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November 29, 2005

Ending Patent Extortion

The Supreme Court will be considering a case of crucial importance for the health of economic innovation in this country: whether holders of patents can use the courts to extort more money from infringers of those patents than the patents are actually worth. The case involved EBay, which unknowingly used a process patented by another company and was ordered to pay economic damages to the patent holder. The question is whether a lower judge made a mistake in not also issuing an injunction forbidding Ebay from continuing to use the patented process.

Why is this crucial?

Patents that are nearly worthless by themselves can be enormously expensive to disentangle once embedded in a production process or complicated technology, the eBay brief asserts, giving patent owners the upper hand in extracting license fees that are higher than the patent itself is worth.
So an injunction on top of economic damages just encourages flat out extortion.

Intellectual property laws are increasingly making innovation, even by some of the largest companies, a legal nightmare. The interests backing insane patent protections -- pharmaceuticals companies are one example -- are protecting profits at the expense of the whole economy.

As I've often argued, progressives pay too little attention to the economic decisions of the Supreme Court. Fighting against the tyranny of extreme patent rights in favor of the public interest is one issue where progressives could seize an issue of innovation and economic growth-- and maybe we could have fun demonizing the corporate IP lawyers the way the rightwing attacks the trial lawyers :)

Posted by Nathan at November 29, 2005 08:49 AM