eBay, Inc. v. MercExchange, LLC

Citation. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 126 S. Ct. 1837, 164 L. Ed. 2d 641, 78 U.S.P.Q.2D (BNA) 1577, 74 U.S.L.W. 4248, 27 A.L.R. Fed. 2d 685, 19 Fla. L. Weekly Fed. S 197 (U.S. May 15, 2006)

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CitationeBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 126 S. Ct. 1837, 164 L. Ed. 2d 641, 2006 U.S. LEXIS 3872, 78 U.S.P.Q.2D (BNA) 1577, 74 U.S.L.W. 4248, 27 A.L.R. Fed. 2d 685, 19 Fla. L. Weekly Fed. S 197 (U.S. May 15, 2006)

Brief Fact Summary.  Ebay, Inc. (Defendant) and MercExchange, LLC (Plaintiff) could not agree on a license for Plaintiff’s patent.  When Defendant proceeded with its website, Plaintiff sued for patent infringement and won damages arising from Defendant’s liability.  Plaintiff also sought a permanent injunction.

Synopsis of Rule of Law.  The traditional four-part equitable test for injunctive relief applies to Patent Act cases.

Facts.  MercExchange, LLC (Plaintiff) held a business method patent for an electronic sales market using a central authority.  It attempted to license its patent to eBay, Inc. (Defendant), but the parties failed to reach an agreement.  eBay (Defendant) proceeded with its website that allowed private sellers to list goods for sale at auction or at a fixed price.  MercExchange (Plaintiff) filed suit for patent infringement.  A jury found the patent invalid and awarded damages to Plaintiff for Defendant’s infringement.  Plaintiff filed a motion for a permanent injunction, but the district court denied it.  Plaintiff appealed and the federal circuit reversed based on the general rule that courts will grant permanent injunctions in patent infringement absent exceptional circumstances.  eBay (Defendant) filed its petition for a writ of certiorari, which the United States Supreme Court granted to determine the appropriateness of the general rule on permanent injunctions in patent infringement cases.

Issue. Does the traditional four-part equitable test for injunctive relief applies to Patent Act cases?

Held. (Thomas, J.)  Yes.  The traditional four-part equitable test for injunctive relief applies to Patent Act cases.  A party seeking an injunction traditionally must establish four elements: (1) it has suffered an injury beyond repair; (2) it has no adequate remedy at law; (3) an equitable remedy is justified after balancing the hardships between plaintiff and defendant; and (4) a permanent injunction serves the public interest.  These principles also apply to the Patent Act.  The district court and the court of appeals failed to apply these principles when considering the appropriateness of a permanent injunction in this case.  The district court impermissibly broadened the scope of the elements while the court of appeals applied a general rule for patent infringement cases.  The district court must apply the four-part test in patent cases as well as other equitable cases.  Vacated and remanded.

Concurrence. (Roberts, C.J.)  Historically, courts have granted injunctive relief in patent cases but that history does not guarantee a right to injunctive relief.  The four-part test must still be applied to determine the appropriateness of relief.

(Kennedy, J.)  The four-part test is appropriate.  Patent protection is now used by many companies as a way of securing licensing fees and the threat of injunctive relief as a way to secure exorbitant licensing fees. When considering injunctive relief, Courts should take the availability of money damages into account.

Discussion.  The Court considered MercExchange’s (Plaintiff) history of licensing the patent in determining that money damages were appropriate rather than injunctive relief.  In 2008, following years of litigation, the parties reached a settlement where MercExhange (Plaintiff) assigned its patents to eBay (Defendant).