Online auction giant eBay told the Supreme Court yesterday that a permanent injunction against its Buy It Now feature is unnecessary and unwarranted, contending that money damages alone could atone for the company's proven patent infringement.
The San Jose, Calif.-based eBay is already on the hook for financial damages to Falls Church, Va.-based MercExchange after a district court in 2003 found it infringed on the company's online process for buying goods at a fixed price.
The district court did not order a permanent injunction, but a federal appeals judge ruled that eBay should be enjoined from continuing to use its Buy It Now feature until it settles infringement issues with MercExchange.
"Money damages can get the job done. Beyond that, nothing further needs to be done," eBay attorney Carter G. Phillips told the justices. "Money damages are a completely acceptable solution in this case."
MercExchange attorney Seth P. Waxman argued that the law mandates a permanent injunction when willful infringement has been proven except in rare cases involving public safety.
"Final judgment of patent infringement yields an injunction, that is the settled rule," Waxman told the high court. "Continuing harm warrants an injunction."
Justice Antonin Scalia interrupted Phillips early in his oral arguments, stating, "We're talking about a property right here and a property owner has the right to exclude others from using his property."
Phillips told Scalia that the high-tech boom and the advent of business process patents over the last 20 years should give rise to new rules, praising the district court for not imposing a permanent injunction.
"Not any of eBay's success is based on these patents," Phillips said. "We put in all this time and work and coding and then they [MercExchange] show up with some vague notion [of eBay infringement]."
Phillips said "enhanced damages down the road" could always be determined in lieu of a permanent injunction. "Enough is enough. There shouldn't be an irrefutable assumption that there is no other remedy [other than a permanent injunction]," he said.
Scalia questioned that assumption, stating, "You want the district court to estimate future damages and let you go merrily on your way?"
MercExchange's Waxman was also peppered with questions from the justices.
Justice Steven Breyer noted that MercExchange had never commercialized its patents.
"It is easy to calculate damages if the inventor wasn't going to go any further with it," he said, asking Waxman if this was a "patent troll case."
Trolls are patent litigation firms that buy patents not to use and to license the technology, but to initiate infringement lawsuits against those companies that are using the technology in a predominately non-infringing manner.
"This is no patent troll case," Waxman said. "eBay came to him [MercExchange founder Tom Woolston], couldn't reach an agreement and then eBay willfully stole the inventor's patent."
Breyer again stressed, "When you license, damages are easier to determine."
Waxman countered that MercExchange has a licensing deal with Autotrader.com but it will be unable to collect royalties "until [MercExchange] proves it can enforce its patents."
After the hour-long hearing, Woolston told internetnews.com, "Small inventors will be vindicated today. American entrepreneurialism is at stake here."
In a brief press conference on the steps of the Supreme Court, Woolston said, "The justices understood we were talking about a property right here. An injunction is paramount to us."
Waxman declined to comment while Phillips was unavailable to the media.
The Supreme Court will issue its opinion in the case later in the spring or early summer.
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