MercExchange v. eBay: Injunction Denied Again

MercExchange v. eBay (E.D.Va. 2007)

In July, 2007, the < ?xml:namespace prefix ="" st1 />Virginia district court denied MercExchange’s motion for a permanent injunction against eBay. That order is now on appeal to the CAFC and may well establish the future guidelines for injunctive relief in patent cases. < ?xml:namespace prefix ="" o />

In 2006, the Supreme Court heard MercExchange’s initial injunctive relief appeal in that case, the Court found that the Federal Circuit was wrong to always favor injunctive relief and that the District Court had been incurred to deny injunctive relief based on categorization of MercExchange as a non-practicing entity.  Rather, the high court held that injunctive relief decisions must be based on an individualized analysis of the traditional factors governing equitable relief. As stated by the Supreme Court:

“[a] plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” eBay Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837 (2006)

On remand, the district court again denied equitable relief to MercExchange – finding that the plaintiff did not adequately prove the four factors.

Presumption of Irreparable Harm: The MercExchange district court read the above quoted language to block any presumption of irreparable injury based on a judgment of patent infringement. Of course, that is not the only reading of the eBay decision.  Another consistent opinion would find that a plaintiff may demonstrate irreparable injury by proving ongoing patent infringement. 

Here, the court found that MercExchange would not be irreparably harmed by ongoing infringement because MercExchange is not in the process of developing its invention, it focuses its licensing regime on companies that independently developed the invention, it offered a license to the defendant, its only employees are patent attorneys, it failed to request a preliminary injunction, its patent is a business method patent which are of ‘suspect validity,’ and the ongoing reexamination coupled with the new KSR  precedent puts the validity of the MercExchange patent in doubt. According to the court, eBay’s market dominance weighs in MercExchange’s favor, but is insufficient.

Willful Infringement:: A consideration of willful infringement does not fit cleanly into any of the four eBay factors as stated. However, the maxim of unclean hands is a longstanding principle of equitable relief and thus must be considered.

“Frankly, it appears to the court that neither side has particularly clean hands as both have engaged in litigation tactics that at times may have crossed the line; however, neither side has successful proven the other to be unworthy of a ruling in equity due to unclean hands.”

Here, the district court disregarded the jury’s willfulness finding because it was a “close call” and enhanced damages are sufficient to punish such behavior

Public Interest Favors No Injunction:

“eBay is a multibillion dollar corporation whose online marketplace brings together tens of millions of buyers and sellers around the world and eBay unquestionably has a substantial impact on the United States’ economy; furthermore, eBay’s success pre-dates its infringement. In contrast, MercExchange is a company with two employees that work out of their homes and appear to specialize in litigation and obtaining royalties for licenses based on the threat of litigation. Although the public plainly benefits from a strong patent system and protection from an infringer may be vital when a patent held by a small patent holder is infringed upon by a multi-billion dollar corporation such as eBay, the strongest arguments in equity exist when such small patent holder utilizes its patent to benefit the public; that is, either seeks to develop the patent on its own or develop the patent through licensing agreements. Similarly, equity may favor a patent holder that seeks to defend its right to exclude and prevent development of its patent by others.”

Injunction denied. The appeal is expected to be heard in early Spring 2008.

Notes:

 

62 thoughts on “MercExchange v. eBay: Injunction Denied Again

  1. 62

    EG

    “I could also argue that the “lead off” phrase to the Patent Clause is an endorsement and an encouragement for protecting inventions”

    Concur. Where I have a concern is the position advocated by some that in certain arts the patent system can be viewed as retarding progress and, hence, a question of constitutional proportions is necessarily presented.

  2. 61

    Michael,

    Your right about being careful about reading too much into such “lead off” phrases in our Constitution. I could also argue that the “lead off” phrase to the Patent Clause is an endorsement and an encouragement for protecting inventions, meaning Congress, the courts (and SCOTUS) must be careful not to set this so-called “constitutional bar” too high. The only limit that is express in the Patent Clause is that the exclusive rights be for “limited times.” And until you delve into the Framers’ intent by investigating the historical documentation and evidence (which SCOTUS didn’t do in Graham, at least not based on the documentation they cited), making broad statements like SCOTUS did in Graham about this so-called “constitutional bar” is fraught with problems and uncertainty.

  3. 60

    Not that this should be necessary for most, but a point of clarification: not all pro se inventors are “disgruntled,” any more than all applicants represented by counsel are happy. Did they stop teaching logic in pre-school?

  4. 59

    “The basis for the consitutional limit on what patents can be permitted is the opening words of the power: “To promote the Progress of …””

    I am by no means a linguistics expert, but the “lead off” phrase you cite does not necessarily mean that all words thereafter must be governed by it. Consistent with ordinary means of construing writings, it is plausible that the initial phrase is exemplary and not a constitutional limitation. Such an analysis has been proffered respecting the Second Amendment, so I will be quite interested in how the Sup. Ct. addresses what is admittedly stilted language when it considers the DC law banning guns. Importantly, please do not let my reference to the Second Amendment suggest that I equate congressional powers under Article 1 as implying substantive rights. There is, of course, no “natural” right for an individual to secure a patent, whereas the Bill of Rights proceeds on an entirely different premise. Even so, the similarity of the linguistic approach is sufficient that the upcoming DC case may be of some future benefit in construing the Patent and Copyright Clause.

