Analysis: no penalty for patent “trolls”
on Mar 29, 2006 at 2:37 pm
When first-rate advocates face off in a Supreme Court argument, it often is difficult to say who had the better of the argument, or who came closest to winning a majority. In fact, only one thing emerged conclusively from the argument Wednesday in EBay v. Mercexchange (05-130) — the Court is not about to interpret the Patent Act so as to penalize patent “trolls” with lesser remedies for infringement. The “troll issue” only provided a bit of merriment in an otherwise serious hearing.
Seasoned lawyers Carter G. Phillips and Seth P. Waxman elevated the quality of the argument with predictable skill, and with utter devotion to each client’s cause. Jeffrey P. Minear, an assistant to the U.S. Solicitor General, competently carried off a cameo role. The Court was fully engaged with them, but did not provide any dependable signs of who will win in the end.
Phillips’ client is EBay Inc., the enormously popular operator of an consumer buy-and-sell, online market, and it faces a potential injunction against use of a patented system for selling goods through an electronic network of consignment stores. (Chief Justice John G. Roberts, Jr., no doubt speaking for the Court, expressed some uncertainty about just what the invention entailed, although he did claim that he felt capable of making a consumer choice from an Internet display of products.)
With his typically high-energy presentation, Phillips argued that the Federal Circuit Court has laid down a categorical rule that, if a patent has been infringed, an injunction against further use must follow. “Is that the only way to read the [Federal Circuit] decision?” Justice Ruth Bader Ginsburg asked. “Yes, the only way.” That, he said, is not the way a court is supposed to deal with a matter of equity.
Along the way, EBay’s lawyer managed to relate the scope-of-remedy issue to rapid technological change, saying innovation will be “stultified” by the nearly automatic injunction approach. He took his complaint a little too far, at least for Justice Antonin Scalia, in complaining about the patent lawsuit trigger-happy litigators in Marshall, Texas. That, said Scalia, is only a problem of “a renegade jurisdiction.” Besides, said Scalia dismissively, everybody is in it for the money, so let the free market work out the problems of using technological advances.
Phillips did not argue for unrestrained discretion for federal trial judges to decide for or against injunctions as a patent remedy, but he did say that they should always have the option of deciding that a money damages award would be an adequate remedy. A money award, he said, can be completely adequate, leaving an injunction for later consideration if infringement persisted. “We’re not asking for the right to continue to infringe,” he said. Moreover, he stressed, the trial judge in this case had found that none of EBay’s success in the Internet-based marketplace was attributable to Mercexchange’s patent.
It was during his time at the podium that the “troll issue” came up. “Trolls,” to some in patent law, are holders of patents who do not turn them into commercial products or processes, but simply police their exclusive rights to own and license the invention and — critics claim — use the threat of injunctions to force huge settlement payoffs. Phillips did not argue for a special limitation on remedies for infringement of patents held by “trolls,” but did suggest that they should not be entitled to any automatic injunction to give them leverage. He and Kennedy had a somewhat amusing exchange over whether “troll” meant the ogre under a bridge, or someone fishing for something. Being present in the courtroom added a bit to the sense that this was funny.
Minear’s task, arguing on Mercexchange’s side but not unqualifiedly, was to encourage the Court to provide new guidance for judges on how to apply traditional factors on when an injunction should be issued. He was not enthusiastic, however, about trial judges in patent cases paying too much attention, in deciding on injunctions, on what the Patent Office may be doing in reevaluating a contested patent; there are too many layers of review there to be conclusive, he indicated.
Waxman, intent on showing that the Federal Circuit had not made a dramatic shift on the availability of injunctions for infringement, said it was “firmly and unequivocally established” that a final judgment of infringement yields an injunction in all but the rarest cases. “Infringement is irreparable injury by nature,” he said.
As the lawyer for Mercexchange, Waxman’s second priority — one to which he gave considerable energy and emotion — was to portray EBay as something of a bad actor, first trying to manipulate the small patent holder into selling its patents, then, when that was refused, “appropriated the technology” for its own use. With some asperity, he said, “this not a patent ‘troll’ case; the founder of Mercexchange really did invent this…this is a real invention.” (it was during this part of his argument that Roberts inquired about the nature of the invention, to which Waxman gave only a fleeting answer, suggesting that neither he nor the Chief Justice was schooled in software technology.)
