Supreme Court Orders New Hearing for eBay

[pinkybella]

Wow.  It appears I've gotten sidetracked by the argument over preliminary injunctions, when this case doesn't even deal with that at all.  It deals with permanent injunctions.  And for that reason, I expect this result will be QUITE controversial amongst property (and IP) law commentators.  There are very strong arguments on both sides here.

I was wondering why you kept mentioning preliminary injunctions but I didn't want to say anything because I figured you probably knew better than me since your username is jd. 

[J D]

I only mentioned them because someone else did.  Weird.

Those are just my initials; I'm not a lawyer yet. 

[pinkybella]

From reading the actual opinion, basically the SCOTUS' holding is that a) the decision to grant/deny equitible relief lies within the discretion of the district courts and that b) in patent disputes, the decision to grant/deny permanent injunction must be consistent with the traditional principals of equity, meaning plaintiff must demonstrate that 1) it has suffered irreparable injury 2) legal remedies are inadequate to compensate for that injury 3) a remedy in equity is warranted and 4) public interest would not be disserved by a permanent injunction.

They also stated that the lower courts were wrong in ruling that a permament injunction should be issued once infringement has been identified.

So basically they ruled that a permanent injunction should not be issued JUST because x is infringing on y's patent(s).

[J D]

From reading the actual opinion, basically the SCOTUS' holding is that a) the decision to grant/deny equitible relief lies within the discretion of the district courts and that b) in patent disputes, the decision to grant/deny permanent injunction must be consistent with the traditional principals of equity, meaning plaintiff must demonstrate that 1) it has suffered irreparable injury 2) legal remedies are inadequate to compensate for that injury 3) a remedy in equity is warranted and 4) public interest would not be disserved by a permanent injunction.

They also stated that the lower courts were wrong in ruling that a permament injunction should be issued once infringement has been identified.

So basically they ruled that a permanent injunction should not be issued JUST because x is infringing on y's patent(s).

Right.

Essentially what the court is saying is "Look, this isn't any different from any other injunction issue.  Injunctions in patent cases are handled the same way as injunctions everywhere else, and that means there can't be any categorical or per se rules EITHER WAY (you can't have rules that say the injunction will automatically issue if something happens, or that it will never issue if something happens, etc.)."  This makes a great deal of sense.  an injunction is an equitable remedy, so the federal courts have to wear their chancery hats, which means balancing the traditional factors; the biggest distinction, historically, between law and equity is that the former relies on strict rules, whereas the latter relies on flexible balancing and trying to find the fairest result in individual cases.  The opinion doesn't say that issuing an injunction is improper in this case, or that it is; they basically say that the lower courts simply applied the wrong standard.  The standard of review is abuse of discretion, so whatever the lower courts decide to do, as long as they go through the balancing of the equities, is likely to be upheld on appeal.

[pinkybella]

From reading the actual opinion, basically the SCOTUS' holding is that a) the decision to grant/deny equitible relief lies within the discretion of the district courts and that b) in patent disputes, the decision to grant/deny permanent injunction must be consistent with the traditional principals of equity, meaning plaintiff must demonstrate that 1) it has suffered irreparable injury 2) legal remedies are inadequate to compensate for that injury 3) a remedy in equity is warranted and 4) public interest would not be disserved by a permanent injunction.

They also stated that the lower courts were wrong in ruling that a permament injunction should be issued once infringement has been identified.

So basically they ruled that a permanent injunction should not be issued JUST because x is infringing on y's patent(s).

Right.

Essentially what the court is saying is "Look, this isn't any different from any other injunction issue.  Injunctions in patent cases are handled the same way as injunctions everywhere else, and that means there can't be any categorical or per se rules EITHER WAY (you can't have rules that say the injunction will automatically issue if something happens, or that it will never issue if something happens, etc.)."  This makes a great deal of sense.  an injunction is an equitable remedy, so the federal courts have to wear their chancery hats, which means balancing the traditional factors; the biggest distinction, historically, between law and equity is that the former relies on strict rules, whereas the latter relies on flexible balancing and trying to find the fairest result in individual cases.  The opinion doesn't say that issuing an injunction is improper in this case, or that it is; they basically say that the lower courts simply applied the wrong standard.  The standard of review is abuse of discretion, so whatever the lower courts decide to do, as long as they go through the balancing of the equities, is likely to be upheld on appeal.

Yup, I completely agree with your analysis.

[J D]

This case actually concerns a VERY old debate in property law about whether injunctions are preferable to money damages from a global perspective (i.e., which is better for society as a whole, which is more economically efficient), and essentially gets into a discourse on the difference between so-called "property rules" and "liability rules" about remedies and which are preferable in which cases.  We discussed this a lot in cases dealing with nuisances.  Fun stuff.

[J D]

This case actually concerns a VERY old debate in property law about whether injunctions are preferable to money damages from a global perspective (i.e., which is better for society as a whole, which is more economically efficient), and essentially gets into a discourse on the difference between so-called "property rules" and "liability rules" about remedies and which are preferable in which cases.  We discussed this a lot in cases dealing with nuisances.  Fun stuff.

interesting. 

I still think the patent system has been almost destroyed from its original purpose due to trolls, but I guess that's a different discussion.

The same basic issues come up in both IP and in nuisance.  What will make society in general better off?  Enjoining eBay from infringing the patent (or alternatively, enjoining the oil refinery from operating because it creates an awful stench which interferes with the ability of neighboring homeowners to enjoy their land), or just making them pay damages to the aggrieved plaintiff (essentially forcing the plaintiff to sell to the defendant a right to infringe the patent or to pollute and make them nauseous)?  This is a huge debate in the academy, and in the legal profession: both injunctions and damages have their respective advocates, and they are all convinced that the remedy they defend is the best one.

Typically, property law thinks of injunctions as being able to issue independent of the harm (if any) that the interference with the right has caused.  Property law and property rules about remedies award entitlements: they say who is in the right, who has the best claim, and tell the other side to get the f*&! out and stop their interference with those rights.  Property rules are not concerned with compensating for harm done; that's what liability rules, which are mostly seen in tort and contract law, are for.  Property rights can be vindicated through injunctions even though no harm has occurred, whereas tort and contract law generally operates under the principle of "no harm, no foul."  It's thought to be inadequate to merely allow the landowner to get $1 or other contemptuous damages every time the defendant steps one foot onto his property (even if there's only minimal damage, or no damage).  In order to adequately protect property rights and entitlements, the traditional view is that injunctions HAVE to be the remedy. 

[J D]

Interesting.  Thanks for the comments, they are really insightful for somebody not yet at law school.

I think you could understand where I'm coming from when I say that the overall effect on innovation by patent trolls is awfully negative, legal mumbo jumbo notwithstanding.  They preclude innovation, rather than enriching it as they are supposed to with trolling and weak patents.

That certainly is a legitimate concern.  On the other side is, perhaps, an equally legitimate concern about the efficacy of property rights in general.  These kinds of conflicts come up again and again.  That's what makes law so fascinating, in my opinion.