    While admittedly off topic and off the wall, it is useful to note that the Patent and Copyright Clause does not vest the power to enact such laws solely with the Congress. It is an enumerated power, but nowhere is it even remotely suggested that the states are foreclosed from providing similar protection as well…at least this was the case in 1788. Interestingly, some states did take this “ball” and run with it. For example, until enactment of the current Copyright Act the State of California and a handful of others provided copyright protection under state law cumulative to that provided under federal law. Certainly this is the case with trademarks. Despite all the bandying back and forth about “federal preemption” as it pertains to patents and copyrights, I remain far from convinced that states are foreclosed from enacting any form of counterpart legislation.

  5. 58

    “I went back to Graham and read what follows this quote, and I’m astounded by SCOTUS’ flimsy argument, logic, and supporting documentation for this so-called “constitutional bar.””

    The basis for the consitutional limit on what patents can be permitted is the opening words of the power: “To promote the Progress of …”

    Nothing more is needed.

  6. 57

    Mal,

    Your spell checker isn’t working.

    I’m applying for a design patent, your favorite.

    Can I file a provisional on a design patent?

  7. 56

    SCOTUS in Graham v. John Deere said:

    “There is a constitutional bar below which Congress cannot go in permitting patents and the legislation should, if possible, be interpreted in a manner consistent with that limitation. If it cannot be so read, it must be struck down.”

    Big Hairy Rat,

    Given that this quote comes from SCOTUS in Graham, it proves my point that what SCOTUS says in the patent area (including the Patent Clause) shoud be taken with a huge grain of salt. I went back to Graham and read what follows this quote, and I’m astounded by SCOTUS’ flimsy argument, logic, and supporting documentation for this so-called “constitutional bar.” Not only is this quote dicta, how does it comport with the express language of the Patent Clause which says nothing expressly about a “constitutional bar” for patentability? For example, is this quote based on the Framers intent, as evidenced in the Federalist papers? I don’t see any of that mentioned in Graham. In fact, all that Graham says in that regard is that the Patent Clause was “written against the backdrop” of the practices that were curtailed by the Statute of Monopolies. And the only cite for that proposition is Meinhardt, Inventions, Patents and Monopoly, pp. 30-35 (London 1946) which I hardly find august documentation for such a pronouncement.

    What is the earlier SCOTUS’s case law for this so-called “constituctional bar”? The only case law support cited in Graham for this “constitutional bar” is a concurring opinion in the 1954 A&P v. Supermarket case which is hardly a shining endorsement for it. Frankly, I’m willing to bet that this “constitutional bar” was pulled entirely out of the rhetorical air because the historical documentation and case law support alleged for it is incredibly thin and weak.

    That being said I’m sure that Congress couldn’t enact legislation that says somthing that’s prior art (in the public domain) and thus lacks novelty could be patented. But then again, what exactly is the standard for this “constitutional bar” that SCOTUS says in Graham exists? Like what SCOTUS said in KSR International, all you get about the standard for patentabily is pure rhetoric, and no substance, logic or any guidance on how to apply or implement that standard.

  8. 55

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  9. 54

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  10. 53

    “My comment above was not intended to imply that courts should be at liberty to conflict with this standard. Instead, how the term “obvious” in 103 is interpreted by courts will greatly affect the patentability bar as set by 103, and such variation would not necessarily create a conflict with 103. For example, I am not aware of a clear-cut argument demonstrating the incompatibility of KSR with 103.”

    agent007,

    Thanks for the clarification, sorry if I took what you said earlier wrong. It’s sometimes difficult in these blog comments to understand exactly what the point of view is of the commentor until there is follow up. Continue to blog on, I enjoy other points of view.

  11. 51

    “Granting patents on inventions which would have been inevitably discovered by someone else within a short period of time even in the absence of any patent system does not promote the useful arts and is economically counterproductive.”

    Big Hairy Rat, 35 USC 103 talks about the “time the invention was made”, not about five or 10 years (or some other short time period) from that time. Perhaps you need to talk to Congress.

    It seems to me that according to your logic, in order to promote the progress, a potential patentee need not just be first, but he needs also to work in a field with few researchers or one that is not progressing quickly overall (i.e. one that would not advance without him). My guess is your idea of “non-counterproductive patents” would effectively slow down the progress in fast moving/crowded research fields because of lack of reward for the cutting-edge research and the ease of following for the corporate giants. But I on the other hand would think that the crowded and fast moving research fields are made so by the market (think AIDS, cancer, genetics etc.), and therefore they are the most important fields and should be the most rewarded.

    For example, IBM brought GMR to market exactly 10 years after its discovery by Fert and Nobel-prize winner Grunberg (not IBM employees, working separately) to (at the time, it was thought) circumvent the so-called superparamagnetic limit (which today no longer seems to be a limit, perhaps). IBM has obtained all the pioneer patents on “spin valves” (the only commercially viable form of GMR for low strength fields).

    link to research.ibm.com

    Once spin valves were discovered (and in hindsight to the untrained eye, you might even say that “once GMR was discovered”: GMR- US4949039, IBM- US5206590), any skilled and large research team of Ph.Ds working in the field (with economic incentive to pursue it) might have commercialized them within 20 years instead of 10 and at hundreds of millions of cost. But if private industry didn’t want to sink the research money, I’m quite sure that DOD or universities would have come up with commercial prototypes in 30 years or less (that should be slow enough for them to get patents that are “non-counterproductive”, right?) and licensed it for commercialization in say 35 years.

