IP News

Supreme Court Vacates Injunction in eBay Case

On May 15, 2006, the U.S. Supreme Court vacated a permanent injunction issued against eBay Inc. and remanded the case back to the district court. eBay Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837 (2006). The Court rejected the general rule articulated by the Federal Circuit that permanent injunctions should issue in patent once infringement and validity have been decided, absent exceptional circumstances.

In this case, a jury found that eBay had infringed MercExhange's patents, but the district court declined to issue a permanent injunction. The district court justified its denial of MercExchange's motion for a permanent injunction arguing that 1) the public interest favored the denial in light of a growing concern over the issuance of business-method patents; 2) the defendants would attempt to design around the injunction, resulting in numerous contempt hearings to determine if changes to the defendants' systems violate the injunction; 3) MercExchange had made public statements regarding its willingness to license its patents; and 4) MercExchange had not moved for a preliminary injunction. On appeal, the Federal Circuit reversed the denial of the permanent injunction, stating that the 'general rule is that a permanent injunction will issue once infringement and validity has been adjudged.' MercExchange, L.L.C. v. eBay Inc., 401 F.3d 1323, 1338 (Fed. Cir. 2005).

Justice Clarence Thomas authored the opinion of a unanimous Court. First, the Court noted that the traditional four-part equity test is also applicable in patent cases: 'Nothing in the Patent Act indicates Congress intended … a departure [from familiar equity principles].' Id. at 1839.

The Court next found that neither the district court nor the Federal Circuit applied these principles correctly. According to the Court, the district court erred because it 'appeared to adopt certain expansive principles suggesting that injunctive relief could not issue in a broad swath of cases.' Id. at 1840. In particular, the Court took issue with the district court's determination that MercExhange's willingness to license its patents and lack of commercial activity in practicing the patents showed that MercExchange would not suffer irreparable harm.

On the other hand, the Court found that the Federal Circuit had erred by laying down a general rule that injunctions will issue in patent cases once infringement and validity have been decided.

As such, the Court vacated the Federal Circuit's decision and remanded the case to the district court for application of the traditional four-part test, which 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. In doing so, the Court did not express an opinion whether an injunction should issue against eBay in the present case.

Chief Justice John Roberts authored a concurring opinion, joined by Justices Antonin Scalia and Ruth Bader Ginsburg, in which he agreed that the four-factor test should be applied in granting permanent injunctions, but noted that 'courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.' Id. at 1841.

Justice Anthony Kennedy also wrote a concurring opinion, joined by Justices John Paul Stevens, David Souter and Stephen Breyer. According to Justice Kennedy, many cases now in the trial courts 'present considerations quite unlike earlier cases' that may tip the equity scales against the issuance of injunctions in patent cases. In particular, Justice Kennedy stated that '[a]n 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 … can be employed as a bargaining tool to charge exorbitant fees … ' Id. at 1842 (citation omitted). Justice Kennedy also noted that injunctions may not be appropriate when 'the patented invention is but a small component of the product,' or for 'the burgeoning number of patents over business methods,' which may have 'potential vagueness and suspect validity.' Id.

This case will be discussed in more detail in an upcoming issue of The Intellectual Property Strategist.

President Bush Nominates Law Professor to the Federal Circuit

On May 18, 2006, President Bush nominated law professor and IP author Kimberly Ann Moore to join the U.S. Court of Appeals for the Federal Circuit. Moore would replace Judge Raymond C. Clevenger, III, who is retiring. She is currently a Professor of Law at George Mason University.

Moore earned a B.S. in electrical engineering and an M.S., both from the Massachusetts Institute of Technology, and earned her J.D. at Georgetown University Law Center. Immediately following law school, she worked as an associate in private practice on complex civil and IP litigation. Subsequently, she clerked at the Federal Circuit for Chief Judge Glenn L. Archer, Jr.. After her clerkship, Moore entered the academic world and taught at Chicago-Kent College of Law and the University of Maryland School of Law, before accepting a position at George Mason.

Moore is President Bush's second appointment to the Federal Circuit. In 2001, he appointed Judge Sharon Prost, the former chief counsel for the U.S. Senate Committee on the Judiciary.

Compulsory Patent Licensing Bill Introduced in U.S. Senate

On May 25, 2006, Sen. Patrick Leahy (D-Vermont) introduced a compulsory patent licensing bill (known as the Life-Saving Medicines Export Act of 2006) in the U.S. Senate that would enable U.S. generic drug firms to make generic versions of patented drugs for export to poor nations when voluntary agreement between the generic and brand-name companies cannot be reached.

