Is The Supreme Court Looking At The Presumption Of Patent Validity?

from the the-big-questions dept

We had chosen not to write about the latest in the eBay/MercExchange case (which we've covered before numerous times), because until the Supreme Court came out with a decision, there seemed to be little to add to the story. However, at the Supreme Court hearings today, some of the justices made some interesting comments that may be worth discussing. cheesedog writes in with some of the details: "Courts currently grant injunctions against an accused patent infringer nearly automatically, because issued patents carry a "presumption of validity," Yet we know that this presumption is, well, presumptuous; the quality of patents being granted by the USPTO varies wildly (and that is an understatement). Today's Supreme Court hearing in the eBay vs. MercExchange case provides evidence that at least some of the Justices understand this discrepancy. Maybe they'll do something about it? Right to Create hopes so: 'removing the presumption of validity would be a step in the right direction; let patents stand on their merits, not on the decisions of a single patent examiner in the patent office bureaucracy.'" There are two quotes in particular, one from Chief Justice Roberts and one from Justice Breyer -- both of which seem to question the validity of the patent.

However, it's very important to note that the presumption of validity is not at all what's being tried here. The case is simply about whether or not courts should mandate injunctions on those found guilty of patent infringement. In other words, whether or not this patent is valid or not -- and whether or not eBay infringed is not on the table here. On the point of injunctions, though, it sounds like eBay may have a tougher job convincing the justices. Justice Scalia, sticking to his property rights roots, is quoted as disagreeing with eBay's core argument that a company that doesn't produce a product shouldn't be allowed an injunction, as it does harm to the market. Scalia points out that the property right includes the right to exclude. Of course, you could argue with this by going back to the Constitution and noting that the purpose of the patent system is solely "to promote the progress of science and useful arts," rather than to "create a property right for inventors." Thus, you could make the argument that a company that is not actually promoting progress is not legitimately using the patent system. It's also amusing to read MercExchange's defense of its activities, by focusing on the fact that the guy behind MercExchange tried to put his patents on internet auctions and set price sales into practice and failed. It doesn't seem like the Constitution is designed to protect failed businesses, and allow them to sue where others succeeded.


Reader Comments (rss)

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  1.  
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    Anonymous Coward, Mar 29th, 2006 @ 3:29pm

    I like the idea of not granting injunctions unless the company filing suit is actually using the patent in a real product in the marketplace. They could still sue to ultimately block the use and could seek damages, but they couldn't handcuff the other company while a crap patent winds it way thru the courts.

     

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  2.  
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    Rishi Khaitan, Mar 29th, 2006 @ 4:23pm

    Mike,

    Great comments in the 2nd paragraph. The district court judge who originally awarded $25MM to MercExchange but did not grant an injunction reasoned that MercExchange was not suffering any competitive loss because they had not actually put the methods described in the patents to commercial use. However, MercExhange argued that they have at www.mercexchange.com. (no wonder they failed because it's clear that the site is just a facade). I fully support the rights of patent holders but injunctions such as this are just not called for and not in the spirit of the law.

    Ultimately patents for business methods represent just that: business methods. Not businesses. As anyone with an ounce of business sense and as history has demonstrated repeatedly, successful businesses are a result of great execution much more so that great ideas. There is nothing positive for the general public/economy that MercExchange is trying to achieve by enforcing this injunction on eBay. Sounds like its spite driven and nothing more. They already got $25MM which even after legal fees is probably several times more than what they ever earned through their own commercial endeavors.

     

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  3.  
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    angry dude, Mar 29th, 2006 @ 4:49pm

    another patent bashing from Mike

    This case is all about big corporate IP thiefs vs. small innovative companies and garage inventors.

    I agree though that the case is not the best to illustrate the point: I am no fan of bussiness method patents myself.

    They could pick a much better case with much stronger patent claims covering some real technical invention, not some "Buy It Now" crap.

    But, nevertheless, EBay MUST lose. This is a matter of principle and good policy.
    Private property MUST be respected.

     

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  4.  
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    Anonymous Coward, Mar 29th, 2006 @ 5:41pm

    but programs are numbers and code. can you patent 1+1=2? then why can you patent programing code? i think they should have a special patent system for programing. PATENT REFORM NOW!

     

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  5.  
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    Ima Fan Ofreform, Mar 29th, 2006 @ 6:48pm

    Injunctions = Presumption of Validity

    As I understand it, injunctions are only granted because the patent is presumed to be valid. If there is no presumption of validity, there can not be an automatic assumption that an injunction is the right thing.

    Now turn that on its head. If the Supreme Court rules that injunctions aren't always the right thing, then that equates to saying that the presumption of validity is a weak presumption. Why? Because a patent is nothing more than a right to exclude others from practicing the claims. If the courts don't uphold that right, they are not upholding the patent. Thus, they are not presuming the patent to be valid.

    I agree that this is a good thing. The courts shouldn't turn a blind eye to patent quality (as they do now, e.g., RIM v NTP). If the patent appears to be bogus, the courts should take that into account before issuing an injunction. It is simple common sense.

