US technology groups win patent lawsuit

US technology companies on Monday applauded a ruling by the US Supreme Court giving them a powerful new tool to fight off lawsuits brought by so-called patent trolls.

Monday?s ruling, which involved the online auction giant Ebay, could profoundly change the balance of power between companies that use patents primarily for litigation ? sometimes called patent trolls ? and high tech companies that make products based on thousands of different bits of patented technology.

The recent wave of litigation involving patent trolls ? including the recent case involving Research in Motion, maker of the popular BlackBerry email device ? has been driven largely by the fact that courts almost always issue an injunction to force companies to change the design of their products once they are found to have infringed a patent.

The justices ruled unanimously that there should be another option: courts should have discretion on whether to allow companies to continue making their product and compensate for the infringement with monetary damages rather than forcing them always to stop using the infringed technology.

?This decision is a clear victory for innovation and for consumers and a defeat for patent trolls and others who are abusing the legal system,? said Robert Holleyman, president of the Business Software Alliance, whose members include Microsoft, Intel and other large computer software and hardware companies. ?By giving courts greater latitude on whether or not to issue an injunction, we are making progress towards restoring much-needed balance to the out-of-control patent litigation process.?

The ruling came in a case involving the patent for fixed-price auctions on Ebay. The company was found to have infringed a patent held by MercExchange, viewed by many in the technology industry as a patent troll. The justices on Monday sent the issue of whether an injunction should be issued in the EBay case back to the lower court, to be decided in line with Monday?s new guidelines.

Legal experts say that, since most such cases settle rather than go to court, the ruling could have most impact on the dynamics of settlement negotiations.

Bruce Sewell, general counsel of Intel, said: ?There will now be a greater willingness to take cases to trial …[since] if you lose a case there is a potential you can compensate the plaintiff in dollars rather than having your whole company shut down.?

The decision is a setback for drug companies that traditionally rely on the near-automatic availability of injunctions to protect the value of their patents. But it is not a total victory for technology companies: though the court agreed unanimously that injunctions should not be automatic, it disagreed about when they should issue.

Three of the justices ? including the chief justice ? made clear injunctions would still be issued in most cases where infringement has been proved. But four justices said that high-tech cases were different. Technology companies are focusing on that four-judge concurring opinion.

?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,? Justice Anthony Kennedy wrote, for the four justices.

Additional reporting by Richard Waters in San Francisco and Paul Taylor in New York