Patent showdown heads to Supreme Court

The “near automatic” injunctions that judges issue when a company is found to be infringing a patent hurt innovation, tech organizations are arguing as the Supreme Court prepares to hear a high-profile patent case.

Tech trade groups such as the Business Software Alliance (BSA) want the Supreme Court to rule against the common practice of judges issuing injunctions to stop patent infringement. But pharmaceutical companies and independent inventors argue the threat of injunctions is one of the only protections they have.

How much discretion a judge should have in issuing an injunction will be the major issue when the Supreme Court hears arguments in the MercExchange v. eBay case March 29. The Court of Appeals for the Federal Circuit overturned a lower court’s decision not to issue an injunction against eBay for a disputed patent for “buy it now” Web auctions.

In recent years, tech company executives have been buried with cease-and-desist letters and threats of lawsuits after patent-holding companies bought hundreds of patents from failed dot-coms, said Emery Simon, a lawyer for BSA. “The letters have just been a blizzard,” he said during a panel discussion on patent injunctions in Washington, D.C., Friday.

Inventors deserve the right to control patented works, even if they don’t develop a commercial product, said Philip Johnson, chief patent counsel Johnson & Johnson, adding that a change in law will hurt more than “patent trolls,” defined by Simon as people who own patents solely to sue others for license fees. “If you take that away, you’re not only going to affect the trolls, you’re going to affect everyone else who would be induced to invest in R&D, in developing technology, at the same time,” Johnson said. “It’s a blunt instrument.”

In the eBay case, the Supreme Court will examine whether the court of appeals was correct in granting a permanent injunction against eBay’s use of a technological process patented by MercExchange and its owner, Thomas G. Woolston. The appeals court reversed a district court decision, which declined to issue an injunction after a jury decided that eBay violated two MercExchange patents related to software search agents and selling fix-priced auction items. The jury awarded Woolston $35 million. The appeals court trimmed that to $25 million and ruled one of the patents invalid, but upheld the patent infringement against eBay’s “buy it now” feature.

In a second high-profile patent case, BlackBerry device maker Research in Motion (RIM) is awaiting a ruling from a district court judge on whether it will have to shut down most U.S. sales of the device. RIM lost an August 2003 case in which NTP argued RIM infringed patents related to wireless e-mail services. *RIM and NTP have now settled – see this story “Shutdown avoided as BlackBerry dispute is settled”.

BSA, which has filed a brief supporting eBay, argues that the threat of injunctions can make tech companies hostage to people who hold patents for the purpose of winning infringement lawsuits. Tech products such as laptop computers often have hundreds of patented parts, and an injunction could force a company to sell an entire product line because one small part is found to be infringing, Simon said.

Inventors take offense at being called patent trolls, saying injunctions are an important weapon when they’re going up against huge companies with deep pockets.

“Those companies get sued for their disreputable conduct, lose in a court of law on the merits of a case, and then try to paint their victims as the abusers,” Ronald Riley, president of the Professional Inventors Alliance, said Thursday in an e-mail exchange. “Their conduct is, to put it mildly, egregious, and includes abusing the process of law to bankrupt the people whose property they steal … and using political influence to try and sway the courts and to definitely sway the patent office.”