Injunctions: “One-click” to
eBay
Patent Law
Prof Merges – 11.9.2010
Relief
Prospective Effect
Issuance
Complaint filed
in District Court
Damages assessed for
this period if marking
(or actual notice)
Preliminary
injunction
hearing
Final
injunction
issues
35 USC § 283.
Injunctive relief.
The several courts having
jurisdiction of cases under this title
may grant injunctions in
accordance with the principles of
equity to prevent the violation of
any right secured by patent, on
such terms as the court deems
reasonable.
MercExchange, L.L.C., holds a number of
patents, including a business method
patent for an electronic market designed
to facilitate the sale of goods between
private individuals by establishing a
central authority to promote trust among
participants. See U.S. Patent No.
5,845,265.
United States Patent 5,845,265
Woolston December 1, 1998
“Consignment nodes”
Abstract
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 . . . in an
electronic market for used goods while assuring the safe
and trusted physical possession of a good with a vetted
bailee.
Inventors: Woolston; Thomas G. (Arlington, VA)
Assignee:MercExchange, L.L.C. (Alexandria, VA)
Filed: November 7, 1995
1. A system for presenting a data record of a good
for sale to a market for goods, said market for
goods having an interface to a wide area
communication network for presenting and
offering goods for sale to a purchaser, a payment
clearing means for processing a purchase request
from said purchaser, a database means for
storing and tracking said data record of said
good for sale, a communications means for
communicating with said system to accept said
data record of said good and a payment means
for transferring funds to a user of said system,
said system comprising:
a digital image means for creating a digital image
of a good for sale;
a user interface for receiving textual information
from a user;
a bar code scanner;
a bar code printer;
a storage device;
a communications means for communicating
with the market; and
a computer locally connected to said [other
elements] said computer adapted to receive said
digital image of said good for sale from said
digital image means, generate a data record of
said good for sale, incorporate said digital image
of said good for sale into said data record, receive
a textual description of said good for sale from
said user interface, store said data record on said
storage device, transfer said data record to the
market for goods via said communications means
and receive a tracking number for said good for
sale from the market for goods via said
communications means, store said tracking
number … printing a bar code from said
tracking number on said bar code printer.
• 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.
Trial court opinion
• Questioned validity of
“business method”
patents
eBay v. MercExchange
• Trial court
• Federal Circuit
• Supreme Court
“Substantial evidence was adduced at trial
showing that the plaintiff does not practice
its inventions and exists merely to license
its patented technology to others. Indeed,
the plaintiff has made numerous comments
to the media before, during, and after this
trial indicating that it did not seek to
enjoin eBay but rather sought appropriate
damages for the infringement.”
-- 275 F.Supp.2d 695, at 712
“In
the case at bar, the evidence of the
plaintiff's willingness to license its
patents, its lack of commercial activity
in practicing the patents, and its
comments to the media as to its intent
with respect to enforcement of its
patent rights, are sufficient to rebut
the presumption that it will suffer
irreparable harm if an injunction does
not issue.” -- Id.
“The defendants also argue that because there is a
growing concern over the issuance of businessmethod patents, which forced the PTO to
implement [additional] review policy . . . , and
caused legislation to be introduced … the public
interest would not be served by such an
injunction. While this argument is certainly not
dispositive, it lends significant weight against the
imposition of an injunction, particularly in this
case where the patentee does not practice its
patents, nor has any intention of practicing its
patents.” -- 275 F.Supp.2d 695, 714
eBay v. MercExchange
• MercExchange, LLC v. eBay, Inc., 401
F.3d 1323 (Fed. Cir. 2005)
– “Automatic injunction” rule: after patentee
wins case, injunction will automatically issue
Federal Circuit opinion
“Because the ‘right to exclude recognized
in a patent is but the essence of the
concept of property,’ the general rule is
that a permanent injunction will issue
once infringement and validity have been
adjudged.”
-- 401 F.3d 1323, 1338
401 F.3d 1323, 1339
“A general concern regarding business-method
patents, however, is not the type of important
public need that justifies the unusual step of
denying injunctive relief.”
“If the injunction gives the patentee additional
leverage in licensing, that is a natural
consequence of the right to exclude and not an
inappropriate reward to a party that does not
intend to compete in the marketplace with
potential infringers.”
Supreme Court
• Reversed Federal Circuit
• Rejected “automatic rule”
• Reimposed historical standard
The 4 Part Test: Plaintiff must
show –
(1) [T]hat it has suffered an irreparable injury;
(2) that remedies available at law, such as
monetary damages, are inadequate to
compensate for that injury; (3) that,
considering the balance of hardships between
the plaintiff and defendant, a remedy in equity
is warranted; and (4) that the public interest
would not be disserved by a permanent
injunction. – book, p. 935
Remedies: Injunctions
Injunction -- 4 Factors:
1. Reasonable likelihood of success
2. Irreparable harm
3. Balance of hardships
4. Impact on public interest
Supreme Court opinion
Like the Patent Act, the Copyright
Act provides that courts "may"
grant injunctive relief "on such
terms as it may deem reasonable
to prevent or restrain
infringement of a copyright." 17
U.S.C. § 502(a). -- p. 935
What was wrong with the
district court test?
