Ebay v. MercExchange

Citation: 126 S.Ct. 1837, 78 U.S.P.Q.2d (BNA) 1577 (2006).

Factual History:
MercExchange, L.L.C. holds a patent on a business method for an internet-based marketplace whereby private buyers and sellers can engage in commerce under the guidance of the website operator. MercExchange has licensed this patent to companies in the past and sought to do so with eBay and Half.com but no agreement was initiated.

Procedural History:
MercExchange brought an infringement suit against eBay and Half.com and a jury found the defendants liable for damages but the district court denied MercExchange's motion for permanent injunctive relief. That court made a finding against irreparable harm in the event that an injunction did not issue based on the "plaintiff's willingness to license its patents" and "its lack of commercial activity in practicing the patents".

The Court of Appeals reversed the District Court applying its own rule on permanent injunctions unique to patent claims "that a permanent injunction will issue once infringement and validity have been adjudged".

Supreme Court:
The Supreme Court vacated the lower court's judgment and remanded to the District Court for a judgment on the injunction based on the four-factor test established in principles of equity.

TO grant relief a motion for a permanent injunction a plaintiff must establish "(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction."

The Supreme Court found that neither of the lower courts had applied this test nor persuasively argued for a departure from the test. Taking no position as to whether an injunction should be granted this court remanded stating that "relief rests within the equitable discretion of the district court".