The Supreme Court took some observers by surprise Monday when it ruled for
in a closely watched patent dispute.
The case centered on whether a court should immediately be required to issue an injunction once it finds infringement of a patent. In practice, the dispute pitted the old economy vs. the new one. Some legal experts said the decision not to require an injunction could reduce the leverage of patent holders who sue even when they have no plans to commercialize an invention themselves.
"They are going to keep filing their suits, but I think their demands will be much more reasonable," says Steve Bauer, a partner with Proskauer Rose in Boston who represents tech companies in patent cases. "People who honestly believe that they don't infringe aren't going to settle as quickly."
Last year, a federal court denied MercExchange's request for a court order to prevent eBay from using its patent in the auction giant's Buy It Now service. eBay and other tech firms have contended that injunctions, which were routinely issued by courts, give too much leverage to patent holders. Tech fans point to
Research in Motion's
$612 million settlement this past March with patent-holding company NTP of Virginia as illustrating the danger of empowering so-called patent trolls.
"Would Research in Motion have settled if this decision had come down?" asks Mark Kesslen, a patent attorney at Lowenstein Sandler. He says he doesn't think so.
Investors have closely monitored the eBay case, which began in 2001. Buy It Now, in which users purchase goods directly instead of through auctions, accounted for about one-third of the value of the goods sold on eBay last year. Shares of eBay fell 22 cents to $31.27.
Some pundits didn't think eBay stood much chance of prevailing after several justices raised questions about the company's case during oral arguments in March. The case pitted tech's fears about the patent trolls against industry's fear that a pro-eBay ruling could squelch innovation by devaluing patents.
For that reason, the Bush administration and
Johnson & Johnson
Procter & Gamble
urged the court to side with MercExchange.
eBay's allies included
"We are extremely gratified by the Supreme Court's unanimous decision," says Jay Monahan, eBay's deputy general counsel, intellectual property. "The trial judge originally found in this case that money was sufficient, and denied an injunction. We are confident that when the District Court revisits this issue, particularly in light of the ongoing re-examination of the patents, that the result will be the same."
As expected, MercExchange saw things differently.
"We are confident that the district court, when it fairly applies the traditional principles of equity set forth in the Supreme Court's opinion, will grant the injunctive relief to which MercExchange is entitled," the holding company says.