“[I]t appeared to adopt certain expansive
principles suggesting that injunctive
relief could not issue in a broad swath of
cases. Most notably, it concluded that a
“plaintiff’s willingness to license its
patents” and “its lack of commercial
activity in practicing the patents” … But
traditional equitable principles do not
permit such broad classifications.” -- 936
What was wrong with the
Federal Circuit test?
Too mechanical: “[T]he Court of Appeals
departed in the opposite direction from the
four-factor test. The court articulated a
“general rule,” unique to patent
disputes… Just as the District Court erred
in its categorical denial of injunctive relief,
the Court of Appeals erred in its
categorical grant of such relief.
[S]ome patent holders, such as university
researchers or self-made inventors, might
reasonably prefer to license their patents,
rather than undertake efforts to secure the
financing necessary to bring their works to
market themselves. Such patent holders
may be able to satisfy the traditional fourfactor test, and we see no basis for
categorically denying them the opportunity
to do so.
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.
Concurrences
“[T]here is a difference between
exercising equitable discretion
pursuant to the established fourfactor test and writing on an
entirely clean slate.” – Roberts,
Scalia & Ginsburg, concurring
Kennedy, Stevens, Souter &
Breyer
The lesson of the historical
practice, therefore, is most
helpful and instructive when the
circumstances of a case bear
substantial parallels to litigation
the courts have confronted
before. -- 938
An industry has developed in which firms use
patents not as a basis for producing and selling
goods but, instead, primarily for obtaining
licensing fees. For these firms, an injunction, and
the potentially serious sanctions arising from its
violation, can be employed as a bargaining tool to
charge exorbitant fees… . When the patented
invention is but a small component of the product
the companies seek to produce and the threat of
an injunction is employed simply for undue
leverage in negotiations, legal damages may well
be sufficient to compensate for the infringement
and an injunction may not serve the public
interest.
NY Times – Op Ed 3.22.06
Patently Ridiculous
[P]rofiteers, including lawyers and hedge funds, have
turned the very purpose of patent rights — to
encourage people to invent and produce — on its
head, using them to tax, blackmail and even shut
down productive companies unless they pay high
enough ransoms. These so-called patent trolls have
emerged as the villains in this intellectual property
debate.
The Supreme Court now appears ready to weigh in
and — we hope — restore some sanity to the system.
Post-eBay “Scorecard”
IP Today has published an interesting
report on permanent injunction decisions
since the Supreme Court's 2006 decision
in eBay v. MercExchange. The authors
found 67 district court injunction
decisions. 48 (72%) granted relief; 19
(28%) denied relief. – Patently-O Nov.
17, 2009
Z4 v. Microsoft
“[T]he jury found that Microsoft's Office and
Windows software products infringed the
asserted claims of the two patents-in-suit. z4
asks the Court to enjoin Microsoft from
making, using, selling, offering for sale, and/or
importing its current software products that use
product activation, i.e. Windows XP products
since 2001 and Office products since 2000.”
In the absence of a permanent injunction against
Microsoft, z4 will not suffer lost profits, the
loss of brand name recognition or the loss of
market share because of Microsoft’s continued
sale of the infringing products. These are the
type of injuries that are often incalculable and
irreparable. The only entity z4 is possibly
prevented from marketing, selling or licensing
its technology to absent an injunction is
Microsoft . . . – p. 950
Z4 v. Microsoft
“[A] violation of the right to exclude
does not inevitably lead to the
conclusion that a patent holder
cannot be adequately compensated
by remedies at law such as monetary
damages without first applying the
principles of equity.”
-- Id.
The key: p. 951
“In his concurrence, … Justice Kennedy specifically
mentioned the situation where a "patented invention is
but a small component of the product the companies
seek to produce" … Here, product activation is a very
small component of the Microsoft Windows and Office
software products that the jury found to infringe z4's
patents. … Accordingly, Justice Kennedy's comments
support the conclusion that monetary damages would
be sufficient to compensate z4 for any future
infringement by Microsoft.
