The Future of Patent Enforcement after eBay V. MercExchange

TABLE OF CONTENTS I. INTRODUCTION II. FACTS OF THE CASE III. PROCEEDINGS IN THE LOWER COURTS IV. THE SUPREME COURT SPEAKS: NO CATEGORICAL RULES A. Finding Equity in the Statutes and Limiting Continental Paper Bag B. Patent Rights Do Not Include Any Property-like Rights Beyond the Provisions of the Federal Patent Statutes C. More Discretion for the District Courts, with Conflicting Directions V. ANALYSIS A. The Change in Law Disfavors Non-Practicing Patent Holders B. It Is No Longer Meaningful to Think of Patents as "Property" VI. THE POST-EBAY LEGAL LANDSCAPE A. z4 Technologies, Inc. v. Microsoft Corp B. Finisar Corp. v. DIRECTV Group, Inc. C. Why Finisar Is Much Worse Than z4 for Non-Practicing Patent Holders VII. IMPLICATIONS A. The eBay Ruling Benefits Large Corporations B. The Shift in the Patent Law Regime in Large Corporations' Favor Does Not Promote the Public Interest VIII. CONCLUSION I. INTRODUCTION Since the creation of the United States Court of Appeals for the Federal Circuit in 1982, the Supreme Court has largely refrained from reviewing patent cases. (1) However, beginning last Term, the Court has shown renewed interest in patent cases, (2) perhaps motivated by several concerns. The Court may have noticed an increase in "intra-circuit splits" (3) in the Federal Circuit. The generalist Supreme Court may have wanted to keep the specialist Federal Circuit from "stray[ing]" too far afield. (4) The Court has also expressed concerns that the increasing prominence of business method patents might have created "too much patent protection," (5) especially for "firms [that] use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. " (6) In eBay Inc. v. MercExchange, L.L. C. , the last two factors may have motivated the Supreme Court's review. In an attempt to reduce patent protection for certain patents and certain patent holders, the Court effectively made it much harder for patent holders who do not practice their patented inventions to obtain a permanent injunction after a finding of infringement of their patents. The Court's approach in eBay led to the holding that traditional equitable principles apply in patent cases, which casts doubt on the conventional view of patent as a type of property. II. FACTS OF THE CASE MercExchange, L.L. C. , was founded by Thomas G. Woolston, an electrical engineer and lawyer by training. (7) In April 1995, Woolston invented "a method and apparatus for creating a computerized market for used and collectible goods," (8) and applied for patents. As his patent applications wound their way through the U.S. Patent and Trademark Office ("USPTO"), Woolston tried to raise money to build a functional website, but attracted little attention from venture capitalists. (9) In December 1998, MercExchange was granted the first of its three patents, U.S. Patent No. 5,845,265 ("'265 Patent"). Licensees and $10 million in venture capital soon followed. (10) However, by then the competition in online auction sites had intensified, and MercExchange's efforts to commercialize Woolston's invention failed within two years. (11) Before MercExchange's commercializing efforts failed, eBay expressed interest in buying its patent portfolio. According to Woolston, eBay sent litigators to look at MercExchange's patents and demanded to see MercExchange's confidential patent files. (12) After the negotiations broke down, eBay started offering the "Buy-It-Now" feature, which infringed the '265 patent. (13) MercExchange filed suit in September 2001. (14) III. PROCEEDINGS IN THE LOWER COURTS After a five-week jury trial, during which the presiding judge's patience wore thin, (15) a jury in the Eastern District of Virginia found that eBay had willfully infringed MercExchange's patents. Nevertheless, the district court denied MercExchange's motion for a permanent injunction. …