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According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and the defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. The decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion. These familiar principles apply with equal force to disputes arising under the Patent Act. A major departure from the long tradition of equity practice should not be lightly implied. Nothing in the Patent Act indicates that Congress intended such a departure. To the contrary, the Patent Act expressly provides that injunctions may issue in accordance with the principles of equity.
Petitioner eBay operated a popular Internet Web site that allowed private sellers to list goods they wish to sell, either through an auction or at a fixed price. Petitioner Half.com, now a wholly owned subsidiary of eBay, operated a similar Web site. Respondent MercExchange, L.L.C., held a number of patents, including a business method patent for an electronic market designed to facilitate the sale of goods between private individuals by establishing a central authority to promote trust among participants. MercExchange sought to license its patent to eBay and Half.com, as it had previously done with other companies, but the parties failed to reach an agreement. MercExchange subsequently filed a patent infringement suit against eBay and Half.com in the United States District Court for the Eastern District of Virginia. A jury found that MercExchange's patent was valid, that eBay and Half.com had infringed that patent, and that an award of damages was appropriate. Following the jury verdict, the District Court denied MercExchange's motion for permanent injunctive relief. The Court of Appeals for the Federal Circuit reversed, applying its general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.
Is permanent injunction relief proper in patent infringement cases?
The Supreme Court of the United States vacated the judgment. According to the Court, in disputes arising under the Patent Act, a prevailing plaintiff seeking a permanent injunction must demonstrate that (i) the plaintiff has suffered an irreparable injury; (ii) remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (iii) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (iv) the public interest would not be disserved by a permanent injunction. The Court held that the Patent Act expressly provided that injunctions could have issued in accordance with the principles of equity. The Court noted that this approach was consistent with the Supreme Court's treatment of injunctions under the Copyright Act. In the case at bar, the Court concluded that neither the district court nor the court of appeals fairly applied these traditional equitable principles in deciding the holder's motion for a permanent injunction. According to the Court, the decision whether to grant or deny injunctive relief rested within the equitable discretion of the district courts, and such discretion had to be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.