^{Democracy & Technology Blog} Supreme Court considers “automatic” injunctions in patent cases

Yesterday the Supreme Court heard arguments in eBay v. MercExchange, where both sides agree that the courts nearly always issue an injunction anytime a patent is infringed. It is argued by Nathan Myhrvold (see “Inventors Have Rights, Too!” in today’s Wall Street Journal) and others that without a strong presumption in favor of injunctions in patent cases, big tech companies would “stall and drown the little guy with legal fees.” This is a variation on a familiar argument: Litigation normally isn’t cheap; it isn’t “predictable.” So we should just get rid of it, right? The convoluted logic of tort reformers is now the convoluted logic of defenders of a questionable patent system.
Patents exist to promote innovation, but lately they have begun to resemble something like a lottery –where the holder of an insignificant patent can block a larger innovation while the Patent Office in effect admits that it didn’t pay much attention to the patent application in the first place and probably shouldn’t have approved it. Patents are supposed to promote innovation through rewards for innovators, but the rewards are a means to an end. This distinction is getting lost in the shuffle, as entrepreneurs turn the patent system itself into a big business. The present case provides an opportunity for the Supreme Court to restore some balance.
Are small inventors a threatened species? Small inventors can recover treble damages and attorney fees on top of compensatory damages in an infringement action. But a strong presumption in favor of injunctions is highly unusual and obviously susceptible to abuse, whether in this or in any other context. Justice Breyer zeroed in on the profit-maximizing behavior of patent trolls who have better alternatives than to negotiate licensing terms. MercExchange doesn’t care about innovation (it has no interest in using its patent), it just wants to make money. I find nothing wrong with this, but it may have implications for innovation and the patent system. The courts cannot ensure that the patent system promotes innovation unless they can make necessary refinements on a case-by-case basis, and they can’t do that if they are prevented from employing the equitable analysis that is always used when deciding whether to issue injunctions.
The brief for the petitioner is here and the brief for the respondent is here.