Supreme Court decides eBay Inc. v. MercExchange

The U.S. Supreme Court issued its decision in eBay Inc. v. MercExchange, L.L.C. on May 15, 2006. The case clarifies when an injunction against patent infringement may be issued. The result is that there is no presumption that a prevailing plaintiff is entitled to injunctive relief. Rather, requests for injunctive relief in patent suits are to be determined under the same standards that apply to cases in general.

MercExchange sued the owner of the well-known eBay online auction service for infringement of a patent covering "an electronic market designed to facilitate the sale of goods between private individuals by establishing a central authority to promote trust among participants." Although the jury found that the patent was valid and infringed, the District Court denied MercExchange's request for a permanent injunction. On appeal, the Federal Circuit reversed based on its general rule that a plaintiff that shows validity and infringement is entitled to an injunction in the absence of exceptional circumstances.

The Supreme Court disagreed. It cited "well-established principles of equity" requiring a plaintiff to satisfy a four-factor test before a permanent injunction may be issued. Under that test, the plaintiff must show:

(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, 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 held that those general requirements apply to cases brought under the Patent Act, which expressly provides that injunctions "may" issue "in accordance with the principles of equity." The District Court has discretion whether to enter an injunction after the required showing has been made. The Supreme Court rejected the trial court's categorical denial of injunctive relief in cases where the plaintiff was willing to license its patent and was not commercializing it, but also rejected the Federal Circuit's presumption in favor of injunctive relief.

The court in eBay rejects "general rules" that either favor the grant of an injunction in patent cases, or that disfavor injunctions in particular classes of patent cases. In the future, District Courts will be required to determine requests for permanent injunctive relief in patent cases based on an application of the familiar four-factor test to the facts of the particular case.

For more information, contact John W. Scruton, Intellectual Property & Technology Service Group, Louisville office, at [email protected].