High court to hear landmark eBay patent case

Reuters - WASHINGTON -- The U.S. Supreme Court will hear arguments tomorrow in a patent case involving online auctioneer eBay Inc. that is part of a wider struggle between the software and pharmaceutical industries over the future of the U.S. patent system.

Lawyers for eBay and small e-commerce company MercExchange LLC will square off over whether eBay should be barred from using its popular "Buy it now" feature, which allegedly infringes on two MercExchange patents.

The case is being closely watched to see if the high court will scale back the right of patent holders to get an injunction barring infringers from using their technologies.

Software companies complain that they can be held to ransom by owners of questionable patents, while drug makers oppose any weakening of patent rights, which they say would chill their investment in new medicines.

Patent experts said that, depending on how the high court rules, the case could have a profound effect on the way the courts treat intellectual property in the U.S..

"Any time we talk about altering injunctions, we really are talking about altering the fundamental balance of power," said Steve Maebius, a patent lawyer at lawfirm Foley & Lardner LLP.

The arguments come on the heels of a recent court fight by a small patent-holding company seeking an injunction to shut down of Research In Motion Ltd.'s popular BlackBerry wireless e-mail devices.

RIM settled the case after a judge made it clear that he would impose an injunction (see "RIM settles NTP patent fight with $612.5M payment").

At issue in the current case is a decision by a federal court of appeals upholding an injunction imposed on eBay at the request of MercExchange.

EBay was found to have infringed on two e-commerce patents that MercExchange said were key to eBay's "Buy it now" feature, which handles fixed-price sales. But a U.S. District Court refused to issue an injunction and awarded MercExchange a small amount of damages instead.

The U.S. Court of Appeals for the Federal Circuit, which hears most patent case appeals in the U.S. courts, reversed the decision, citing legal doctrine that gives patent holders the right to an injunction "absent exceptional circumstances."

Hopeful that the Supreme Court will overturn the doctrine, some of the largest U.S. software companies have filed friend-of-the-court briefs supporting eBay.

"Money that could go to productive investments is instead diverted to legal fees and settlement payments. The costs of these practices are less innovation or a slower rate of innovation and higher costs for consumers," a group of computer technology companies wrote in one such brief.