U.S. Supreme Court Deals a Blow to Patent Trolls

Anonymous Coward writes "Forbes is reporting that the Supreme Court has just limited the power of patent trolls to obtain permanent injunctions against infringers as a matter of course. The court has ruled that the principles of equity apply, meaning that a court considering slapping an injunction on the infringer must consider how much damage is really being done ... which in the case of EBay's Buy It Now feature, isn't much, since the company that owns this so-called patent only has it for the purposes of suing other people." From the article: "The high court's decision deals a blow to patent trolls, which are notorious for using the threat of permanent injunction to extort hefty fees in licensing negotiations as well as huge settlements from companies they have accused of infringing. Often, those settlements can be far greater than the value of the infringing technology: Recall the $612.5 million that Canada's Research in Motion forked over to patent-holding company NTP to avoid the shutting down of its popular BlackBerry service."

Comments

Which is kind of funny since...

[Salty Moran]

...Creative just filed a lawsuit against Apple regarding the iPod.

Doh!

Apple lucked out. Creative can't get an injunction "just because" which could have been a serious blow to Apple's sales even if Creative ultimately lost the case.

Re:Which is kind of funny since...

[Salty Moran]

The behavior being corrected here was recognized in patent trolls, but it was by no means limited to them. Previously, patent trolls were simply filing suits and getting de facto injunctions as a result. It cost more to try and defend the dragging case than to simply come to a licensing agreement, so the trolls made it their business model to basically buy patents on the cheap and then extort companies producing actual products.

However, what's good for the goose is good for the gander, so even companies that had valid patent complaints used this tactic to try and extort producers of actual goods rather than muddling through an actual case. Creative can't do that now, however. They have to prove that the case is not only valid, but that an injunction is actually necessary while the complaint is being argued.

They may well get an injunction if requested, but they won't just get one because they filed a lawsuit, they'll actually have to invest time into proving they need one.

The problem with the "patent trolls" idea

[JanneM]

The problem with the "patent trolls" idea is that it's all but indistinguishable from the "small inventor with few resources" one in many cases.

This ruling does mean that if you're a small-time inventor that couldn't afford to implement your idea yourself, you can freely be ripped off by large corps that can, with impunity, since you wouldn't have made a lot of money without a major partner in any case.

Tell me again how patents are protecting the inventor against large corporations?

A ruling against some legitimate inventor types

[rw2]

Won't this ruling hurt the garage inventor that doesn't have the business accumen to bring a product to market, but has the creativity needed to make new stuff?

Is the ruling, in essence, "patents were made to protect products, not ideas"?

Re:Evil

[Anonymous Coward]

You have to be pretty naive to think that this isn't exactly what corporatists want. Now every small company with legitimate patents stands to lose them to big business and get slapped with the "patent troll" stigma. This ruling keeps a broken system in power by declaring that you can only hold patents if you're getting rich from using it already. Suppose you invent something and don't have the resources to build it. That's the prototypical argument for how patents protect the little guy, right? Guess what, you're a patent troll now. If someone with the necessary resources rips you off, you lose nothing, so you aren't awarded damages.

Re:Greater settlement than value?

[BrianRoach]

If the Blackberry service wasn't worth $612.5 million to RIM, they wouldn't have paid, but rather shut it down. So that actually is an example where the value of the technology was more than the settlement - it would have made no sense for RIM to agree to pay more than the technology was worth.

I think you're a bit confused on the concept of "value".

The technology wasn't necessarily worth $612.5 Million. The ramifications of being shut down by an injunction were. This is called extortion in many cultures.

If I tell you you're going to pay $5000 for car with an actual value of $1000 or else I'm going to break your legs so you can't walk to where you need to go ... it's still a $1k car. You're just going to be paying 5 times that. The value has been artificially increased, and only in relation to you.

- Roach

The goal of patents is not inventor protection

[sacrilicious]

Tell me again how patents are protecting the inventor against large corporations?

Your question implies that the goal of patents is to protect small inventors against competition. Let's not lose sight of the fact that this is NOT the goal of patents. Their goal is to increase the number of useful inventions to which the public has access. It is only incidental (i.e. a means to an end) that the method being tried to achieve this aim happens to be granting a temporary monopoly. Interpreted one way, this ruling by the supreme court says it's not right to create an idea and then simply sit and goal tend it... I don't know the court's reasoning (haven't read the article or the ruling) but this would seem to align with the idea of making useful things available to the public.

We need a change.

[kahrytan]

Patent laws need a change. People shouldn't get away with patenting ideas like MercExchange just did. "buy it Now" is an idea. It is not technology. Amazon.com's 1-click does the same exact thing.

Patent Law should be changed so only physical and exact things are patented. One should not be able to patent ideas. This includes software patents.

The Decision

[servoled]

The decision itself can be found here along with countless other places.

For the most part it is a pretty cut and dry decision stating that a 4-part based on the principles of equality should be applied before an injunction is granted. Specifically:

A plaintiff must demonstrate: (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. See, e.g., Weinberger v. Romero-Barcelo, 456 U. S. 305, 311-313 (1982) ; Amoco Production Co. v. Gambell, 480 U. S. 531, 542 (1987) .

There is an interesting part of Thomas opinion:

Although the District Court recited the traditional four-factor test, 275 F. Supp. 2d, at 711, it appeared to adopt certain expansive principles suggesting that injunctive relief could not issue in a broad swath of cases. Most notably, it concluded that a "plaintiff's willingness to license its patents" and "its lack of commercial activity in practicing the patents" would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue. Id., at 712. But traditional equitable principles do not permit such broad classifications. For example, some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves.

This basically lays out that just because a patent owner has no intention of selling or making the product does not mean that they automatically fail the 4-part test. Presumably if they also have no intention of licensing the patent to someone they would fail the test, but this isn't specifically said in the decision. Might be something to watch for in the future.

Off to read the two concurring opinions.

Re:Clarity in reporting please.

[Anonymous Coward]

As a patent attorney, I would point out to everyone who bashes the current patent system that the whole point of obtaining a patent is so that you may exclude others from making, using, selling, offering to sell, importing, or exporting the claimed invention. How is this done? Through lawsuits. While patent "trolls" are an unfortunate byproduct of the current system, there is no denying that to a large degree, the system works well for its intended purpose, which is to promote the prorgess of science and technology. The Supreme Courts decision to limit the ability of patentees to obtain permanent or temporary injunctions up front merel waters down the rights of all patent owners, and may end up doing more harm then good.

And for the record, the NTP v.s. Blackberry suit was not a patent troll case as far as the term has come to be defined in the IP industry.