eBAY v. MerceXchange as a sign of things to come: is the Supreme Court still reluctant to hear patent cases?

• Date: 22 September 2006
• Author: Huang, Peter O.

1. INTRODUCTION

   Several years ago, I wrote a short practice note for this journal, (1) suggesting in it that the United States Supreme Court's then-recent decision in The Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc. (2) indicated that appellate litigators should consider whether the Federal Circuit remained the only--or indeed the best--option for appeals in cases that include patent claims. I write again for similar reasons: to put appellate lawyers on notice that patent appeals appear more likely to end up in the Supreme Court today than has been the case for almost a generation.

   On May 15, 2006, the Supreme Court rendered its decision in eBay Inc. v. MercExchange L.L.C., vacating and remanding a decision from the Federal Circuit that addressed requests for injunctions in patent cases. (3) This case was carefully watched by the patent bar, for the issues it involved were of significant importance to both patent lawyers and their clients. But the decision is also of interest to every appellate lawyer who might eventually handle an appeal in a patent case.

   As I explain in this note, eBay is of particular concern to appellate lawyers because it may mark a change in the Supreme Court's historical interaction with the Federal Circuit. For many years, the Supreme Court regularly deferred to the Federal Circuit in patent cases, and indeed, that court was established in part to specialize in patent appeals. (4) However, eBay is among the latest, and it is perhaps the most controversial, in a string of recent decisions in which the Supreme Court has reversed or remanded patent decisions from the Federal Circuit. (5)

   Is eBay representative of a fundamental change in the Supreme Court's relationship with the Federal Circuit in patent cases, or is it an anomaly? Only time will tell, but eBay tells us at least that times may be changing.

2. BACKGROUND

   1. Two Decades of Supreme Court Deference to the Federal Circuit

      When Congress created the Federal Circuit in 1982, it gave the new court nationwide appellate jurisdiction over patent appeals. (6) For the next two decades, the Supreme Court seemed almost to have delegated final review of patent cases to the Federal Circuit, "render[ing] itself well nigh invisible in modern substantive patent law." (7) Indeed, the Federal Circuit had by 2001 "become the de facto supreme court of patents," (8) for, as one commentator put it, "[i]n those rare patent cases when the real Supreme Court has materialized, the Court has left behind a largely uninspiring jurisprudence. When winnowed down to those cases dealing directly with substantive patent issues, the jurisprudence is paltry indeed." (9)

      The Supreme Court decided only ten patent cases between 1982 and 2000, (10) an average of approximately one decision every two years. Furthermore, as Professor Janis's 2001 analysis indicates, only three of those cases involved "substantive" patent issues, an average of approximately one substantive patent case on the Supreme Court's docket every six years. (11) In the relatively recent past, then, it was fair to say that the Supreme Court appeared remarkably reluctant to review patent cases. The Court seemed content instead to stand aside and allow the Federal Circuit to be the final arbiter of most patent matters.

   2. The Waning of the Supreme Court's Deference to the Federal Circuit

      By 2003 there were suggestions of a shift in the Supreme Court's attitude towards the Federal Circuit. One observer noted that the Court's "initial deference to the Federal Circuit" had by then "been replaced by a more critical view of the Federal Circuit's decisions and its decision-making processes," (12) and applauded the emergence of the trend, asserting that the Court had "correctly abandoned its deferential mindset toward the Federal Circuit." (13) The Supreme Court's track record in patent cases in the years since 2001 seems to support that analysis.

      From 2001 to 2006, the Supreme Court decided five patent cases, (14) which yields an annualized total of patent cases almost double that on its docket in each year of the first two decades in the Federal Circuit era. Three of those five arguably involved substantive patent issues, (15) which amounts to approximately one substantive case every two years, or roughly triple the pace of the Court's review of substantive cases during the first two decades of the Federal Circuit's existence.

3. A SHORT HISTORY OF EBAY V. MERCEXCHANGE

   1. The District Court Decision

      MercExchange sued eBay for infringement of its patents, (16) prevailed after a jury trial, and requested a permanent injunction. (17) After applying the traditional four-factor test, (18) the district court denied this request, concluding that the issuance of an injunction would. be inappropriate. (19)

   2. The Federal Circuit Decision

      The Federal Circuit reversed the district court as to the denial of a preliminary injunction, (20) recognizing the "general...