lionel Hutz:
    “Just an ordinary Inventor, our federal court system handles matters of law and equity [Yes]. In resolving a case of infringement, there is no reason that the court should not be able to decide that an injunction would be inequitable [No].”

    Mr. “patentdood”:
    Your second paragraph captures the moment.

    Willful or not, when infringement of a valid patent has been found it can be stopped at the sole discretion of the patentee. When infringement of a valid patent is found, the difference between plain infringement and willful infringement is the level of damages according to Congressional statutes as determined by a judge in a bench trial, or by a jury.
    (There are exceptions referred to in the Constitution to the “exclusive Right.” These exceptions are described in the comment posted on Jun 12, 2007 at 07:37 AM on this link:
    link to patentlyo.com )

    But, lacking a Constitutional Amendment, exceptions to infringement not embodied in the Constitution are not left to the discretion of a judge or anyone else.

    Question: Having found infringement of a valid patent, under what legal premise, if any, would it be discretionary under the Constitutional for a judge or jury to say, “the infringement shall be stopped within ‘X period of time’”?

    I think Lionel has the answer [Yes].

  12. 19

    Lionel, you make a good point, but one word stands out – “alleged” infringer. Of course a preliminary injunction might be unfair to an alleged infringer, but I have an extremely difficult time thinking an injunction is not appropriate when infringement is willful, found so by a jury, and affirmed by the Federal Circuit. I would hope that most on this thread would not agree that one can knowingly tresspass on another’s property (this is different from accidental tresspass,or tresspass with a good faith belief that there was no tresspass), usurp it for his own benefit, force the patentee to litigate for years, and then believe that an injunction is somehow unfair. The law should discourage the commission of a tort, but the present case and those to come simply encourage and promote infringement and litigation, as opposed to encouraging the parties to settle or not infringe.

    I think just an inventor’s point is that the statute that permits a court to decide whether an injunction is inequitable runs directly counter to the plain and clear language of the Constitution (as does the S. Ct.’s decision in eBay). Not sure how the Framers of our Constitution could have meant anything other than exclusive when they said exclusive rights. I guess its only exclusive for some patentees, and not so if we feel sorry for the poor infringer and think its unfair to punish someone who broke the law (having a willful infringer merely pay what they would have paid before litigation is not punishment).

  13. 18

    Just an ordinary Inventor, our federal court system handles matters of law and equity. In resolving a case of infringement, there is no reason that the court should not be able to decide that an injunction would be inequitable.

    I understand that as a potentially affected party you may be biased toward an absolute position, but the fact is injunctions are simply unfair to the alleged infringer sometimes.

  14. 17

    Dear Alan McDonald,

    Well for sure, who could disagree?:

    When the Framers of the Constitution wrote Article I, Section 8, Clause 8, they had every expectation that Inventors, and Inventors alone, would set the price for their Discoveries.

    “[T]he exclusive Right” is what the Framers specified, and “the exclusive Right” is what the Framers meant to give Inventors for their Discoveries.

    The Framers never intended to allow a judge or anyone else to interfere with an Inventor licensing his Discovery, or setting the price if he elects to commercialize his Discovery.

    Aren’t these Constitutional & Economic truths self-evident? Who could disagree?

  15. 16

    A challenge to anyone who says that injunctions are not “all about the money”.

    Are you willing to accept a change in patent law that would require an injunction at the patent owner’s request if infringement is found COUPLED WITH a ban on the patent owner granting any license for future use of the invention to the infringing party? The patent owner could opt into granting a future license by forgoing the right to an injunction.

    If you are so willing, then you are stand for the proposition that the patent owner shall have the right to make sure the invention is not practiced if it so chooses. I cannot fault you for taking this position, as it appears consistent with the Constitution.

    If you are not so willing, it must be because you want to use the injunction to get an overpriced license and it IS all about the money and not the Constitution.

  16. 15

    A PATENT WITHOUT AN INJUNCTION IS A GUN WITHOUT BULLETS.

    Dear Just Visiting,

    Yes, there are exceptions referred to in the Constitution to the “exclusive Right.” These exceptions are described in the comment posted on Jun 12, 2007 at 07:37 AM on this link:
    link to patentlyo.com

    I do not agree with your example: Other than exceptions such as those described, the patentee, and only the patentee, has the absolute discretion to either allow the use of, or stop the use of, his “Discovery.” That is the plain and unambiguous meaning of “the exclusive Right.” Traditionally, patent injunctions have been used to stop infringement.

    For anyone to consider an injunction as “just a ploy to get ‘more money’” is naïve.
    At the sole discretion of the patentee (and not at a judge’s or anyone else’s discretion), typically, there are two possible purposes of an injunction:
    (i) to get more money for a license fee, or,
    (ii) to stop an infringement.

    “[T]he exclusive Right” is what the Framers specified.
    “[T]he exclusive Right” is what the Framers meant to give Inventors for their Discoveries.

    A patent without an injunction is a gun without bullets. Why anyone would stumble over this elemental concept is surprising. There is nothing subjective about it.

    The Framers used words sparingly throughout the Constitution to avoid confusion – from a literary standpoint, that is one reason our Constitution is so brilliant and wonderful, and considered the best Constitution of its kind ever written.

    “Article I, Section 8, Clause 8:
    To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;” (please note the Framers masterful economy of words.)

  17. 14

    Even exclusive rights in real property have some limitations. If someone innocently builds an expensive addition to their house that extends onto your property by a quarter inch, courts are not going to require the addition be torn down in all instances.