Preliminary injunctions
• The Amazon.com story
• “One-click” ordering patent
‘411 Patent ABSTRACT:
A method and system for placing an order to purchase an item
via the Internet. The order is placed by a purchaser at a client
system and received by a server system. The server system
receives purchaser information including identification of the
purchaser, payment information, and shipment information
from the client system. The server system then assigns a client
identifier to the client system and associates the assigned client
identifier with the received purchaser information. The server
system sends to the client system the assigned client identifier
and an HTML document identifying the item and including an
order button. . . . In response to the selection of the order
button, the client system sends to the server system a request to
purchase the identified item. The server system receives the
request and combines the purchaser information associated
with the client identifier of the client system to generate an
order to purchase the item in accordance with the billing and
shipment information whereby the purchaser effects the
ordering of the product by selection of the order button.
US Patent 5,960,411
1. A method of placing an order for an item
comprising:
under control of a client system, displaying
information identifying the item; and
in response to only a single action being
performed, sending a request to order the
item along with an identifier of a purchaser
of the item to a server system …
retrieving additional information previously
stored for the purchaser identified by the
identifier in the received request; and
generating an order to purchase the
requested item for the purchaser identified
by the identifier in the received request
using the retrieved additional information;
and
fulfilling the generated order to complete
purchase of the item
whereby the item is ordered without using a
shopping cart ordering model.
US Patent 5,960,411
9. A server system for generating an
order comprising:
a shopping cart ordering component;
and
a single-action ordering component
including:
a data storage medium storing
information for a plurality of users;
a receiving component for receiving
requests to order an item, a request
including an indication of one of the
plurality of users, the request being
sent in response to only a single action
being performed; and
an order placement component that
retrieves from the data storage
medium information for the indicated
user and that uses the retrieved
information to place an order for the
indicated user for the item; and
an order fulfillment component that
completes a purchase of the item in
accordance with the order placed by
the single-action ordering
component.
US Patent 5,960,411
10. The server system of claim 9
wherein the request is sent by a client
system in response to a single action
being performed.
What it Boils Down To:
The client system [i.e., user’s or customer’s computer] is provided with
an identifier that identifies a customer [in a file permanently stored on
customer’s computer, e.g., a “Cookie” file]. The client system displays
information [about an item to purchase]. [After the customer indicates he
or she wants to buy something,] the client system sends to a server
system the provided identifier and a request to order the identified item.
The server system uses the identifier to identify
additional information needed to generate an order for
the item and then generates the order.
-- from specification
Express Lane
Claim 1
Buy it now with just 1 click!
A method of placing an order for an item
comprising:
under control of a client system,
displaying information identifying the item; and
in response to only a single action being
performed, sending a request to order the item
along with an identifier of a purchaser of the
item to a server system;
under control of a single-action ordering
component of the server system;
receiving the request;
retrieving additional information previously
stored for the purchaser . . .; and
generating an order to purchase the requested
item . . .
fulfilling the generated order . . .
whereby the item is ordered without using a
shopping cart ordering model.
• validity?
• infringement?
The Wall Street Journal, Friday, December 3, 1999
Amazon.com Is Granted an Injunction In
barnesandnoble.com Patent Dispute
By Scott Thurm and Rebecca Quick
A federal district judge in Seattle granted
Amazon.com Inc. a preliminary injunction in a
patent dispute, barring rival barnesandnoble.com
Inc. from using a one-click system for online
orders. U.S. District Judge Marsha J. Pechman
late Wednesday ordered barnesandnoble.com to
stop using its Express Lane service by tomorrow.
WSJ, cont’d
In her ruling, Judge Pechman said
barnesandnoble.com could avoid
infringing on Amazon.com's
patent "by simply requiring
users to take an additional action
to confirm orders placed by
using Express Lane."
Reference 1
CompuServe Information Manager
Price Volume Graph
Reference 2
http://www.morwood.net/web-basket/
The Internet Engineering Task Force
Draft Cookie Specification
Web-basket is a Linux-based
software package for e-commerce on
the World Wide Web. This software
provides an efficient mechanism for
maintaining user accounts,
inventory, and orders placed
through the World Wide Web.
Dr. John Lockwood
August 1996
a text file that is stored on your hard drive
that tells the Web server about you, your
computer, and your activities.
Reference 3
© 1996
Appendix F
Instant Buy Option
Merchants also can provide shoppers
with an Instant Buy button for some or
all items, enabling them to skip check
out review. This provides added
appeal for customers who already
know the single item they want to
purchase during their shopping
excursion.
Reference 4
A single click on its picture is all it takes to order an item.
[O]ur solution allows one-click ordering anywhere you
see a product picture or a price.
A user’s identifying and purchasing information is
captured and stored “the very first time a user clicks on
an item to order.”
Federal Circuit holding
• District court erred in ignoring Compuserve
Trend prior art
– Creates doubt about Amazon’s
“reasonable likelihood of success on the
merits”
• Does this mean Amazon patent is invalid?
– Subsequent settlement . . .
“Public Interest” Element
• Federal Circuit had in the past usually
identified public interest with patent
enforcement
• Some exceptions . . .
• Obviously changed post-eBay