Monday, May 15, 2006

SCOTUS to Trolls: Go Home?

There is a bit of a bombshell for the patent bar on the Supreme Court's front porch today -- No doubt the folks at RIM are a bit miffed that this didn't occur about 3 months ago, but I digress...

Have Justices Kennedy, Stevens, Souter and Breyer all but given public recognition to the (so-called) patent troll industry? Read into the following whatever you might like...

In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. See FTC, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, ch. 3, pp. 38-39 (Oct. 2003), available at (as visited May 11, 2006, and available in Clerk of Court's case file). For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. See ibid. When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.

EBAY INC. et al. v. MERCEXCHANGE, L. L. C., ___ U.S. ___ (May 15, 2006) (J. Kennedy concurrence)(emphasis added).

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