The bill would empower the director of the U.S. Patent & Trademark Office to issue compulsory licenses upon application by generic manufacturers. The patent holders would receive royalty payments, and generic companies would be limited to selling those drugs to the poorest nations (as defined by the United Nations or World Trade Organization). The director would set the royalty rates according to formulas set forth in the bill.

Generic companies would be required to have made attempts to buy the right to manufacture and sell the medicine under normal arrangements with patent holders. The bill would also set a 7-year license limit for the generic companies, and the license could be extended once.

Under the bill, a national advisory board would be established to 'provide advice and guidance regarding the implementation and administration of the compulsory licensing program.' This board would be composed of 10 members, including patent experts, a physician, industry representatives, and representatives of international organizations, such as the United Nations.

U.S. Solicitor General Recommends Supreme Court Review of Obviousness Doctrine

The U.S. Solicitor General has filed a brief in the U.S. Supreme Court recommending that the Court grant certiorari to review the decision in Teleflex, Inc. v. KSR Int'l Co., 119 F. App'x 282 (Fed. Cir. 2005), arguing that it presents an important question of patent law.

In Teleflex, the district court granted KSR's motion for summary judgment, concluding that claim 4 of U.S. Patent 6,237,565 is invalid by reason of obviousness. The Federal Circuit vacated the grant of summary judgment, finding that the district court incorrectly applied its 'teaching-suggestion-motivation' test. According to the Federal Circuit, the district court failed to make factual findings showing the ”specific understanding or principle within the knowledge of a skilled artisan that would have motivated one with no knowledge of [the] invention to make the combination in the manner claimed.” Id. at 289 (quoting In re Kotzab, 217 F.3d 1365, 1371 (Fed. Cir. 2000).

The Solicitor General argued that the Federal Circuit has transformed the teaching-suggestion-motivation test into an 'inflexible' requirement for determining obviousness:

The Federal Circuit's teaching-suggestion-motivation test subjects persons challenging the validity of a patent, as well as PTO's patent examiners, to substantial obstacles in establishing obviousness beyond those that Section 103(a) and this Court's decisions prescribe. As this case aptly demonstrates, the Federal Circuit's rigorous and inflexible application of its test alters Graham's functional approach to the nonobviousness inquiry in a way that unnecessarily sustains patents that would otherwise be subject to invalidation as obvious.

Eric Agovino is an associate in the New York office of Kenyon & Kenyon LLP. He can be reached at 212-908-6858.

Supreme Court Vacates Injunction in eBay Case

On May 15, 2006, the U.S. Supreme Court vacated a permanent injunction issued against eBay Inc. and remanded the case back to the district court. eBay Inc. v. MercExchange, L.L.C. , 126 S. Ct. 1837 (2006). The Court rejected the general rule articulated by the Federal Circuit that permanent injunctions should issue in patent once infringement and validity have been decided, absent exceptional circumstances.

In this case, a jury found that eBay had infringed MercExhange's patents, but the district court declined to issue a permanent injunction. The district court justified its denial of MercExchange's motion for a permanent injunction arguing that 1) the public interest favored the denial in light of a growing concern over the issuance of business-method patents; 2) the defendants would attempt to design around the injunction, resulting in numerous contempt hearings to determine if changes to the defendants' systems violate the injunction; 3) MercExchange had made public statements regarding its willingness to license its patents; and 4) MercExchange had not moved for a preliminary injunction. On appeal, the Federal Circuit reversed the denial of the permanent injunction, stating that the 'general rule is that a permanent injunction will issue once infringement and validity has been adjudged.' MercExchange, L.L.C. v. eBay Inc., 401 F.3d 1323, 1338 (Fed. Cir. 2005).

Justice Clarence Thomas authored the opinion of a unanimous Court. First, the Court noted that the traditional four-part equity test is also applicable in patent cases: 'Nothing in the Patent Act indicates Congress intended … a departure [from familiar equity principles].' Id. at 1839.

The Court next found that neither the district court nor the Federal Circuit applied these principles correctly. According to the Court, the district court erred because it 'appeared to adopt certain expansive principles suggesting that injunctive relief could not issue in a broad swath of cases.' Id. at 1840. In particular, the Court took issue with the district court's determination that MercExhange's willingness to license its patents and lack of commercial activity in practicing the patents showed that MercExchange would not suffer irreparable harm.

On the other hand, the Court found that the Federal Circuit had erred by laying down a general rule that injunctions will issue in patent cases once infringement and validity have been decided.

As such, the Court vacated the Federal Circuit's decision and remanded the case to the district court for application of the traditional four-part test, which 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. In doing so, the Court did not express an opinion whether an injunction should issue against eBay in the present case.

Chief Justice John Roberts authored a concurring opinion, joined by Justices Antonin Scalia and Ruth Bader Ginsburg, in which he agreed that the four-factor test should be applied in granting permanent injunctions, but noted that 'courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.' Id. at 1841.

