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Supreme Court Sides With EBay Against Patent Injunctions

The Supreme Court sided with eBay (EBAY) in a patent fight over a selling feature Monday, in a ruling that will make it easier for high-tech companies to avoid court injunctions in such disputes.

Justices, in a unanimous opinion, said that judges have flexibility before they impose court orders barring continued use of a technology after juries find a patent violation. They must consider several factors, the court said.

The decision threw out a ruling by a federal appeals court that said injunctions should be automatic unless there are exceptional circumstances.

• Click here to read the decision (FindLaw).

The case had been closely watched by businesses of all types.

High-tech companies said that they needed protection from "patent trolls," small companies that sue larger firms over ideas they have never developed into products.

Drug and biotechnology companies argued that court injunctions were needed to shield their ideas and recoup costs of their investments.

The fight centered on eBay's "Buy It Now" fixed-price purchase option, which allows buyers to purchase items without bidding.

MercExchange, a small Virginia company, sought an injunction to prevent eBay from using the technology.

The company's founder, patent lawyer Thomas Woolston, had come up with the idea of using an electronic network of consignment stores that would ensure legitimacy of sales by taking possession of the goods being offered.

A jury had sided with MercExchange, finding that its patent had been infringed, and awarded the patent-holder $35 million. A trial judge later reduced the award by $5.5 million.

The Supreme Court ruling does not affect the judgment against eBay.

An appeals court said that MercExchange was entitled to an injunction. But eBay and other high-tech companies had told the Supreme Court that patent-holding companies could use the threat of court injunctions to coerce larger firms into settling lawsuits for huge sums of money.

In a brief opinion, Justice Clarence Thomas said that neither the district court nor appeals court that had considered the eBay case "fairly applied ... traditional equitable principles" in deciding MercExchange's motion for a permanent injunction.

A judge must now consider whether an injunction is appropriate in the case.

MercExchange said in a statement that it was confident it would again win an injunction, noting that the high court rejected the notion that injunctions were not appropriate for patent owners willing to license their patents and use them commercially.

Although the decision was unanimous, some justices wrote to explain their votes.

Chief Justice John Roberts wrote an opinion that was joined by Justices Antonin Scalia and Ruth Bader Ginsburg. Justice Anthony M. Kennedy wrote an opinion that was joined by Justices John Paul Stevens, David Souter and Stephen Breyer.

The case is eBay Inc. v. MercExchange, 05-130.