Thanks to N3WBI3 for the heads-up on this article.
Posted on 05/16/2006 10:51:56 AM PDT by ShadowAce
WASHINGTON, D.C. -
The U.S. Supreme Court has tipped the balance in patent disputes ever so slightly toward the users of patented technology and away from inventors, owners of intellectual property and the hated "patent trolls"--companies that make money by suing for infringement of patents they own but don't use.
In a victory for eBay (nasdaq: EBAY - news - people), the justices ruled unanimously that federal courts must weigh several factors before barring a patent infringer from using a contested technology or business method.
The online auction house had petitioned the Supreme Court to review the practice of automatically issuing a permanent injunction whenever a patent was found valid and infringed, arguing that the rigid standard was not grounded in the law.
At stake for eBay was the viability of the popular, fixed-price "Buy It Now" section of its Web site. MercExchange, a tiny, Virginia-based patent-holding company, won millions of dollars in damages when it successfully sued eBay for violating one of its patents related to the fixed-price auction feature.
Now the case will be sent back to the U.S. District Court where eBay originally won the right to continue operating "Buy It Now" while it designs around the patent it infringed.
For years now, the U.S. Court of Appeals' Federal Circuit in Washington, D.C., which reviews all appeals of patent suits, has slapped infringers with permanent injunctions as a matter of course, except in the most extreme circumstances.
But the Supreme Court ruled that traditional "principles of equity" must be taken into account before such a drastic sanction is imposed. These principles include whether the patent holder has suffered irreparable damage or whether monetary awards might be enough to compensate for the harm done to the patent holder.
In this case, a U.S. District Court stopped short of forcing eBay to shut down the service entirely, saying that MercExchange wouldn't be harmed if eBay continues to offer the service while it tries to design around the patents. MercExchange hasn't used its patents, the court wrote, and could eventually be compensated with additional monetary damages if the infringing continued. But on appeal, the Federal Circuit stuck to its rule of always handing down injunctions and reversed the decision.
The high court's decision deals a blow to patent trolls, which are notorious for using the threat of permanent injunction to extort hefty fees in licensing negotiations as well as huge settlements from companies they have accused of infringing. Often, those settlements can be far greater than the value of the infringing technology: Recall the $612.5 million that Canada's Research in Motion
(nasdaq: RIMM - news - people ) forked over to patent-holding company NTP to avoid the shutting down of its popular BlackBerry service.
Patent trolls have thrived as American industries have churned out more and more high-tech gizmos containing dozens or even hundreds of patented bits of technology. In accepting the case and ruling as they did, the justices seemed to have had it in mind to hem in their power.
But doesn't the ruling also hurt bona fide inventors, not to mention the many universities that fund their research and own the patents? To be sure, it plainly erodes the power that has been typically bestowed by a patent. Patent law unambiguously grants owners of intellectual property the same rights as regular property holders, including the right to exclude others from using their property. But the law also clearly states that injunctions "may"--not "shall"--be issued "in accordance with the principles of equity."
"All this is saying is that District Courts are free to use their discretion and to be fair. And it takes away a little of the edge from those patent-licensing operations," says Steven Bauer, a partner at Proskauer Rose in Boston who often represents biotech firms in patent disputes.
The justices drew the line on ruling out injunctive relief in all cases where the patent holder does not use the patents it owns to produce anything, as is often the case with universities. That makes the ruling somewhat less than an unmitigated victory for eBay, since the lower court had refrained from imposing an injunction on the basis of MercExchange's not using its patents.
The courts will have to work out on a case-by-case basis when an injunction is appropriate, says Mark Davis, a patent litigator at McDermott, Will & Emery in Washington, D.C. "There's going to be more uncertainty here, and it's going to take a while for the law to develop to figure out when you can expect an injunction," he says.
Thanks to N3WBI3 for the heads-up on this article.
So, as I read this: If I invent a cure for shingles that is like no other, and I patent it, but I don't produce it myself (not enough room in the Garage), then Merck can get the patent...? Sounds like another Eminent Domain style ruling....
Not really. The S. Ct. did nothing but re-establish some common sense to the process. It used to be an axiom that a patent suit was one in equity as well as law. Somehow the principles of equity were stripped from the process. No more and thank goodness.