    So you’re saying IBM shouldn’t have been rewarded with patents for being *first*, and letting us enjoy since 1998 what otherwise may not have been commercialized for perhaps several years more now? And the fact that they had a 20 year “window” within which to exploit commercial exclusivity didn’t act as an incentive for them to commercialize it in 10 years? [Spintronic research is a very crowded and fast moving field. Your hard disk uses GMR.]

    P.S. Simultaneous discovery, or discovery by multiple parties at about the same time, can already be used as rebuttable evidence of non-obviousness. But just because something will be obvious next year does not, under 35 USC 103, make it obvious and non-patentable today, nor (in my opinion) should it.

  12. 50

    “Thus, Congress may authorize the issuance of patents, but doesn’t have to. But, Congress may NOT authorize the issuance of patents for stuff that isn’t “innovative”… So, those who think there’s a constitutional right to a patent are way off. There’s actually a built-in bias against them”

    I don’t think this built-in bias goes so far as to establish a minimum standard for obviousness. The IP clause on its face requires some advance over the prior art, but Congress could set 103 at some point where they believe that some “subjectively obvious” inventions get created and promulgated faster would occur without a patent system. Further, the scrutiny for whether Congress has picked the right standard is simply “rational basis” (i.e. essentially non-scruity.)

    Further, this analysis ignores the possibility of Congress create IP schemes under the Commerce Clause.

  13. 49

    Big hairy rat is right. As the Court said in Graham, “Congress may not authorize the issuance of patents whose effects are to remove existent knowledge from the public domain… Innovation, advancement, and things which add to the sum of useful knowledge are inherent requisites in a patent system which by constitutional command must ‘promote the Progress of … Useful Arts'”

    Thus, Congress may authorize the issuance of patents, but doesn’t have to. But, Congress may NOT authorize the issuance of patents for stuff that isn’t “innovative”… So, those who think there’s a constitutional right to a patent are way off. There’s actually a built-in bias against them…

    So let’s quit complaining and be glad there’s a patent system at all…

  14. 48

    Mr. Stonecker wrote: “there was no “constitutional bar” as that terms is currently used.”

    SCOTUS in Graham v. John Deere said:

    “At the outset, it must be remembered that the federal patent power stems from a specific constitutional provision which authorizes the Congress “To promote the Progress of . . . useful Arts, by securing for limited Times to . . . Inventors the exclusive Right to their . . . Discoveries.” Art. I, § 8, cl. 8. [Footnote 1] The clause is both a grant of power and a LIMITATION.” (EMPHASIS ADDED BY BIG HAIRY RAT)

    There is a constitutional bar below which Congress cannot go in permitting patents and the legislation should, if possible, be interpreted in a manner consistent with that limitation. If it cannot be so read, it must be struck down.

    Mr. Stonecker also comments that a well defined system of property is necessary for the effective functioning of the economy. In the absence of transaction costs and wealth effects, Coase’s theorem tells us that well defined property rights are what is needed. A more complete economic theory tells us that transaction costs are important and hold up problems are real when property rights are defined and allocated on a fragmented basis. We need not merely well defined rights but appropriate rights.

    Granting patents on inventions which would have been inevitably discovered by someone else within a short period of time even in the absence of any patent system does not promote the useful arts and is economically counterproductive.

  15. 47

    “If I understand you to mean that there is a standard for patentability beyond what is set out in 103, then I strongly disagree. If you simply “look to case law,” then what will happen is the rhetorical nonsense that SCOTUS spouted in Anderson’s-Black Rock and Sakraida about “the improbability of finding patentability in a combination of old elements” and requiring “synergy”. Giving courts, especially SCOTUS, such license improperly ignores the express language 103.”

    In pertinent part, 103 states a patent may not be obtained “if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.”

    My comment above was not intended to imply that courts should be at liberty to conflict with this standard. Instead, how the term “obvious” in 103 is interpreted by courts will greatly affect the patentability bar as set by 103, and such variation would not necessarily create a conflict with 103. For example, I am not aware of a clear-cut argument demonstrating the incompatibility of KSR with 103.

  16. 46

    “Mr. Slonecker — Thanks for your continued comments. I believe that Typepad is attempting to beef-up security to prevent spam. I also have a list of banned words and will e-mail them to you.”

    See here:

    link to everything.typepad.com

    And a comment to Typepad from a Typepad blogger (I wonder if the misspellings were necessary):

    “This is rediculous.

    Out of 48 comments in my great new “Spam folder” this morning 46 were regular comments.

    THERE WAS NO SPAM ON MY BLOG BEFORE THIS GREAT NEW FEATURE WAS INTRODUCED.

    I am disgusted. Your IT folks have no idea of what they are doing. The help-desk doesn’t know s*** and does anything but help.

    Tell me: Why do I pay for this junk?

    Posted by: b | December 19, 2007 at 12:00 PM”

  17. 45

    Mr. Slonecker — Thanks for your continued comments. I believe that Typepad is attempting to beef-up security to prevent spam. I also have a list of banned words and will e-mail them to you.

  18. 43

    For God’s sake, what is happening with Typepad? Yet another post, with nary a problematic word, flagged as potential spam.

    This is getting ridiculous and is certainly placing a damper on my willingness to continue participation on this blog.

    Mr. Crouch: Please explain what is going on and what can be done to avoid this from happening.

  19. 42

    “A literal reading of PHOSITA sets the bar for patentability unconstitutionally low.”

    It may be useful in coming to grips with this and other issues that grace current discussions of the patent system and reform for practitioners, academics, and commentators alike to review the ebb and flow of the law as embodied in the Acts of 1790, 1793, 1836 and 1870.