     

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  6.  
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    Joe Smith, Mar 29th, 2006 @ 11:30pm

    "What exactly is the invention here?"

    I believe the presumption of validity is statutory, not Judge made law so the court is not going to interfere with that.

    The Chief Justice is reported to have asked "what is the invention here?" to which MercExchanges lawyer apparently said, "I'm not a computer programmer and neither are you." Funny bloody exchange between people who are seriously discussing shutting down a multi-billion dollar operation over that patent. If the public aren't appalled, they're not paying attention.

    The Court may well become concerned that the combination of automatic injunctions, garbage patents and reverse onus in infringement suits has created so much potential for Judicially aided and abetted blackmail that something has to be done. The one thing the court can do is to pull back on when injunctions will be issued.

    Restricting patent licencing firms to damages as an adequate remedy and refusing to grant injunctions when there are serious pending challenges to a patent or a patent covers only one aspect of a complex product would be a reasonable place to go.

    Scallia's comments about patents being property, seem to miss the point that patents are not really property - they are the State restricting every other American's freedom because the government thinks on balance it is in America's collective interest. In fact, if it could be shown that on balance the current patent system does not promote innovation, of some severable part of the system does not promote innovation the system or part is probably unconstitutional.

    If the US Supreme Court was sincere about protecting individual property rights they would not have allowed cities to expropriate private homes to flip to wealthy developers.

    I guess this post is likely to draw more psychotic ranting from angry dude. That's the price of a free society.

     

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  7.  
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    angry dude, Mar 30th, 2006 @ 6:46am

    Hey, Joe Smith, I am not "psychotic",
    I am a very normal tax-paying citizen of this great country.

    The only difference between me and you is that I actually "promoted the progress" by inventing something new and useful, which was immediately stolen by large industrial consortium.
    I got zero compensation for my invention, that's right, zero, zilch, nil...

    If you were me , you would be angry too, maybe even more...

     

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  8.  
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    Adam, Mar 30th, 2006 @ 7:23am

    RE: angry dude

    I know a guy who talks kind of like you do. Except that guy is psychotic, and wraps his supposed idea theft in a massive conspiracy that rivals the Illuminati in it's far reaching consequences. If it were more than the ramblings of a crazy man.

    But if you invent something new and useful, turn it into a product. If you don't want to turn it into a product, then take your patent, and go to various companies offering to lease it to them. Keep lots of paperwork to show that you were, in fact, making use of the patent by attempting to lease it to these companies, so that you have a decent chance of winning any lawsuits that might emerge. And don't tell the companies how it works, just tell them what it does. In this way, you pretty much eliminate reverse engineering. If your invention was worth the time and effort of a patent, it should take the company some time to come up with something similar, and you can use that as a selling point to every other company you try to sell it to.

     

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  9.  
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    angry dude, Mar 30th, 2006 @ 8:05am

    Re: RE: angry dude

    Hey, Adam,

    your comment shows that you know nothing about patents and patent system.

    If you choose to patent your invention (as opposed to keeping it a trade secret) you MUST disclose enough details in your patent application, so that an average person skilled in the art can reproduce your invention.
    Anybody in the world can read all issued patents at
    www.uspto.gov/patft free of charge.
    Your only protection then is your right to sue the infringer.

    And about conspiracy, do you have any idea about the state of morale of those large corporations ?
    Have you heard about Enron, Tyco, Adelphia, WorldCom etc etc.etc. ?

    Read all the lies they wrote about Rambus (www.rambus.org) and just shut up.
    Those corpoarate CEOs and Legal counsels are the real crooks and trolls... Not that all patent holders are angels...
    But as I said, it's a "dog eat dog" corporate world out there.

     

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  10.  
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    inventor, Mar 30th, 2006 @ 8:15am

    angry dude is not an inventor

    angry dude, the only difference between you and me is my invention was a) valuable, b) non-obvious, and c) non-trivial. And I didn't need a patent to protect it, because it was a), b), and c).

    You claim to know more than any of the rest of us about the patent system, but what you say really only demonstrates that you know how to abuse the purpose of the system. Patents aren't there to ensure that you can file some abstract idea that you don't know how to implement yourself, then wait until someone else figures out the details and puts it into practice so that you can sue them. That is corruption.

    And you do sound psychotic.

     

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  11.  
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    Joe Smith, Mar 30th, 2006 @ 8:21am

    Re: contribution

    The only difference between me and you is that I actually "promoted the progress" by inventing something new and useful If you did not patent it then you took that risk. If you did patent it, then go get a lawyer. I have no problem with patent protection for genuine inventions. I have a problem with business method and software patents and I have a problem with injunctions which allow extortion of unreasonable licencing fees. You and I are profoundly different but contribution to progress is not the difference, assuming that you have made a contribution. I made my contribution to progress years ago. I co-wrote some scientific / engineering software which is still in regular use around the world and the standard by which other software in its area is judged. None of what I did was patentable at the time and yet I did it and moved progress forward. I am still proud of that contribution even if all it ever got me was a paycheck from the University I was working for.

     

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  12.  
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    angry dude, Mar 30th, 2006 @ 8:33am

    Re: angry dude is not an inventor

    >my invention was a) valuable, b) non-obvious, and c) >non-trivial. And I didn't need a patent to protect it, >because it was a), b), and c).

