Toppling Trolls

Patent trolls take a hit in a Supreme Court ruling.
Magazine Contributor
2 min read

This story appears in the September 2006 issue of Entrepreneur. Subscribe »

In what some are calling the biggest patent law decision in a decade, the U.S. Supreme Court has ruled that patent owners are not necessarily entitled to a permanent injunction against another company using the patent in commerce. By siding with eBay in the case eBay v. MercExchange, the court tipped the balance toward companies that actually use patented innovations, and away from inventors, their estates and so-called "patent trolls."

Patent trolls make money by buying patents on various bits of technology and threatening litigation against companies that use that innovation. The companies are forced to either pay a license--often far more than the patent is worth--or face a permanent injunction against using it.

A U.S. district court ruled that eBay had indeed violated a patent owned by tiny, Virginia-based MercExchange. However, it ruled that eBay could use the innovation until it had a chance to design around it. A federal appellate court overthrew that ruling, following procedure for granting a permanent injunction whenever there's a patent infringement. But the Supreme Court reversed the decision, declaring that district courts may consider several factors in these cases, focusing on traditional doctrines of equity--in other words, what's fair. And that's good news for companies.

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