    Following so closely on the heels of the Constitution’s ratification (November 1788), I have always considered the Act of 1790 (enacted April 1790) to be a fair reflection of how Article 1, Section 8, Clause 8 was viewed by the framers of our Constitution. Several basic principles quckly became apparent when I fist engaged in this exercise. First, there was no “constitutional bar” as that terms is currently used. Second, the concept of “first to invent” was the rule of the day with the Act of 1790 (See: Sections 5 and 6). Limitations of what was not an invention was first stated in in the Act of 1793 (See: Section 3). Interferences were likewise explicity reconized in the Act of 1793 (See: Section 9). Examination was not the order of the day under the first two acts, with grants being largely based on a registration system. Third, the Patent Office was not created until enactment of the Act of 1836, at which time a rudimentary form of examination was first implemented (See: Section 7) Fourth, each of the first three acts were devoid of any “claiming requirement”. That concept did not appear until the Act of 1870 (See: Section 26). Lastly, even as late as the Act of 1870, the rights granted to a patentee were affirmative in nature and not exclusionary.

    What has transpired over the ensuing years is that our federal court system has systematically imposed “requirements” nowhere found within the clear language of the first four acts. If anything, the patent system as we now find it today is in large measure a creature of judicial construction, and in many respects such construction is, shall I dare say, not entirely consistent with statutory pronouncements contained in the first four acts.

    The Act of 1952 is, of course, the first “modern” attempt at distilling the transformations that had taken place over the preceeding 162 years. It was not crafted in a vacuum by congressional aides and lobbyists, as is now largely the case. It was crafted by persons (most notably Giles Rich and Pat Federico) who had a firm handle on the law’s history. Just like the predecessor acts, it too left some concepts to the “sound discretion” of the federal courts to “fill in the blanks” whenever significant issues of interpretation arose.

    What I find most troubling as the “law” currently exists is the hypertechnicality with which our courts have chosen to approach statutory construction. A relative simple and straightforward concept of law has been transformed into a system that I daresay would be unrecognizable to the Constitution’s framers. Couple this with the rise in the propensity for federal agencies to engage in rulemaking (the most recent examples of which are generating discord, the likes of which I have rarely seen), and I have to wonder if the system as it currently exists does in fact serve its original, broadly stated constitutional purpose of promoting the useful arts (a term that was originally given wide latitude). The more I read the more I become convinced that this is not the case, due in no small measure to the ramblings of a Supreme Court devoid of historical perspective and inclined to wrongly view patents as “monopolies”.

    I have always viewed as requirements for the conduct of our economy the need for a well-defined monetary system, a well-defined system for contracts, and a well-defined system for property. Without these it is well nigh impossible for business to be conducted in a relatively stable and predictable manner. It seems to me that the last requirement as it pertains to patents has begun to deviate in a manner I believe does not bode well for our economic system.

  20. 41

    “In fairness, I don’t think the language of 103 sets a clear standard for where the patentability bar should be, therefore we look to case law.”

    If I understand you to mean that there is a standard for patentability beyond what is set out in 103, then I strongly disagree. If you simply “look to case law,” then what will happen is the rhetorical nonsense that SCOTUS spouted in Anderson’s-Black Rock and Sakraida about “the improbability of finding patentability in a combination of old elements” and requiring “synergy”. Giving courts, especially SCOTUS, such license improperly ignores the express language 103.

    In enacting 103, Congress set what the “bar” for “patentability” should be; the Federal Circuit got that message (loud and clear) and I frankly wish SCOTUS would do the same, instead of mucking up our area of the law with rhetorical nonsense. That the language of 103 isn’t necessarily easy to apply I will grant. The Federal Circuit with the TSM test (applied flexibly) has at least tried to make the language of 103 easier to apply. Thats more than I can say of what SCOTUS did in KSR International which does nothing more to help us, the lower courts, and especially a non-legally trained patent examiner apply the standard for obviousness defined in 103 than SCOTUS did 40 years earlier in Graham.

  21. 40

    “A literal reading of PHOSITA sets the bar for patentability unconstitutionally low”

    It does nothing of the sort. Nowhere does the Patent Clause define what the standard for grant of a patent should be, only that the exclusive rights be for limited times. In fact, Congress did us a service in enacting 103 so we would have a “standard” where none really existed before (other than as a figment of the courts’ imagination and an elusive and confusing one at that, especially whenever SCOTUS opined on the subject).

  22. 39

    103 sets a standard, albeit one with virtually the same degree of specificity as the venerable “reasonable man/person”.

    What 103 does do, however, is at least attempt to place such a mythical person in a context where what he/she is attributed as knowing bears at least some relationship to art relevant to an invention, i.e., “…to which said subject matter pertains.” My observation above is merely that the portion quoted from 103 is continuously ignored. Is it reasonable (there is that word again) to assume that a person skilled in an art specifically identified in the PTO’s classification system is likely to resort to teachings in wholly unrelated arts to “fill in the blanks” for his/her invention?

    Sometimes the answer is clearly “yes”. Sometimes it is “no”. My concern is that many courts seem prone to default to the former almost as if it is an irrebutable presumption.

  23. 38

    “Since the governing case law at that time was strict TSM, I still stand by this impression as accurate at that point in time.”

    Indeed.

  24. 37

    In fairness, I don’t think the language of 103 sets a clear standard for where the patentability bar should be, therefore we look to case law.

    But this does remind me of when I started out in this business, and heard the explanation of the legal fiction of PHOSITA for the first time.