    Now try to make a little money on your invention without a patent. Good luck...

    And if it's a trade secret, then you did not promote any progress - it will be lost.

     

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  13.  
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    angry dude, Mar 30th, 2006 @ 8:42am

    Hey, Joe

    It is my understanding then that you have a problem with the likes of RSA patent or Karmarkar patent ?

    True, most software patents are junk, but same can be said about hardware patents.

    E.g. there are ~600 patents on something as simple as ethernet plug.

    For somebody who earns a living developing non-trivial software algorithms, your comments are quite insulting.

    People like RMS are self-serving hypocrites pretending not to understand the difference between e.g. invention of public key cryptography and e.g. coding some trivial client-server application.

    Software is really no different from any other field.

     

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  14.  
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    Anonymous Coward, Mar 30th, 2006 @ 10:32am

    Look at the Bigger Picture

    > It doesn't seem like the Constitution is designed to
    > protect failed businesses, and allow them to sue
    > where others succeeded.

    What Mike fails to remember are investors who backed a failed business.

    They put money behind the invention and the filing of the patent. Mike seems to think that if a business fails, then Intel, IBM or HP should be able to swoop up and grab the IP for free without compensating the investors.

    Sorry, Mike, you are wrong on this. If the patents are truly valuable, then the investors of a failed company won't prevent others from using them - they will sell, license or do something else to extract value from them. It's called the free enterprise system, and the courts should protect those who made the investment to file the patents, not the ones who happen to be using them.

    The market will make sure that that valuable patents are used - as remarked before patents are public record and if someone really finds something valuable it will be used one way or another. If patents are made invaluable, fewer people will file and hold ideas as trade secrets, which means no one knows about them when a business fails.

    I predict the Court will rule against Ebay.

     

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  15.  
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    Mike (profile), Mar 30th, 2006 @ 11:26am

    Re: Look at the Bigger Picture

    What Mike fails to remember are investors who backed a failed business.

    Huh? How did I forget that? Explain to me why investors should be rewarded for backing the wrong horse.

     

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  16.  
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    Joe Smith, Mar 30th, 2006 @ 12:53pm

    software patents

    It is my understanding then that you have a problem with the likes of RSA patent or Karmarkar patent.

    Yes I do have a problem with those patents. Neither should ever have been granted.

    The big progress in software happened before software patents were recognized (1) showing that software patents are not necessary for progress to occur and (2) suggesting that software patents have slowed down the pace of progress. If you are developing software I think you need to look to licencing agreements and copyright to protect your work product.

     

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  17.  
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    Lawrence B. Ebert, Mar 30th, 2006 @ 1:09pm

    Comments on presumption of validity way off base

    Of --Yet we know that this presumption is, well, presumptuous; the quality of patents being granted by the USPTO varies wildly (and that is an understatement).-- etc., these comments really miss the mark on the Federal Circuit holding. A permanent injunction can only issue AFTER validity and infringement are established in court. We're not talking about a "presumption" here; the parties duked it out in court, and eBay lost the invalidity argument.

    This brings up the CJ Roberts comment about the re-exam on the '265 patent. AFTER losing at district court, THEN eBay filed a re-exam, asserting the SAME art upon which it had argued and lost. This is creativity? Yes, the USPTO issued an Office Action rejecting (not invalidating) claims, but before the Office Action was mailed the Federal Circuit had AFFIRMED the district court that the invalidity arguments were wrong. Guess where any appeal from the USPTO ulimately ends up? Yes, the Federal Circuit. [All this was written down on page 5 of Intellectual Property Today in February 2006, so that it is not exactly a secret.]

    Sure, one can debate whether MercExchange patents are good or bad, but the "presumption of validity" and in fact "validity" arguments are totallly irrelevant to eBay v. MercExchange. eBay is about conditions for a permanent injunction, and the rules for this were created long before the eBay case was decided.

     

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  18.  
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    angry dude, Mar 30th, 2006 @ 1:12pm

    Re: software patents

    is my understanding then that you have a problem with the likes of RSA patent or Karmarkar patent.

    >Yes I do have a problem with those patents. Neither >should ever have been granted.

    Aren't we humble today ?

    So you support copyright for software, which protects large code base relatively well but does nothing to protect small ingenious piece of code on which somebody might have spent 3 years ?

    You want to collect your paycheck for developing a lot of trivial software but want to deny it to me for spending a lot of time and mental effort in order to develop a small but non-trivial piece ?

    Is this what you want ?

    I say, if you oppose software patents then you should also be against software copyrights.
    Otherwise it's just noit fair to some people who develop new important technologies, like public key encryption etc.

     

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  19.  
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    Joe Smith, Mar 30th, 2006 @ 2:35pm

    Re: Re: software patents

    Aren't we humble today ?
    Humility is an overvalued virtue usually attribute to people who lack the strength of character to have an opinion.
    You want to collect your paycheck for developing a lot of trivial software
    The software I was referring to was not trivial and took about four years of research, programming and testing to produce and document.

     

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