Once again, Valley, DC eyes on patent reform

Is the current patent system, um, patently absurd? It all depends on how you look at it. To the degree that patent trolls are buying up patents  - often improperly granted by an overwhelmed Patent Office - and essentially blackmailing big companies ("License our technology or we will take you to court, get a restraining order, and extract a large penalty from you, after which the price of the license will go up substantially") without breaking any laws, the system is deeply flawed.

If, however, you see the system as protecting legitimate intellectual property owners from getting ripped off by the big guys, perhaps the system is working great.

At issue in Ebay v MercExchange, on which the Supreme Court heard oral arguments last week, is what happens when a patent claim comes to court. As a matter of policy, courts practically automatically issue a restraining injunction and a money award. MercExchange, the patent holder, says that's appropriate. As the Washington Post reports:

"This is not a patent troll case," MercExchange's lawyer, Seth P. Waxman, told the court. MercExchange came up with a legitimate invention that eBay offered to buy, he said, but when negotiations broke down, eBay "stole the technology." The invention is a method for allowing users to buy goods at a set price instead of bidding on them.

In 2003, MercExchange sued Ebay and won, but the district court judge refused a restraining order and reduced Merc's award from $35m to $5.5m. The Court of Appeals overturned and instated a restraint, saying the court's concern over unfairness didn't justify the refusal to restrain. Ebay took the case to the Supreme Court.

At the hearing yesterday, eBay's lawyer, Carter G. Phillips, argued that the appeals court's ruling is too inflexible to encompass the fast-changing world of software technologies. Those realities demand that district courts be allowed to consider the circumstances of each case before determining whether shutting down a business is necessary to address the property concerns of companies like MercExchange, Phillips argued.

"The time has come for this court to say, 'No, this is not what the Patent Act protects,' " Phillips said. District judges should be empowered to limit the relief to patent holders to cash alone, he argued.

In arguments, Justice Scalia seemed unwilling to unseat the primacy of property rights in this case, while Chief Roberts noted that the Patent Office had overturned the patents in question.

 

Chief Justice John G. Roberts Jr. challenged Waxman, noting that since the lawsuit began, the Patent Office has rejected MercExchange's patent claims. Can the district court take that into account? Roberts asked.

Waxman said allowing parties to file for review after litigating cases in court would be an "open invitation" to manipulations of the patent process by infringers like eBay.

Justice Antonin Scalia seemed to agree with Waxman, asking questions that suggested he did not consider this case different from others regarding private property rights.