Ruling in eBay patent-infringement case could be far-reaching

IDG News Service - When the U.S. Supreme Court hears arguments tomorrow in a patent infringement case, its examination of what may seem to be a narrow point of law could have far-reaching implications for the U.S. technology industry.

In eBay v. MercExchange, the court will examine whether near-automatic injunctions should be granted when a company is found to be infringing a patent (see "High court to hear landmark eBay patent case"). Much of the tech industry is siding with eBay Inc., which was found guilty in May 2003 of infringing a "buy it now" patent held by MercExchange LLC, a small auction site. An appeals court later ruled that an injunction against eBay's use of the "buy it now" feature was appropriate.

On the other side are independent inventors and many pharmaceutical companies, which spend millions of dollars developing new drugs and want to protect their patents.

The case could shift the balance of power between inventors -- some of them one-person operations or small businesses -- and large companies that sell products such as software and hardware, say observers of the case. A court ruling for eBay could make it harder for inventors to collect patent damages and easier for large vendors to market their products without fear of a court shutting them down.

In the eBay case, the U.S. District Court for the Eastern District of Virginia declined to issue an injunction after a $35 million jury award, but the U.S. Court of Appeals for the Federal Circuit reversed that decision, saying an injunction was warranted.

Both sides say their arguments support innovation. "I think everybody's right," said John Englander, a partner at law firm Goodwin Procter LLP who has represented pharmaceutical companies. "All of this is a balancing act."

If the Supreme Court rejects near-automatic injunctions, "that's perceived by inventors as devaluing the value of a patent," he added. "The long-term impact is, at some point there will be a drag on innovation, because there will be less of it."

Many large technology vendors disagree, saying injunctions issued in patent infringement cases hurt their ability to bring products to market. Many complicated tech products -- such as a laptop -- can contain hundreds of patented inventions, and if the vendor overlooks one patent, an injunction can stop the vendor from selling the total product, according to the Business Software Alliance (BSA) and other trade groups.

In the eBay case, the company would still be able to operate if the courts bar it from using its "buy it now" feature. But in another case earlier this month, BlackBerry device maker Research In Motion Ltd. agreed to pay patent holder NTP Inc. more than $612 million rather than face a potential injunction barring it from offering its mobile e-mail service in the U.S.