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A Patently Offensive Ruling?

By Rich Duprey – Updated Nov 15, 2016 at 6:30PM

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eBay vs. MercExchange was the wrong ruling in the right case.

I'm not swayed by the argument that the patent-lawsuit victory eBay (NASDAQ:EBAY) won in the Supreme Court on Monday is really a victory for everyone. Rather than balancing the power between so-called "patent trolls" and innovation, this ruling could end up tipping the scales against small-time inventors who lack the resources to challenge corporations that usurp a patent's advancements.

eBay, along with other technology-dependent companies, have charged that some owners of patents exist merely to extort money from businesses that want to use the innovations for the betterment of consumers. They pejoratively call the owners "trolls" -- or worse, "terrorists" -- and accuse them of holding on to the patents without ever attempting to develop them. When a company like eBay, Intel (NASDAQ:INTC), or Microsoft (NASDAQ:MSFT) uses the technology, they are then sued for infringement of the patent. That's what happened in the Research In Motion (NASDAQ:RIMM) BlackBerry settlement.

And such was the case with eBay. The trial court found that the company infringed on the electronic-auction patent owned by MercExchange and ordered eBay to pay $35 million as a result. Since the fixed-price auction was central to the way that eBay conducted its business, it appealed all the way to the Supreme Court.

The victory, though, is not clear and sweeping. Typically in patent infringement cases, when a company is found to have infringed on a patent, an injunction from further infringement is almost always entered afterwards. What the Supreme Court said on Monday was that the courts should have discretion on whether to impose an injunction. When the patent infringement is just a small portion of the overall way a company does business, it should not automatically be shut down because of that. Thus, eBay will be allowed to continue using its "Buy It Now" feature.

But the fact remains that the patent holders might not see the full fruits of their labor. The holders may receive a settlement from the infringing company, but then they will be forced to stand and watch others continue to use their invention for their own profit.

Yet let's not shed too many tears for some of these patent holders. Whether or not a patent should be issued in the first place for some of these "business processes" is highly debatable. Recall (NASDAQ:AMZN) getting a patent for its "one-click checkout" method that it then wielded against Barnes & Noble (NYSE:BKS). Some of these patents are for extremely obvious ways of doing business.

It seems to me that perhaps this was the wrong ruling in the right case. I don't believe a patent should necessarily have been issued to MercExchange for this software design. Allowing a customer to pay a fixed price for an item at auction is an obvious technological "innovation" that ought not to have been protected.

Yet I can also foresee that legitimate patent holders might suffer at the hands of large corporations who infringe on their inventions mainly because they have the deep pockets unavailable to the inventor. Even companies formed for the purpose of buying and enforcing patents serve a legitimate purpose by ensuring that there's a market for inventors who don't have the resources to commercialize their idea.

More careful screening at the Patent Office in the first place would prevent these bad decisions from being issued later on and becoming patently offensive to our senses.

Render your own decision with these related Foolish articles:

eBay and are Motley Fool Stock Advisor picks. Microsoft and Intel are recommendations of Motley Fool Inside Value . Want to see all the market-beating services The Motley Fool offers? Just click here .

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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