eBay Inc. v. MercExchange (2006)

Quick Summary

The Supreme Court said: after a patent is found infringed, a permanent injunction is not automatic. Judges must apply the four-factor test from equity—irreparable harm, inadequacy of money damages, balance of hardships, and public interest. Also, a patentee’s failure to practice the invention does not automatically defeat an injunction.

Issues

• Do patentees have an automatic right to a permanent injunction after infringement is proven?
• Must courts apply the traditional equitable four-factor test in patent cases?

Rules

• Four-Factor Test: (i) Irreparable injury; (ii) Inadequate legal remedies; (iii) Balance of hardships favors equitable relief; (iv) Public interest not disserved.
• No automatic grant or denial: injunctions are case-by-case; non-practice of the patent is not a bar by itself.

Facts (Timeline)

Arguments

Judgment

The Supreme Court vacated the Federal Circuit’s near-automatic rule and reinstated the traditional four-factor test. It also said the District Court erred by discounting an injunction merely because MercExchange did not practice the patent. The case was remanded for proper equitable analysis.

Ratio

No categorical rules: Patent injunctions require a fact-specific application of the four-factor test; courts cannot presume for or against injunctions.

Why It Matters

• Balances patent rights with innovation and market stability.
• Guides courts to choose between injunctions and ongoing royalties.
• Shapes negotiation leverage in licensing and settlement talks.

Key Takeaways

1. No automatic injunctions after infringement.
2. Apply the four-factor test from equity.
3. Non-practicing status does not bar injunctions.

Mnemonic + 3-Step Hook

Mnemonic: “HARM → MONEY FAILS → FAIRNESS → PUBLIC OK”

• HARM: Irreparable injury.
• MONEY FAILS: Damages are inadequate.
• FAIRNESS: Hardships balance for plaintiff.
• PUBLIC OK: Injunction won’t hurt public interest.

IRAC Outline

Issue: Is a permanent injunction automatic after proving patent infringement?

Rule: Apply the traditional equitable four-factor test; avoid categorical rules.

Application: Lower courts erred by using presumptions and by penalizing non-practice; the correct path is fact-specific equity.

Conclusion: No automatic injunction; remand for proper four-factor analysis.

Glossary

Irreparable Harm

Injury that money cannot fix or measure well.

Adequate Remedy at Law

Money damages that fully compensate the loss.

Balance of Hardships

Which side is more unfairly burdened by relief or denial.

Public Interest

The community impact of granting or denying an injunction.

FAQs

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Reviewed by The Law Easy.