Editor’s Note: José Cortina is a member of the Research Triangle Park law firm of Daniels Daniels & Verdonik, P.A. TechLaw is a regular feature in LTW.
__________________________________________________________________________________________What happens when a court holds that a patent has been infringed?

Historically, this has resulted in an order known as an injunction, whereby the court tells the party found to be infringing that it must stop using the technology that was found to infringe. Since the judgment of the first court is often appealed to a higher court (and perhaps from the higher court to the highest court), and since the appeal process normally takes many years, being enjoined while the appeal is pending is tantamount to a death knell for the product that allegedly infringes. It is possible that this practice is about to change.

The Supreme Court recently agreed to review a patent infringement case against eBay. The review will consider whether to allow eBay to continue to use it’s “Buy it Now” function while the appeal of the lower court decision is pending. A federal District Court (or lowest level of federal court) jury found eBay liable for willful patent infringement of two patents owned by MercExchange; a third patent was ruled to be invalid and unenforceable.

As a result, eBay was order to pay $35 million in damages and faced a possible trebling of the damages because of the finding of willfulness…but no injunction was issued. The failure to enjoin was appealed. On appeal to the Federal Circuit Court of Appeals, only one patent was found to infringe but an injunction was issued based on that finding of infringement. eBay then appealed the granting of the injunction.

The Supreme Court has agreed to hear this appeal, which means it will review the general practice of granting injunction after a finding of infringement. Since the Supreme Court rejects the vast majority of cases it is asked to review, the decision to hear this case probably means that the Court wishes to make a statement on the particular issue.

This is interesting given the long-established practice by courts throughout the nation to issue injunctions against companies found to be infringing, even while their cases are being appealed. Critics of this practice have argued that the practice of issuing such injunctions unnecessarily impedes the business practices of companies who may ultimately succeed in overturning the verdict of infringement on appeal. They argue that any further harm to the patent holder can be compensated with an additional award of damages. The court will now formally address this issue. Its decision would be expected to provide guidance to the lower courts in future infringement actions.

Historically, and dating back to the 1800s, the award of an injunction against further infringement has been readily available to the courts. There has been a presumption that patent infringement causes irreparable harm to a patent owner, which harm cannot be compensated by an award of damages. Until the early 1980’s, however, it was common for an infringer to obtain a stay of the injunction pending appeal by posting a bond. In the early 1980’s the newly established Court of Appeals for the Federal Circuit ruled that where validity and infringement have been clearly established, immediate irreparable harm is presumed, and in such a case an injunction was the appropriate remedy. That Court then adopted the same rule of irreparable harm as applied to copyright infringement.

The issue of whether patent infringement should be enjoined is only one of many that have risen to new prominence since the federal courts ruled in 1998 that business methods are protectable through patents. While the issue is no more or less pressing to holders of non-software patents, the sheer number of cases related to infringement of software process patents, and the publicity related to them, brings the focus of the courts more and more into this area. As these patents affect the conduct of companies doing business in e-commerce, they have increasingly come under significant criticism. Many have argued that the U.S. Patent Office does not have the right resources to properly examine such patents and that as a result, many patents on well-known business methods have been improperly granted. The eBay/MercExchange dispute is one of many of this type, although watched more closely that others due to the players involved.

Interestingly, even though the Supreme Court has decided to review the case, any decision, favorable or not, may ultimately not affect eBay in terms of its ability to continue to conduct its business. eBay has revised the way it runs its sales such that it believes the new method does not infringe the MercExchange patents. In addition, the U.S. Patent Office is also reviewing the validity of the MercExchange patents involved.

While a decision by the Supreme Court may affect the long-established practice of granting injunctions after a finding of infringement, the decision may amount to being only a “blip on the radar screen.” Congress is already reviewing the practices of the U.S. Patent Office and there is a move to correct what many perceive to be obvious inequities and errors in the granting of many business method patents. In contrast, however, there is also legislation advancing in the House of Representatives which greatly expands the scope of process patents (traditionally the way of protecting business methods), in ways which affect how businesses do research abroad. Ultimately, while the Supreme Court may change the law, Congress may have the last laugh by changing established patent law in unpredictable ways, with unforeseen consequences.

Daniels Daniels & Verdonik, P.A. has been serving the legal needs of entrepreneurial and high technology clients for more than 20 years. A. José Cortina is a registered patent attorney who focuses his practice on the intellectual property needs of small to large technology companies, including providing patent, trademark, copyright, counseling, licensing, conflict resolution and transactional services. He is experienced in a broad range of technologies, including electronics, communications, computer hardware and software, biomedical, materials, and selected chemical and chemical engineering technologies. Questions or Comments can be sent to jcortina@d2vlaw.com