    My reaction after a few minutes thought was “OK, the PHOSITA is omniscient with respect to the prior art, and fully understands the relevant references, yet somehow manages to have the reasoning capability of the village i***t.”

    Since the governing case law at that time was strict TSM, I still stand by this impression as accurate at that point in time. I got a dirty look from my mentor, but no substantive disagreement…

  25. 36

    In fairness, I don’t think the language of 103 sets a clear standard for where the patentability bar should be, therefore we look to case law.

    But this does remind me of when I started out in this business, and heard the explanation of the legal fiction of PHOSITA for the first time.

    My reaction after a few minutes thought was “OK, the PHOSITA is omniscient with respect to the prior art, and fully understands the relevant references, yet somehow manages to have the reasoning capability of the village idiot.”

    Since the governing case law at that time was strict TSM, I still stand by this impression as accurate at that point in time. I got a dirty look from my mentor, but no substantive disagreement…

  26. 35

    “You’re absolutely correct, we need consider all of the language of 103, including how it defines what a PHOSITA is.”

    A literal reading of PHOSITA sets the bar for patentability unconstitutionally low.

  27. 34

    Michael,

    You’re absolutely correct, we need consider all of the language of 103, including how it defines what a PHOSITA is. In fact, what you bring up is the main item that really varies how the claimed invention is (or should be) assessed versus the relevant art. Thanks for mentioning this overlooked portion of 103.

    Yeah, I can just see the litigators dredging up Sakraida and Anderson’s-Black Rock in all their ugliness. It’s so much easier form them to spin such rhetorical nonsense, versus as the judge to roll up their sleeves and figure out what the claimed invention is, what the art says and then making an objective judgment as whether or not the claimed invention is obvious to that PHOSITA to “which the subject matter of the invention relates” in view of that art (I’m assuming the claimed invention is at least different or novel in some respect). But at least by “rolling up the sleeves” you do justice to 103 which SCOTUS does not.

    Alway enjoy and learn from your commentary, let’s continue this trend

  28. 33

    I did not mention the other three who joined Kennedy only because he was the author, though clearly each seems in accord with his view concerning patents in general. Re Scalia, at least he exhibited an understanding of the practicing versus non-practicing argument, coming down squarely on the side that such a distinction is irrelevant and of no moment.

    Re your comment “For example, in my opinion SCOTUS continues to completely ignore, or at most give lip service to, the language of 35 USC 103…”, I am beginning to become more than just a bit upset that people stop reading 103 once the have reached the term PHOSITA. They all seem to forget, or deliberately ignore, that 103 continues by defining such a person in terms of the art to which the subject matter of an invention relates. Long ago the PTO implemented this latter part of 103 via its classification system, and yet I see nary a mention in any decision of recent vintage that recognizes what the classification system is and how it relates to defining what PHOSITA is actually being talked about. If 103 is to be given any meaning consistent with 103, then the entirety of 103 has to be noted. Cherry picking terms does violence to the statutory provision.

    Yes, Sakraida and Anderson’s have once again been resurrected in the context of apparatus…”nothing more than old stuff combined, resulting in something which anyone with common sense would have readily been able to do had they been inclined to do so.” While this is certainly better than the silly “flash of genius” test of old, I would not be surprised to see it too once more rear its ugly head.

  29. 32

    “My assumption is that you don’t agree with the concurring opinion by Justice Kennedy in eBay[.]”

    That’s correct. I think Justice Kennedy’s concurring opinion is particularly misguided in suggesting (1) that circumstances have changed and the previously commonplace practice of injunctions issuing merely reflects earlier, different circumstances; (2) that non-praciticing licensing entities are second-class patent citizens who extort “exorbitant fees” by using “undue leverage”; and (3) business method patents have less significance, are vague, and have suspect validity.

    As to items 1 and 3, until the courts says “business method” patents — whatever that may mean in their minds — do not claim statutory subject matter under 101 or until the legislature removes the same from the definition of 101, “business method” patents should be treated the same as any other class of subject matter under 101 for purposes of granting or denying an injunction. To do otherwise, would inject even more uncertainty than what eBay has done and thus embolden infringers to not settle their disputes.

    As to item 2, a patentee only has leverage up to the cost of the design arounds, if the court agrees to delay the injunction a reasonable time for implementing the design around. So why not give the infringer time to implement the design around and then let the parties decide the true value of the invention?

  30. 31

    Michael,

    Not only Kennedy, but also at least Breyer, Souter and possibly Ginsburg seem to have an “animus” against patent law generally, or quite possibly the Federal Circuit as you suggest. (In Scalia’s case, I sense simply ignorance because he hasn’t written an intelligible decision that I’ve seen yet in the IP area.) Whatever the reason, my opinion of SCOTUS to render anything intelligible, logical or even consistent with the statutes in the patent area continues to wane. For example, in my opinion SCOTUS continues to completely ignore, or at most give lip service to, the language of 35 USC 103, as reflected by what SCOTUS says in KSR International.

    You bring up a very enlightening point (and not a small point at all) in MercExchange about what the patent(s) at issue actually claims. Unfortunately, that’s beyond SCOTUS to comprehend or deal with, so instead they resort to rhetorical nonsense like “business method” patents.

    I really like your thought about processing the KSR decision in the Sakraida apparatus. The only thing I would suggest is to add the Anderson’s-Black Rock decision. That SCOTUS apparently resurrected in KSR the skeletons of Sakraida and Anderson’s-Black Rock about the “improbability of finding patentability in a combination of old elements” is mind boggling and must have the late Chief Judge Markey rolling over in his grave. SCOTUS would do well to simply bury these two ill-considered and nonsensical decisions forever (I have another expression for this but it’s too profane to post).

