When Should Courts Permanently Enjoin a Patent Infringer?

eBay Inc. v. MercExchange, L. L. C.

MercExchange holds “a business method patent for an electronic market designed to facilitate the sale of goods between private individuals by establishing a central authority to promote trust among participants.” When MercExchange and eBay failed to reach an agreement on a licensing fee MercExchange took eBay to court and a jury found that is patent was valid. Later, a federal court applied a “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.” The question here is whether that was the appropriate rule to follow.

“Well-established principles of equity” require that for a plaintiff to win a permanent injunction it must demonstrate (1) that it has suffered an irreparable injury; (2) that remedies available at law 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.” The Court holds that principles of equity apply to the Patent Act, especially since it expressly provides that injunctions may issue “in accordance with the principles of equity.”

The Patent Act also declares that patents shall have the attributes of personal property (“subject to the provisions of [the Act]”), including “the right to exclude others from making, using, offering for sale, or selling the invention,” a right which the lower court used to justify its rule. The Court, however, states that “the creation of a right is distinct from the provision of remedies for violations of that right.” The Court also notes that this is analogous to the workings of copyright law. In response to assertions by the lower courts Justice Thomas, for the majority, argues that a patent holder does not necessarily fail to meet the conditions of the test above simply by failing to practice the patents (such as a university researcher). The majority here merely holds that the traditional four factor test is the correct one, without taking a position on what its outcome should be.

Chief Justice Roberts and Justices Scalia and Ginsburg concur, noting that “Discretion is not whim, and limiting discretion according to legal standards helps promote the basic principle of justice that like cases should be decided alike,” and that “in this area, as other, ‘a page of history is worth a volume of logic.’” Justices Kennedy, Stevens, Souter and Breyer concur and endorse the court’s role in issuing injunctions in accordance with the fourth part of the above test, arguing that “the traditional practice of issuing injunctions against patent infringers” does not rest, as the preceding concurrence suggests, on “the difficulty of protecting a right to exclude through monetary remedies that allow an infringer to use an invention against the patentee’s wishes."