The Supreme Court made a rather important ruling today in the case of eBay Inc. v. MercExchange, LLC., remanding the case back to the United States Court of Appeals for the Federal Circuit. The uninamous decision did not address the specific merits of the case, but argued that the process of getting an injunction against those accused of violating a patent should follow a four prong test:
Justice Thomas said that in resorting to the general rule, “just as the district court erred in its categorical denial of injunctive relief, the court of appeals erred in its categorical grant of such relief.”
In patent cases no less than in other kinds of cases, he said, the party seeking an injunction must meet a four-factor test. It must show that it has “suffered an irreparable injury”; that other remedies like monetary damages are inadequate; that an injunction is warranted; and that the public interest “would not be disserved by a permanent injunction.”
Companies are currently based entire business models on purchasing or developing broad IP patents then suing supposed infringers. The débacle of the SCO Linux suits, the Creative/Apple suit, and others have all been horrendous misuses of the patent system as a bludgeon against competitors rather than a way of preserving intellectual property rights. The concurrent opinion of Justices Kennedy, Souter, Bryer, and Stevens notes this factor:
But the other group of justices said that history was not necessarily a reliable guide in the new business climate of today. “In cases now arising, trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases,” this group, composed of Justices Anthony M. Kennedy, John Paul Stevens, David H. Souter, and Stephen G. Breyer, said in an opinion by Justice Kennedy.
Justice Kennedy’s opinion continued: “An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent.”
Indeed, in this case, Justice Kennedy is right. The patent system was never meant to be used offensively as has been repeatedly done in the past. This perverts the intention of having a patent system – to promote science in this country, not bludgeon competitors with spurious patent suits. By placing some reasonable restrictions on injunctive relief in this case, it prevents so-called “patent trolls” from bleeding companies dry while they try and drag on litigation, increasing the likelihood of a settlement. This decision tries to keep the playing field as level as possible – neither restricting intellectual property rights nor allowing spurious injunctions from continuing to cause problems for corporations like Research in Motion and others.
Our patent system is in need of some serious reform to meet the needs of a 21st Century marketplace. This ruling is an incremental, but still important, step towards restoring some semblance of sanity to our intellectual property laws.