  31. 30

    “Seriously, the ‘harm’ flowing from the the injunction is hardly the end of the world from eBay.”

    That’s right. In infringement cases, the infringer’s success can be (1) unrelated to the infringement or (2) related to the infringement. If unrelated, it’s not the end of the world because the public will still benefit of the truly valuable, non-infringing services. If related, the public is only harmed from the loss of a provider of the patented services — but that’s true in any case and shouldn’t be given much, if any weight. (And as I noted above, if courts aren’t going to force compulsory licenses for life-saving drugs, should “Buy it Now” be any different?)

  32. 29

    “How can anyone shill on behalf of a piece of junk like MercExchange’s patent?” — MM

    Because neither you nor anyone else has proven in accordance with the law that the patent is invalid, Malcolm. The patent was issued and is presumed valid. People suggesting that patent rights should be enforceable whether the current owner is a practicing entity or a “troll” are hardly guilty of being a “shill,” but standing up for the well known principle that the ends do not justify the means. Your opinions concerning business method patents neither change the state of the law nor have bearing on whether MercExchange is “worthy.”

    You have the same opportunity as everyone else to challenge this patent that so offends you within the USPTO. If you’re so certain of your conclusion, I suggest that you make use of that opportunity. In the meantime, MercExchange is due its damages in the same way that every other patent owner would be. At least this judge appears to acknowledge that continuing infringement can be subject to enhanced damages, so that eBay may be forced to negotiate a license rather than rely upon a judicially-created compulsory license.

  33. 28

    “Am I the only one that thinks EBAY has sucked the life out of patents?”

    I am not prepared to go quite that far, but it does seem to have fanned the flames in favor of denying equitable relief, both pre and post trial. Injunctive relief seems to be on life-support, and there are some who clearly want to terminate same.

    I believe that KSR, and especially after reading the district court’s eBay opinion denying a permanent injunction, is more along the lines of the sentiment you express.

  34. 27

    I sent my comments to Mr. Crouch and asked if perhaps he might post them. There is nothing in them that is even in the slightest questionable, except, perhaps, to the Typepad servers.

    EG,

    I have to wonder if Justice Kennedy’s animus was due to patent law in general, or if it was more in the nature of a comment directed specifically to the CAFC. I believe the latter, but its inclusion was ill advised given the single issue before the court.

    Just a small point I believe is worthy of note: The ‘265 patent that is being talked about is not a “business method” patent. It is for apparatus. The “business method” claims are contained in the other two patents held by MercExchange, and even then each of them contain both apparatus and method claims. Of course, this will mean that those who castigate the ‘265 patent on the erroneous assumption that it is for a business method will now change course and begin spouting the mantra “KSR, KSR, KSR!”. Personally, how nice it would be to take the KSR decision and process it with the Sakraida apparatus. I believe they both fall within the same PTO class.

  35. 25

    ‘Disgruntled’ pro se inventors…hmm, must be an oxymoron. We are quite happy not to pay an attorney 12-15 grand to write our pat. app-not to mention the self-satisfaction of ‘doing it yourself’.I guess that means that inventors that use attorneys are not ‘disgruntled’. Quite a funny statement, actually.

  36. 24

    SF,

    My assumption is that you don’t agree with the concurring opinion by Justice Kennedy in eBay, and if so, I completely agree with you. In an article I wrote on the eBay case, I said the following about Justice Kennedy’s ill-considered and ill-advised concurring opinion:

    What is particularly distressing about Justice Kennedy’s concurring opinion is the further comments he makes about injunctive relief in the context of patents on “business methods”. Why Justice Kennedy felt compelled to make these unfortunate remarks about applying the traditional “four-factor test” to patent cases generally and “business method” patents specifically is anybody’s guess. No citation is made by Justice Kennedy to the record, other facts or even case law to support these remarks. These remarks are not only completely unnecessary, but completely inconsistent with the holding in the eBay case that there is nothing “unique” about applying the traditional “four-factor test” to patent disputes. One can only hope that these regrettable remarks will be ignored as the dicta they are. If not, these remarks may be cast unfortunate, as well as erroneous, doubt on the validity of many patents characterized (rightly or wrongly) as involving “business methods.”

    Unfortunately Kennedy’s ill-advised concurring opinion was picked up on in the z4 Technologies v. Microsoft. Sometimes I wish that the SCOTUS Justices would have the good sense to realize that what they’re addressing isn’t even part of facts before them, and simply keep their comments to themselves. But that would asking for too much, eh?

  37. 23

    Could we please be a bit more civil and not use the derogatory “trolls”. We would not call landlords land trolls, nor call car companies car trolls. MercExchange, the company, does for patents exactly what the owner/operator of an office building does when they do not occupy any space in the building. And they enable a little guy to make some money off his or her patent when the infringer is a huge company like eBay.

    On the merits, IMHO, the learned district judge’s comments about eBay’s effect on the economy reflect the sentiments of an earlier era, about the time of Pres. McKinley, not what one might expect of a chancellor in equity.

  38. 22

    The adjective “f1ipping” (when spelled correctly) will also block the post. Obviously we won’t be able to describe USPTO conduct on Patently-O anymore unless we engage in self-censoring of our self-censoring.

  39. 21

    Michael, I’ve heard rumors that use of the adjective “stoopid” can result in a blocked post when spelled correctly.