    In short, an exclusive right does not imply that an injunction should issue in all cases. If the court correctly perceives that the injunction is just a ploy to get “more money”, then perhaps simply awarding “more money” is the right thing to do.

  18. 13

    Setting aside the general concerns about an entire class of patents and not moving for a TRO, it would appear that the holding of the lower court impunes the patent owner’s motive. Of course merc prevailed on the second question on cert to scotus – whether the bag case should be reversed (holding – no question of patent owners motive is an appropriate factor – in other words, a patent is a property right, to be reasonable withheld or for no reason withheld, or even withheld to prevent the deployment of a new more efficient process, while maintaining the old lesser process and marketshare. So i t soudn liek liek the result that ebya et al lost on is going forward – the judge will substitute his judgment on money damages instead of letting the market set that rate by virture of the injunction.

  19. 12

    Correction:
    According to our Constitution, “the exclusive Right” CANNOT be changed without an Amendment. Against this imperative there is NO plausible argument.

  20. 11

    A patent without an injunction is like a eunuch. This is a call to intellectual arms.

    By all rights, the patentee, and only the patentee, has the right to allow others the use of his invention. The patentee has always had the absolute right to exclude others from infringing his patent. The Supremes’ eBay ruling is a colossal topsy-turvy, Alice in Wonderland “mistake.”

    When the Merc v eBay case gets to the Supreme Court again, educated patent professionals in droves should make our various pro-patent positions known. For example:

    What the Framers intended when they specified “the exclusive Right” in Patent Clause 8 (which has never been amended) in Article I Section 8 of our Constitution, i.e.,

    “The Congress shall have Power …
    “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;”
    is clear, unmistakable and unambiguous, and “the exclusive Right” has always been interpreted literally, in perfect accord with what the word “exclusive” meant when the Constitution was written and what “exclusive” still means.

    Further, for example, above and to the right of the red ribbon and gold seal on the cover of United States patents “granted under the law” by the Director of the USPTO, the following is printed:

    “Therefore, this United States Patent
    Grants to the person(s) having title to this patent THE RIGHT TO EXCLUDE OTHERS FROM MAKING, USING, OFFERING FOR SALE, or selling the invention throughout the United States of America or importing the invention into the United States of America for the term set forth below, subject to the payment of maintenance fees as provided by law.” (emphasis added)

    Thus, as every patent professional knows, a patent does not grant the patentee the right to make, use or sell his invention. Rather, a patent grants the patentee THE RIGHT TO EXCLUDE EVERYONE ELSE from making, using or selling his invention.

    According to our Constitution, “the exclusive Right” CANNOT be changed without an Amendment. Against this imperative there is plausible argument.

    Put simply in 25 words, the net result is:
    The Supreme Court’s (first) eBay ruling reserves a patent’s “exclusive Right” for big businesses while denying a patent’s grant of “exclusive Right” to independent non-manufacturing inventors.

    And now this single-minded EDVA District Court Judge again asserts his organized big-business-biased anti-patent views, and again denies an injunction.

    So, I ask all the Officer of the Court Patently-O readers with deontological obligations, what can be done about it? We cannot, should not, must not sit back and do nothing – that would be tragic and would haunt – we are not eunuchs.

    This is a call to intellectual arms.

    For more Constitutional details regarding the faulty USSC eBay ruling, please goto the lengthy comment posted on Jun 12, 2007 at 07:37 AM on this link:
    link to patentlyo.com

  21. 10

    Dear Mr. Slonecker,

    Regarding your question about the “DC judge”:
    I believe he is single-minded and has a personal anti-patent agenda. Also, it would take a person with character to rule differently than he did the first time around. The only bench Judge Friedman should be sitting on is in the park.
    More thoughts below.

  22. 9

    Please correct me if I am wrong, but just where in the ‘265 patent is there a claim directed to a method of doing business? Moreover, perhaps someone might be able to explain why, given the history of Mr. Woolston’s activities trying to promote his creation and eBay’s activities dealing with his creation, the DC judge seems so dead set against the grant of a permanent injunction?

    Mine is a question merely out of curiosity given my understanding of the long history pre-dating the lawsuit and its subsequent movement through the courts.

  23. 8

    The 2004 license was non-exclusive, see the opinion link above.

    It is interesting that negotiations for an exclusive license began right after the Supreme Court decision, but UBid didn’t want to give up 25% ownership of itself for “Jack” if the patents were found invalid during reexam.

    There was also a quote that this negotiation was started by MercExchange “to make Friedman (the district court judge) happy”. It didn’t work.

  24. 7

    “CHICAGO, IL (June 14, 2004) – UBid, a leading brand name auction marketplace that offers consumers and businesses leading manufacturer`s merchandise below wholesale prices, and MercExchange, LLC, holder of several important U.S. patents on Internet-based auction and market processes, today announced an agreement that provides UBid with a license to MercExchange’s key patents for Internet-based auctions.”

    With due respect Alan, I wouldn’t be so quick to predict another eBay victory. If the agreed license is exclusive or near-exclusive, like the publicised negotiations back in December claimed to be, then I suspect that the Supreme Court is going to be forced to deal with the “exclusive” rights of the patentee and the nuance of contract law rather than again relying upon the quantum physics-like concept of a “suspect patent.”

  25. 5

    And eBay will win again.

    If the Supremes get really mad, bye bye business method patents.

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