SCOTUSblog Debate: eBay v. Mercexchange
on May 15, 2006 at 1:39 pm
As we did last year, SCOTUSblog will be hosting a series of debates on some of the major cases of the Term as the opinions in those cases are issued. Today we will be kicking off the first debate, on the Court’s opinion in eBay v. Mercexchange. Kathleen Sullivan of Stanford Law School and Quinn Emanuel, who filed an amicus brief on behalf of AOL and Time Warner, has these thoughts about the Court’s opinion:
The outcome was a significant victory for eBay and the companies who share its interests, albeit on the narrowest possible ground. Justice Thomas’s opinion for the unanimous court follows straightforward principles of statutory construction to invalidate the Federal Circuit’s indefensible rule of automatic injunctive relief. This is a significant holding since it clearly wipes that rule off the table and frees up the district courts to exercise considerably greater discretion.
Division among the justices, however, forced the court to embrace free-form case-by-case balancing rather than any categorical approach or structured rule of reason. Justice Thomas’s opinion stated, for example, that courts should not presume that monetary damages suffice when the patentee does not commercialize. In other words, the Court declined to divide the world into good and bad, inventors and trolls. Indeed, despite colloquy at oral argument over whether “troll†was a fishing term or the little creatures under the bridge, the term “troll†is never mentioned.
The division in the concurrences is between the justices who view the economics of the new world of high technology as a sea change and those who do not. CJ Roberts and Justices Scalia and Ginsburg see intellectual property as on a continuum with real property, emphasizing the rights (in italics, no less) to use and exclude. Justices Breyer, Stevens, Kennedy and Souter view the property of Blackberry as different from the property of Blackstone. Intellectual property, unlike my garden, can be used by many people at once non-exclusively. Monetary damages may well more typically suffice to compensate any unlicensed use. Conversely, injunctions can be used as holdup devices by patent holders who exploit the leverage gained when a patent covers but one tiny component embedded in a complex product or process. Strategic exploitation of the open-endedness of the patent process, such as by patentees who lie in wait while potential targets develop and market their products, compounds these difficulties. The amicus briefs in support of eBay’s position made these points vividly, and the four justices who joined Justice Kennedy’s opinion plainly got it.
The question now is how the ratio of injunctive relief to pure monetary relief will play out in the lower courts. Because Justice Alito didn’t vote and Justice Thomas didn’t side with either concurrence, it may appear that this area is now ripe for a 5-4 split, should they both go with the Roberts opinion. It is hardly clear that either will. But even if they did, injunctions should go way down in practice. District courts that decline to award injunctive relief will now be difficult to reverse so long as they do so using the traditional factors in a careful way rather than invoking any strong presumptions or categorical rules. They are reviewed only for abuse of discretion, and it should be easy for them to distinguish troll cases from the prior cases the Roberts opinion invokes as its “page of history.†So this is not only likely a victory for eBay on remand, but a shift that will diminish the leverage of the injunction threat in the patent context much more broadly.