  40. 20

    I just attempted to upload a comment, only to receive a notice that Typepad had flagged it as potential spam. Is this something that others have noted? I have had it happen twice over the past several weeks.

  41. 19

    Yes ip-esq,

    It is not only “Easy!,” that’s Constitutionally according to Hoyle.

  42. 18

    I tend to agree with SF. The patent is still valid. If it is invalid out of ReExam then so be it. But now, right now, Ebay is infringing and it owes money to mercexchange (per jury verdict).

    Also, the PE v. NPE entity distinction is absurd. Patents are property and can be assigned, etc. If the Assignee doesn’t practice it shouldn’t affect a remedy…What about practicing entities that place patents in holding companies for tax purposes? Technically speaking, those holding companies do not practice the invention.

    If we are looking for a bright line rule… how about this…

    IF YOU INFRINGE, INJUCTIONS ARE AUTOMATIC. You can avoid injunction by paying 2x damages.

    Easy!

  43. 17

    Hello Caveman,

    It is makes little sense to try to compare:

    (a) yesterday’s Constitutionally empowered U.S. patent system,

    (b) today’s evolving into nothing U.S. patent system, and

    (c) the European and Asian patent systems.

    In answer to your question, neither, but thanks for asking.

    Regarding your comment about “viable challenges between small entities and large entities,” if you only knew! However, please keep on believing, and those good patent times may come back.

    Historically, the patent pendulum swings both ways. I hope to live/fight so long for the next cycle.

    (PS: I’d sooner buy the brooklyn Bridge than MM’s view.)

  44. 15

    “keep in mind that no one is suggesting that eBay will be shut down — they’ll just have to stop using the “Buy It Now” feature, assuming that still infringes. ”

    The “Buy It Now” feature is very popular with Congressional represenatives and Senators. ;)

    Seriously, the “harm” flowing from the the injunction is hardly the end of the world from eBay. Yes, it will “hurt” them. But so what? Everybody gets hurt in the world of big business. Like digital TV broadcasts and Blackberries, nobody really needs crxp like “Buy it Now” in their life.

    But a valid patent claim covering a “Buy It Now” feature which ends an auction early? Please, give us all a break.

  45. 14

    **The opinion notes that “eBay’s success pre-dates its infringement.”**

    The point being that the “Buy It Now” option was not a factor in eBay’s success and thus there is no evidence that eBay’s success is due to its alleged “theft” of MercExchanges IP.

    How can anyone shill on behalf of a piece of junk like MercExchange’s patent? Oh yeah, I forgot: it’s “the American way” to play this game and an entire little cottage industry of “small entities” have invested a lot of time in their mother’s basements trying to scam the PTO into granting them a junk patent that they can play with.

    Then when it all blows up, they blame the Supreme Court for “not getting it.” Pathetic.

  46. 13

    “Moreover, certainly the patent system is more fouled up than most, maybe all.”

    This is pure hogwash.

    The U.S. patent system is a great system. Probably the only remaining great system that still allows viable challenges between small entities and large entities. The European and Asian systems are merely registration systems.

    The only people who seem to denigrate the U.S. system are casual outside observers and disgruntled pro se inventors. Which one are you “Just an ordinary…”?

  47. 12

    … keep in mind that no one is suggesting that eBay will be shut down — they’ll just have to stop using the “Buy It Now” feature, assuming that still infringes.

    So the only “harm” to the public is that eBay will stop the infringing activity. If that is the only harm contemplated, it really is a strange result that the more eBay infringes, the more the public relies upon that infringement, the more the public is “harmed” if eBay has to stop infringing, and thus the less likely an injunction will issue. This creates more incentives to infringe, right?

    Isn’t the public always “harmed” when an infringer has to stop infringing? Think about pharmaceuticals. Wouldn’t the public be harmed if a generic had to stop producing a drug and there are fewer providers — or just a single provider? Of course. Here, ME partnered with a few providers, but the public could “benefit” from eBay also providing the “Buy It Now” feature. But, if life-saving drugs can so limited without running afoul of the public interest prong, why should “Buy It Now” be different?

  48. 11

    “The opinion notes that ‘eBay’s success pre-dates its infringement.'”

    So there’s a disconnect in the courts logic. The public apparently can still benefit from that big success without eBay’s infringement, right?

  49. 10

    Laughable indeed.

    Even though the concurring opinion of the Supreme Court case questioned business method patents (suggesting they were of “dubious validity,” that is, of statutory subject matter), they’re still valid subject matter under the current state of the law. So why not focus on the facts, eh?

    Your assumption that “the plaintiff contributes nothing to the public good” truly ignores the quid-pro-quo. The disclosure is sufficient. If not, Congress is free to change the law to require practice. Until it does, your argument rings hollow.

    Lastly, I was discussing the public interest prong and noted that it’s a strange, if not incorrect, result that the more someone infringes, the less likely they’ll be enjoined. Why should we create incentives to violate patents?

  50. 9

    Dennis, is there really any good faith argument that MercExchange should be awarded an injunction?”

    If I may answer the question…yes. eBay has been adjudged an infringer of someone else’s property.

    “ME is the prototypical NPE troll”

    MercExchange, so far as I am aware, was practicing the invention at the time the litigation commenced. It is still an ongoing company for internet sales, and has granted licenses to others. Of course, it and its licensees are not in the same league as eBay when it comes to sales.

    “and allowing injunctive relief would amount to a holdup for private benefit with no benefit to the public or the patent system.”

