eBay Inc. v. MercExchange, L.L.C.

PETITIONER: eBay Inc. et al.
RESPONDENT: MercExchange, L.L.C.
LOCATION: U.S. Court of Appeals for the Ninth Circuit

DOCKET NO.: 05-130
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Federal Circuit

CITATION: 547 US 388 (2006)
GRANTED: Nov 28, 2005
ARGUED: Mar 29, 2006
DECIDED: May 15, 2006

ADVOCATES:
Carter G. Phillips - argued the cause for Petitioner
Jeffrey P. Minear - argued the cause for Respondent
Seth P. Waxman - argued the cause for Respondent

Facts of the case

MercExchange patented a design for an online marketplace in which a single company provides the trustworthy framework within which buyers and sellers can negotiate for goods. After negotiations with eBay and Half.com to license the patent failed, MercExchange brought suit in federal district court alleging patent violation under the Patent Act. The jury sided with MercExchange, ruling that its patent had been violated, but the district court judge refused to issue a permanent injunction. The injunction would have forced eBay and Half.com to stop using the contested framework, but the judge applied the traditional four-part test to determine whether an injunction was necessary and found that it was not. That decision was reversed, however, by the U.S. Circuit Court of Appeals for the Federal Circuit, which applied a "general rule that courts will issue permanent injunctions against patent infringements absent exceptional circumstances."

Question

Under the Patent Act, should a permanent injunction always be issued when a patent has been violated, absent exceptional circumstances?

Media for eBay Inc. v. MercExchange, L.L.C.

Audio Transcription for Oral Argument - March 29, 2006 in eBay Inc. v. MercExchange, L.L.C.

Audio Transcription for Opinion Announcement - May 15, 2006 in eBay Inc. v. MercExchange, L.L.C.

John G. Roberts, Jr.:

Justice Thomas has the opinion in 05-130, eBay, Incorporated, v. MercExchange.

Clarence Thomas:

This case comes to us on a writ of certiorari to the United States Court of Appeals for the Federal Circuit.

Petitioners eBay and Half.com operate internet websites that allow private sellers to list goods that they wish to sell.

Respondent MercExchange holds a business-method patent for an electronic market designed to facilitate the sale of goods between private individuals.

MercExchange sought to license its patent to eBay and Half.com, but the parties failed to reach an agreement.

As a result, MercExchange filed a patent-infringement suit against eBay and Half.com in the United States District Court for the Eastern District of Virginia.

A jury found that MercExchange’s patent was valid, that eBay and Half.com had infringed that patent and that an award of damages was appropriate.

The District Court then denied MercExchange’s motion for permanent injunction relief.

The Court of Appeals for the Federal Circuit reversed, applying its general rule that a permanent injunction should issue upon a finding of patent infringement absent exceptional circumstances.

We granted certiorari to determine the appropriateness of this general rule.

In an opinion filed with the Clerk today, we vacate the judgment of the Court of Appeals.

Ordinarily, a federal court considering whether to award permanent injunctive relief to a prevailing plaintiff applies the four-factor test historically employed by courts of equity.

A plaintiff must demonstrate, one, that it has suffered an irreparable injury; two, that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; three, that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and, four, that the public interest would not be disserved by a permanent injunction.

The decision to grant or deny permanent injunctive relief is an act of equitable discretion by the District Court, reviewable on appeal for abuse of discretion.

We conclude that these familiar principles apply with equal force to disputes arising under the Patent Act.

Nothing in the Patent Act indicates that Congress intended to depart from the long tradition of equity practice.

To the contrary, the Patent Act expressly provides that injunctions may issue in accordance with the principles of equity.

Neither the District Court nor the Court of Appeals below fairly applied these traditional equitable principles in deciding respondent’s motion for a permanent injunction.

Accordingly, we vacate the judgment of the Court of Appeals so that the District Court may apply that framework in the first instance.

In doing so, we take no position on whether permanent injunctive relief should or should not issue in this particular case, or indeed in any number of other disputes arising under the Patent Act.

We hold only that the decision whether to grant or deny injunctive relief rests within the equitable discretion of the District Courts and that such discretion must be exercised consistent with traditional principles of equity in patent disputes no less than in other cases governed by such standards.

This decision is unanimous.

The Chief Justice has filed a concurring opinion, joined by Justices Scalia and Ginsberg.

Justice Kennedy has also filed a concurring opinion, joined by Justices Stevens, Souter and Breyer.