Thanks for posting this. I hate Patent trolls, but I want protection for patent holders that actually want to make their products.
Sweet mother of Mercy! Is this the end of Lemelson?
The Federal Circuit went off the reservation and tipped the playing field in favor of the trolls because the possibility of being shut down by injunction was forcing defendants with a meritorious defense not to defend the case and to settle for extortionate payments because they couldn't take the risk.
This won't quiet down the Reynold's Hat wearers claiming Auto and Oil companies are sitting on energy efficient products.
No. The patent holder still owns the patent, and has the right to exclude. In my opinion, the cnet coverage here is more balanced. For example, it includes the snippet: "Some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves," and they should be given equal opportunity to obtain injunctions, Thomas wrote.
NTP was not a patent-holding company - the guy who founded the company was the original inventor. This misstatement casts doube on everything else in the article.
But you're saying they tipped the playing field in favor of the trolls...
Sorry, but it seems you're saying the opposite. (Yes, the MSM has a habit of misinterpreting rulings.)
Exactly. Common sense....
Now, if they would just bring back the RPM (reasonbly prudent man) rule that used to apply to civil lawsuits (burned by McD's hot coffee comes to mind), where Ambulance Chasers go after the deep pockets where the plaintiff is a complete idiot, and blames someone else who can enrich him/her.....
This uncontrollable tort juggernaut needs to be stopped by the simple application of common sense in the jury room (if only Liberals were barred from juries where "victimhood" is their creed in civil cases, but victims in criminal cases are only the DEFENDENTS who had a broken home, bad family experience, descendant of slaves, celebrity status, etc., etc. to exonerate them for murders, etc.)
Merck can use the patent *until* legal action is complete at which time you can be awarded for actual damages. Lets be clear this is not about a unique and innovative cure for shingles. The patent system is hugely abused by companies and individuals big and small and in the end the only winners are lawyers. The patent office is granting millions of patents which should not be granted and counting on the courts to settle it 'Grant them all and let the judicial system sort it out' is the way they have been operating for more than a decade. Let look at it another way, lets say you invent a product that someone has a trivial patent for a part of, they demand an unreasonably license fee for this patent (which should not have been granted in the first place) and demand a court shut you down before the issue of this patent is resolved.
The patent system was put into place to help with innovation and growth in the arts and sciences you cant honestly say its doing that now can you?
In most trials involving big guy vs little guy, the big guy always looses which is why there is so much $$$ in it for the firm.
Its also known as "Patent Laundering"
Absolutely not. If you're a small inventor and nobody's selling your invention, it does not hurt you to have a big company continue to infringe on your patent while the solution is worked out. You will still get your money in the end. In normal law, such injunctions are for when the other person continuing his actions will irreparably your business.
First, the district courts were responsible for this kind of patent even existing, then they tilted the law in favor of the patent holder and against how law is normally done in this country. Things have now tilted slightly towards more balance in the system. It is good.
NTP knew about prior art that would blow its case, and hired the original inventor with a non-disclosure agrement during the course of the trial.
ping
The roberts court has been interesting lately to say the least. I don't see much conservative yet. This court could turn out to be very independent and vote without thinking conservative or liberal. That would certainly be different.
What about individuals who have no way to produce a product? What about companies such as say Ampex who invented the Video Tape Recorder (VTR) for professional use, then invented the first VCR, then sold royalties of it to Sony and other oriental companies. They were still getting royalities for that and still getting royalities for other consumer products that were first used on profesional audio and video recording equipment, but have no intention of producing consumer products. Is that patent trolling? Seems a step in the wrong direction to me.
http://kellogg.northwestern.edu/news/hits/060219ct.htm
Thomas Campana founded NTP to protect his patent. It is not and never was a patent-holding company.
>>>I hate Patent trolls, but I want protection for patent holders that actually want to make their products.<<<
If someone invents new technology, but chooses to license the right to produce that product to others, rather than produce it himself, do you think that person should lose his right to the patent the first time an infringer comes along?
>>"Supreme Court Buries Patent Trolls"<<
This has to be a candidate for "Misleading Headline Of The Year".