    Do you really mean to suggest the “Buy It Now” feature used by eBay is so important to the public good that eBay should continue to have the right to use MercExchange’s property without the latter’s approval?

  51. 8

    Dear me (oh dear me),

    “The system works, lets let it do its job!”

    Sometimes it does work, bravo, and sometimes it does not work, “sicko.”

    When so many innocents went to jail for horrendous crimes they did not commit, only to be subsequently found innocent by modern evidence, how can one say the system works? Moreover, certainly the patent system is more fouled up than most, maybe all.

    As you know, I hope you do, such injustices are not Constitutional. Nor is our patent system as it is operating today Constitutional, not by a long shot.

    The truth is, today’s systems suck – they work only some times, sort of at random, and they therefore are not performing up to their Constitutional mandates. In this regard, random is bulsit.

    The sad sad truth be known, we are approaching a totalitarian nation status.

    Are you comfortable with that? Is everybody out there comfortable with that? Our Great American democratic nation so disgraced? Speak out, speak out loudly, if you are not happy with that!

    (Don’t listen to Malcolm — obviously, he is an ignoramus.
    MM, nothing personal, just the facts. However, I appreciate
    you when you limit your mindless comments to red meat.)

  52. 7

    Dear me (oh dear me),

    “The system works, lets let it do its job!”

    Sometimes it does work, bravo, and sometimes it does not work, “sicko.”

    When so many innocents went to jail for horrendous crimes they did not commit, only to be subsequently found innocent by modern evidence, how can one say the system works? Moreover, certainly the patent system is more fouled up than most, maybe all.

    As you know, I hope you do, such injustices are not Constitutional. Nor is our patent system as it is operating today Constitutional, not by a long shot.

    The truth is, today’s systems suck – they work only some times, sort of at random, and they therefore are not performing up to their Constitutional mandates. In this regard, random is bulsit.

    The sad sad truth be known, we are approaching a totalitarian nation status.

    Are you comfortable with that? Is everybody out there comfortable with that? Our Great American democratic nation so disgraced? Speak out, speak out loudly, if you are not happy with that!

    (Don’t listen to Malcolm — obviously, he is an ignoramus.
    MM, nothing personal, just the facts. However, I appreciate
    you when you limit your mindless comments to red meat.)

  53. 6

    “Attention Infringers: Infringe in a big way and you’ll be more likely to avoid an injunction. After all, the public benefits from big-time infringers, and therefore, they shouldn’t be enjoined!!”

    The opinion notes that “eBay’s success pre-dates its infringement.”

  54. 5

    There must be balance, and the courts are finding the correct and appropriate one, so lets not mess it up with patent reform and the new rules.

    The system works, lets let it do its job!

  55. 4

    “Attention Infringers: Infringe in a big way and you’ll be more likely to avoid an injunction. After all, the public benefits from big-time infringers, and therefore, they shouldn’t be enjoined!!

    Sigh.”

    The public doesn’t benefit from extremely dubious patents like MercExchange’s, which exploit flaws in the patent system to extract rents without advancing the state of the art/innovation/disclosure.

    When you focus on the infringer exclusively, as most “strong patent” supporters do, you ignore the fact that the system is a quid-pro-quo – when the plaintiff contributes nothing to the public good, its argument that it should extract full rents and equitable relief is weaker.

    Or, in other words, patents are just regulation, and the cost/benefit analysis here weighs heavily in favor of the defendant, as in most NPE troll cases.

  56. 3

    Dennis, is there really any good faith argument that MercExchange should be awarded an injunction? ME is the prototypical NPE troll and allowing injunctive relief would amount to a holdup for private benefit with no benefit to the public or the patent system.

    The eBay decision was a clear signal from the Court that the property paradigm of patents, pushed so hard by the CAFC and the patent bar, is (a) not how they were historically envisioned and (b) disruptive of the balance stuck by the patent laws. Patent law is a regulatory framework, and the fact that the plaintiffs here are not competing in the marketplace, along with all of the other factors, should be sufficient to deny the injunction given the balance of benefits and harms. The District Court’s analysis is spot-on.

    In fact, as the eBay Court recognized, the point of the injunction for MercExchange and plaintiffs like it isn’t to prevent harm, but to boost the plaintiff’s money damages, which are adequately accounted for by the verdict.

    But based on your squib here, it seems you disagree, and believe that the identify of the plaintiff (NPE, two employees/owners who are both patent prosecutors) should be irrelevant? Or perhaps that eBay was wrongly decided by the Court?

    Funny note for anyone who has studied remedies – There’s no real basis in law for the Court’s test. Two of the “factors” are just mirrors of the irreparable injury rule, and the other two factors seem to come from PRELIMINARY injunction cases, which should be irrelevant here, not the least because the likelihood of success on the merits isn’t a factor.

  57. 2

    “eBay is a multibillion dollar corporation whose online marketplace brings together tens of millions of buyers and sellers around the world and eBay unquestionably has a substantial impact on the United States’ economy”

    Attention Infringers: Infringe in a big way and you’ll be more likely to avoid an injunction. After all, the public benefits from big-time infringers, and therefore, they shouldn’t be enjoined!!

    Sigh.

  58. 1

    “Last week, Judge Friedman affirmed a $30 million verdict for MercExchange. EBay’s stock quickly rose on the news. [Link] EBay is appealing the final judgment — and is expected to argue that the patent is invalid under KSR v. Teleflex.”

    An obvious business method patent?

    Yeah, that sounds about right. And about time. Good riddance.

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