In an exciting exchange at the Supreme Court, lawyers for MercExchange and eBay squared off in the battle for and against injunctions. The Court heard oral arguments yesterday in a crucial intellectual property case where the outcome could hinge on whether the justices think eBay is an evil patent infringer or the innocent victim of a so-called “patent troll”

In 2003, eBay lost an infringement action to MercExchange when a jury awarded MercExchange $35 million – although the judge reduced the award by $5.5 million and denied MercExchange an injunction, saying the smaller company would not face “irreparable harm” without it.

The district judge reasoned that, among other things, MercExchange was not practicing the patents and was willing to license its technologies to other companies. The judge also cited “growing concern over the issuance of business-method patents” as a reason that an injunction would not be in the public interest.

However, the U.S. Court of Appeals for the Federal Circuit reversed the ruling last year, saying MercExchange was entitled to an injunction because a “general concern” about business-method patents did not justify “the unusual step of denying injunctive relief.” eBay’s lawyers argued that the appeals court’s ruling is too inflexible to encompass the fast-changing world of software technologies.

eBay also argued that MercExchange wouldn’t be harmed if eBay continued to offer the service while it tried to design around the patents since MercExchange didn’t use its patents and could eventually be compensated with additional monetary damages if the infringing continued.

On Wednesday, the Supreme Court justices seemed to back the necessity for injunctions with Justice Antonin Scalia firing out that “We’re talking about a property-right here; all he’s asking for is ‘give me my property back.’ “

Injunctions, of course, are critical to the pharmaceutical industry, which has a huge stake in patenting drugs that take years to develop and needs easy access to injunctions.

A decision is expected by July. In the meantime, the USPTO has handed down another Non-Final rejection in the patent at issue in the course of re-examination. In the 105 page Office Action, the Examiner contends that claimed invention was obvious over the cited art.

More will be forthcoming.

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