>>>Often, those settlements can be far greater than the value of the infringing technology: Recall the $612.5 million that Canada's Research in Motion.<<<
Absolute nonsense. Research in Motion could have settled for a fraction of that amount, but chose instead to try to "bury the little guy".
Acutally, the Supremes said "we take no position on whether permanent injunctive relief should or should not issue in this particular case, or indeed in any number of other disputes arising under the Patent Act."
The traditional four-factor test applied by courts of equity when considering whether to award permanent injunctive relief to a prevailing plaintiff applies to disputes arising under the Patent Act. That test requires a plaintiff to 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 decision to grant or deny such relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion. These principles apply with equal force to Patent Act disputes. “[A] major departure from the long tradition of equity practice should not be lightly implied.” Weinberger v. Romero-Barcelo, 456 U. S. 305, 320. Nothing in the Act indicates such a departure.
The full text of the decision is available here in PDF format.
Lemelson was already killed by the CAFC with its ruling regarding prosecution laches.
Patenting a cure versus a technical idea is the problem. Now if I only had patented "compound interest rate" I would be rich!
That said, in most cases it will be difficult for a troll that is not marketing a product and exploiting a patent to establish the traditional element of "irreparable injury" because a damages remedy will generally be sufficient. It depends on how the lower courts apply this opinion, but in practice it may make it much more difficult for a troll to get an injunction.
That is not clear to me given: "But traditional equitable principles do not permit such broad classifications. For example, some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves. Such patent holders may be able to satisfy the traditional four-factor test, and we see no basis for categorically denying them the opportunity to do so."
Further, the Court re-affirmed the continued validity of Continental Bag. "To the extent that the District Court adopted such a categorical rule, then, its analysis cannot be squared with the principles of equity adopted by Congress. The court’s categorical rule is also in tension with Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U. S. 405, 422– 430 (1908), which rejected the contention that a court of equity has no jurisdiction to grant injunctive relief to a patent holder who has unreasonably declined to use the patent."
No. The big business who has stolen your patent has the time and money to ruin you in court even if they have stolen your patent. I saw it happen.
If the owner of a patent does not develop the idea, then someone who develops the idea should get the majority of the proceeds because they ventured capital to produce the patent. Not saying the patent holder shouldn't be compensated. But there should be an issue of who made the most investment, how long the idea was undeveloped prior to being marketed by another entity, and how much actual damage to the patent holder arose from the so called infringement.
If we could patent every idea and hold the rights just because we thought of it, all innovation and invention would cease because the financial incentive to proceed with development is removed.
Just my opinion.
Hmmm. A patent troll is defined as one who licenses, but does not practice the invention. The decision indicates that if one licenses and does not practice the invention, that is not sufficient to deny injunctive relief.
Although the District Court recited the traditional four-factor test, 275 F. Supp. 2d, at 711, it appeared to adopt certain expansive principles suggesting that injunctive relief could not issue in a broad swath of cases. Most notably, it concluded that a “plaintiff’s willingness to license its patents” and “its lack of commercial activity in practicing the patents” would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue. Id., at 712. But traditional equitable principles do not permit such broad classifications.
This is about equity. If the court sees such an inequity, it is free to grant the injunction, achieving equity. Until now they were just granted regardless of the regular rules surrounding injunctions.
It's more like if you patent something, then can't market it but sell it to a lawyer who sits it on it, and somebody else comes along and patents something similar and puts it to use and develops a successful business, the lawyer can't sue and get an injunction to prevent the company from using it hence blackmailing the company to force him to compensate on his terms, which doesn't matter to the other inventor since he's not going to get anymore anyway.
I'm not arguing whether NTP is one of those companies that does nothing but buy and enforce patents. But the definition of a patent-holding company is pretty much founding a company to protect a patent. That's all his company does -- hold a patent and sue over it.
My previous post was to show unclean hands on the part of NTP, lest somebody start thinking they were the poor victim.
So long as the patent is valid (no prior art, actually novel idea) they should have they only say in who can use the patent for a reasonable length of time.
"My father always used to say, it's always something. If it's not one thing, it's another"
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