In a case closely watched by the e-commerce world and involving patents asserted by MercExchange against eBay, its subsidiary Half.com and others, the U.S. Court of Appeals for the Federal Circuit affirmed the jury’s verdict regarding infringement and validity of one of MercExchange’s patents but reversed the jury’s verdict regarding validity of another patent, finding it invalid for anticipation, and overruled the district court’s denial of a permanent injunction. MercExchange, L.L.C. v. eBay, Inc., Case Nos. 03-1600-1616 (Fed. Cir. Mar. 16, 2005) (Friedman, J.).
MercExchange, the assignee of three patents directed to systems for selling goods through an electronic network, filed suit against eBay, Half.com and ReturnBuy, alleging infringement. At issue in the case was the fixed-price purchasing feature of eBay’s website, which allows customers to purchase items that are listed on eBay’s website for a fixed, listed price. Half.com is a wholly owned subsidiary of eBay, and at the time the action was brought, ReturnBuy operated an internet website hosted on the eBay website. Following the verdict, defendants appealed the denial of their motions for judgment as a matter of law (JMOL) and for a new trial on two of the patents in suit. MercExchange cross-appealed.
On appeal, the defendants argued that a reasonable jury would necessarily have found the asserted claims of one patent to be invalid as anticipated or rendered obvious by a prior art reference. In response, MercExchange argued that because defendants’ invalidity arguments were based on obviousness, they had waived their right to make an invalidity argument on appeal based on anticipation. The Federal Circuit disagreed: "[b]ecause ‘anticipation is the epitome of obviousness,’ the defendants’ obviousness arguments preserved their right to argue invalidity based on anticipation." Notwithstanding the preservation of defendants’ right to make an anticipation argument, the Federal Circuit found that there was substantial evidence to support the jury’s finding of non-obviousness.
In overruling the denial of a permanent injunction, the Federal Circuit rejected the lower court’s reasoning that an injunction should be denied because of a "growing concern over the issuance of business-method patents;" the likelihood of continuing disputes due to eBay’s attempts to design around the patents in suit and MercExchange’s public statements that it was willing to license its patents. The Federal Circuit found such reasons unpersuasive, stating "[i]njunctions are not to be reserved for patentees who intend to practice their patents, as opposed to those who choose to license. The statutory right to exclude is equally available to both groups….We therefore see no reason to depart from the general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances."
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