- The Washington Times - Tuesday, March 28, 2006

The U.S. Supreme Court is scheduled to hear arguments today in a case involving Internet auctioneer EBay Inc. that is testing the methods patent owners use to protect their inventions.

The small Internet commerce company MercExchange LLC is trying to enforce an injunction against EBay to prevent the billion-dollar company from using the “Buy it now” software that lets customers purchase fixed-price items over the Internet. MercExchange says it owns the rights to that software under two patents.

The Supreme Court has agreed to decide the extent to which court orders can be used to protect patent rights. Injunctions are a fundamental tool of the patent system, allowing inventors to stop others from copying their technology.

Large companies like EBay say they sometimes are forced to pay off people who hold questionable patents merely to avoid the time and expense of lawsuits. They refer to the people and small companies that sue them seeking settlements as “patent trolls.”

“They are in the business of filing lawsuits, not of inventing new products,” said a coalition of technology companies led by the Business Software Alliance.

“Patent litigation firms typically do not assert infringement claims until the target of the claim has brought a product to market or a standard has been finalized by a standard-setting organization,” the group said in a legal brief filed in support of EBay. “The reason for this behavior is simple: It maximizes the value of the infringement claim.”

Unnecessary patent litigation inhibits innovation and development of new products, the business coalition said.

Companies that sue for infringement and independent inventors say they are merely protecting their patent rights, which they say are essential to private enterprise.

A brief filed by an independent inventors group countered that large corporations want courts to protect intellectual property rights “only for themselves and companies like theirs.”

Patent experts say the case could play a pivotal role in determining how U.S. courts handle intellectual property rights.

“Injunctions are important to the private property system,” said John Dudas, administrator of the U.S. Patent and Trademark Office, who spoke to students at Fort Hunt Elementary School in Alexandria yesterday.

The Bush administration filed a brief that largely supports an injunction in favor of MercExchange, saying that maintaining the integrity of the patent system should take precedence over the convenience of parties with a stake in the case.

Mr. Dudas said a problem with patent litigation is determining whether patent owners are merely seeking easy money or valid protection of their rights.

“It’s hard to distinguish that,” he said.

Even patent lawyers agree that the expense of litigation can be excessive.

Legal expenses for patent lawsuits can sometimes reach $100,000 per month, said Fred H. Perkins, a patent lawyer with Morrison Cohen LLP. Some of his clients give up rather than pay the legal bills.

Mr. Perkins described lawsuits by patent litigation firms as “a serious problem.”

The EBay appeal to the U.S. Supreme Court case follows a recent court battle involving McLean-based patent holder NTP Inc., which sought an injunction against Research In Motion Ltd. from selling its popular BlackBerry wireless e-mail devices.

Research in Motion settled the case for $612.5 million after a judge made it known that he would grant an injunction to NTP.

EBay is contesting a decision by the U.S. Court of Appeals for the Federal Circuit that upheld an injunction requested by MercExchange. EBay says federal judges should have more discretion to deny injunctions and award money to patent holders instead.

The Supreme Court is expected to issue a ruling in the EBay case later this year.

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