Supreme Court gives tech companies breathing space in patent cases

By Steve Malone

Posted on 17 May 2006 at 09:44

The US Supreme Court has struck a blow against the patent trolls. The Justices agreed unanimously that injunctions against patent infringing technology should only be used as a last resort.

Instead courts should take other factors into account before issuing the injunctions including whether the patent holder has suffered irreparable damage or whether simple damages awards might be enough to compensate the patent holder for any losses.

Companies and analysts throughout the IT industry are breathed a sigh of relief as the Supreme Court has struck a blow against companies whose only purpose is to build a portfolio of overly broad and poorly described patents in the hope that some much larger and cash rich company can be successfully sued for patent infringement sometime in the future.

MercExchange, a small technology licencing company from Virginia had successfully sued eBay over its use of 'fixed price auctions' with its 'Buy It Now' feature. In 2003, MercExchange was awarded $29.5 million in damages from eBay.

The damages and the patent ruling itself were not at issue. eBay had asked the Supreme Court to examine the practice of automatically issuing a permanent injunction against the offending technology. In effect this means that a company can be threatened with extinction unless it comes to an agreement on the patent holder's terms before it can come up with a workaround.

The most recent demonstration the ramifications of this was the NTP case against RIM and its push email BlackBerry service when the Canadian company was faced with shutting down its US service had NTP prevailed in its injunction.