Patent Cases
MM 450 Issues in New Media
Theory
Steve Baron
March 3, 2009
eBay v. MercExchange (2006)

The parties:
– Petitioners = eBay and Half Moon - operate
auction sites on Internet
– Respondent = MercExchange – owns patents,
including business method patent for an
electronic market designed to facilitate sale of
goods between private individuals by
establishing a central authority to promote trust
among participants.
eBay v. MercExchange (2006)

ABSTRACT of U.S. Patent 5,845,265: A method and
apparatus for creating a computerized market for used and
collectible goods by use of a plurality of low cost posting
terminals and a market maker computer in a legal
framework that establishes a bailee relationship and
consignment contract with a purchaser of a good at the
market maker computer that allows the purchaser to
change the price of the good once the purchaser has
purchased the good thereby to allow the purchaser to
speculate on the price of collectibles in an electronic
market for used goods while assuring the safe and trusted
physical possession of a good with a vetted bailee.
eBay v. MercExchange (2006)
– The facts:





MerchExchange asks eBay and Half Moon to enter into a
license to use MercExchange’s patented business methods.
The parties fail to reach agreement.
MercExchange sues for patent infringement and prevails in a
jury trial.
The trial court denies MercExchanges request for permanent
injunctive relief.
The Federal Circuit reverses – permanent injunction will issue
absent exceptional circumstances.
eBay v. MercExchange (2006)

Supreme Court decision
– Reviews four factor test for permanent
injunction:




Irreparable injury
Inadequate remedy at law (i.e. $$ not enough)
Balance of hardships
Public interest
eBay v. MercExchange (2006)

Supreme Court decision
– Criticizes district court for being to restrictive on
injunctions in patent cases.
– Criticizes appeals court for not being restrictive enough
(i.e. permanent injunctions should not automatically
issue after finding of infringement)
– Holds: whether to issue injunction is in discretion of
trial court, which should apply the four factor test.
– Kennedy concurrence: Beware the patent troll who
uses the threat of injunction to exact money.
In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d
1385 (2008)

http://www.cafc.uscourts.gov/opinions/071130.pdf
 Business method patent on a method of
hedging risk in commodities trading
 Federal Circuit narrows scope of business
method patents
In re Bilski, 545 F.3d 943, 88
U.S.P.Q.2d 1385 (2008)

Majority Opinion: A claimed process is
patent eligible if:
– (1) it is tied to a particular machine or
apparatus, or
– (2) it transforms a particular article into a
different state or thing.

The patent at issue failed the test and
therefore was not patent eligible.
Tivo v. Echostar (Fed. Cir. 2008)

Tivo sues Echostar for infringing the ‘389
patent.
– Hardware and software claims relating to
DVR’s

Jury verdict in favor of Tivo
– $74 million!!!
 Lost profits and reasonable royalties
– Permanent injunction
Tivo v. Echostar (Fed. Cir.
2008)

Echostar appeals to Federal Circuit:
– Reverses and remands on hardware claims
– Affirms software claims
– Affirms damages award
– Affirms permanent injunction – which had been
stayed pending appeal
Tivo v. Echostar (Fed. Cir.
2008)

Observations:
– A lot of money at stake
– Linguistics and semantics are critical in patent
prosecution and litigation
– Expert testimony is critical
– Juries and judges with little technical expertise are
called upon to make important decisions about
technology.
– Permanent injunctions are alive and well after the eBay
case
Quotes of the Day

“Four things belong to a judge: to hear
courteously, to answer wisely, to consider soberly,
and to decide impartially.”
– Socrates

One good mother is worth a hundred
schoolmasters.
– George Herbert