Justice Anthony Kennedy also wrote a concurring opinion, joined by Justices John Paul Stevens, David Souter and Stephen Breyer. According to Justice Kennedy, many cases now in the trial courts 'present considerations quite unlike earlier cases' that may tip the equity scales against the issuance of injunctions in patent cases. In particular, Justice Kennedy stated that '[a]n 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 … can be employed as a bargaining tool to charge exorbitant fees … ' Id. at 1842 (citation omitted). Justice Kennedy also noted that injunctions may not be appropriate when 'the patented invention is but a small component of the product,' or for 'the burgeoning number of patents over business methods,' which may have 'potential vagueness and suspect validity.' Id.

This case will be discussed in more detail in an upcoming issue of The Intellectual Property Strategist.

President Bush Nominates Law Professor to the Federal Circuit

On May 18, 2006, President Bush nominated law professor and IP author Kimberly Ann Moore to join the U.S. Court of Appeals for the Federal Circuit. Moore would replace Judge Raymond C. Clevenger, III, who is retiring. She is currently a Professor of Law at George Mason University.

Moore earned a B.S. in electrical engineering and an M.S., both from the Massachusetts Institute of Technology, and earned her J.D. at Georgetown University Law Center. Immediately following law school, she worked as an associate in private practice on complex civil and IP litigation. Subsequently, she clerked at the Federal Circuit for Chief Judge Glenn L. Archer, Jr.. After her clerkship, Moore entered the academic world and taught at Chicago-Kent College of Law and the University of Maryland School of Law, before accepting a position at George Mason.

Moore is President Bush's second appointment to the Federal Circuit. In 2001, he appointed Judge Sharon Prost, the former chief counsel for the U.S. Senate Committee on the Judiciary.

Compulsory Patent Licensing Bill Introduced in U.S. Senate

On May 25, 2006, Sen. Patrick Leahy (D-Vermont) introduced a compulsory patent licensing bill (known as the Life-Saving Medicines Export Act of 2006) in the U.S. Senate that would enable U.S. generic drug firms to make generic versions of patented drugs for export to poor nations when voluntary agreement between the generic and brand-name companies cannot be reached.

The bill would empower the director of the U.S. Patent & Trademark Office to issue compulsory licenses upon application by generic manufacturers. The patent holders would receive royalty payments, and generic companies would be limited to selling those drugs to the poorest nations (as defined by the United Nations or World Trade Organization). The director would set the royalty rates according to formulas set forth in the bill.

Generic companies would be required to have made attempts to buy the right to manufacture and sell the medicine under normal arrangements with patent holders. The bill would also set a 7-year license limit for the generic companies, and the license could be extended once.

Under the bill, a national advisory board would be established to 'provide advice and guidance regarding the implementation and administration of the compulsory licensing program.' This board would be composed of 10 members, including patent experts, a physician, industry representatives, and representatives of international organizations, such as the United Nations.

U.S. Solicitor General Recommends Supreme Court Review of Obviousness Doctrine

The U.S. Solicitor General has filed a brief in the U.S. Supreme Court recommending that the Court grant certiorari to review the decision in Teleflex, Inc. v. KSR Int'l Co. , 119 F. App'x 282 (Fed. Cir. 2005), arguing that it presents an important question of patent law.

In Teleflex, the district court granted KSR's motion for summary judgment, concluding that claim 4 of U.S. Patent 6,237,565 is invalid by reason of obviousness. The Federal Circuit vacated the grant of summary judgment, finding that the district court incorrectly applied its 'teaching-suggestion-motivation' test. According to the Federal Circuit, the district court failed to make factual findings showing the ”specific understanding or principle within the knowledge of a skilled artisan that would have motivated one with no knowledge of [the] invention to make the combination in the manner claimed.” Id. at 289 (quoting In re Kotzab, 217 F.3d 1365, 1371 (Fed. Cir. 2000).

The Solicitor General argued that the Federal Circuit has transformed the teaching-suggestion-motivation test into an 'inflexible' requirement for determining obviousness:

The Federal Circuit's teaching-suggestion-motivation test subjects persons challenging the validity of a patent, as well as PTO's patent examiners, to substantial obstacles in establishing obviousness beyond those that Section 103(a) and this Court's decisions prescribe. As this case aptly demonstrates, the Federal Circuit's rigorous and inflexible application of its test alters Graham's functional approach to the nonobviousness inquiry in a way that unnecessarily sustains patents that would otherwise be subject to invalidation as obvious.

Eric Agovino is an associate in the New York office of Kenyon & Kenyon LLP. He can be reached at 212-908-6858.