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) pdf 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