Los Angeles Times Gets Facts Wrong in Discussion about Supreme Court case, eBay v. MercExchange
By: Lawrence Ebert
In an editorial on the Supreme Court case eBay v. MercExchange, the Los Angeles Times [May 17, B12] stated:
[A]n appeals court [the Court of Appeals for the Federal Circuit, “CAFC”] ruled that MercExchange was automatically entitled to an injunction against EBay.
In a unanimous ruling, the justices disagreed — not only with the appeals court but with a nearly 100-year-old Supreme Court precedent on patent law. That case, which stemmed from a dispute over paper-bag manufacturing techniques, held that an injunction was mandatory in almost all cases of patent infringement.Thus the scales were tilted in favor of patent holders, who could use the threat of an injunction to win disproportionately rich licensing deals.
Of the “nearly 100-year-old” Supreme Court case, Justice Thomas wrote in the unanimous opinion in eBay:
The [district] court’s categorical rule is also in tension with Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 422-430, 28 S. Ct. 748, 52 L. Ed. 1122, 1908 Dec. Comm’r Pat. 594 (1908), which rejected the contention that a court of equity has no jurisdiction to grant injunctive relief to a patent holder who has unreasonably declined to use the patent.
The Thomas opinion did not disagree with the Continental Paper case, contrary to what the Los Angeles Times said.
The CAFC did not state that MercExchange was automatically entitled to a permanent injunction. The CAFC did go through the traditional 4-factor analysis for granting a permanent injunction, and disagreed with the findings of the district court. The CAFC erred in suggesting that permanent injunctions will issue absent exceptional circumstances.
The Times editorial also noted:
The patent office is second-guessing itself on some MercExchange patents as well, which points to a fundamental problem that the Supreme Court didn’t address. The system yields too many bad patents, particularly when business methods are concerned. Proposals that would significantly strengthen
the process have been bottled up in Congress. Now that the Supreme Court has started fixing the patent morass, lawmakers need to finish the job.
Of the re-examination matter, I had written in the February 2006 issue of Intellectual Property Today:
One reason eBay furnished to the Supreme Court on the public interest factor in the 4-factor test on injunctions was the uncertain status of the validity of business method patents. In support, the eBay brief noted, that subsequent to the district court decision, the PTO had found claims of US 5,845,265 invalid [In re-exam 90/006,956, filed by eBay under 37 CFR 1.510 on March 5, 2004, after the district court decision of August 6, 2003 in 275 F.Supp.2d 695, the PTO issued a non-final Office Action (signed on Feb. 11, 2005 but mailed March 24,
2005) rejecting claims 26-29 under 102(e) and claims 1-25 under 103 over US 5,664,111, the same art found not invalidating in the CAFC decision of March 16, 2005 (401 F.3d 1323).] To suggest that this was a more pervasive problem, the eBay brief stated that 74% of the time the PTO finds “the patent invalid” or
restricts claims. The eBay brief did not mention that re-examinations occur for only a fraction of a percent of issued patents. The eBay brief also cited Cecil Quillen, 11 Fed. Cir. B. J. 1, 3 for “estimating rate of patent approvals by the PTO to be 97%.” Sadly, Quillen and his co-author Ogden Webster never
estimated the patent approval rate to be 97%. Rather, they placed the Grant Rate in the range 80% to 97%, with the 97% upper bound rendered invalid by their recognition in Footnote 17 that a patent can issue both from a continuing application and the corresponding parent application. Although not mentioned in the
eBay brief, Quillen and Webster corrected their view of estimates of the Grant Rate number the following year (12 Fed. Cir. B. J. 35 (2002), discussed in 86 JPTOS 568 (2004)). In the eBay brief, the 97% number is neither a faithful representation of what Quillen and Webster said nor an accurate statement of the
patent grant rate at the PTO.
An earlier news piece in the Los Angeles Times had said:
The 9-0 decision in the closely watched case reversed a federal
court ruling that said judges must almost always order a halt to ordinary business whenever a company was found to have infringed a valid patent.
The trouble here is that there were only 8 justices voting in eBay v. MercExchange.
The Los Angeles Times got many of the facts wrong on the eBay case, much as it has erred in matters surrounding the embryonic stem cell discussion [Ebert, Lawrence. “Los Angeles Times Article Way Off Base on Stem Cell Issues.” EzineArticles 12 April 2006]
Lawrence B. Ebert is a registered patent attorney located in central New Jersey. He holds a Ph.D. from Stanford, a J.D. from the University of Chicago, maintains a blog at IPBiz.blogspot.com, and is the author of LESSONS TO BE LEARNED FROM THE HWANG MATTER: ANALYZING INNOVATION THE RIGHT WAY, published in the Journal of the Patent & Trademark Office Society [88 JPTOS 239 (March 2006)]. Ezine draft submitted May 25, 2006.