In the case of eBay Inc. v. MercExchange, L.L.C., the U.S Supreme Court ruled in 2006 that a plaintiff who proves patent infringement does not have an absolute right to receive a permanent injunction against the infringing party. Instead, courts must apply traditional principles of equity and consider four factors before granting such an injunction: (1) whether the plaintiff has suffered irreparable injury; (2) whether remedies available at law are inadequate to compensate for that injury; (3) considering balance of hardships between plaintiff and defendant, if remedy in equity is warranted; and (4) public interest would not be disserved by a permanent injunction. This decision overturned previous lower court rulings which had held that once patent infringement was established, it should almost automatically result in an injunction barring further use or sale of the patented invention without permission from its owner.

In the dissenting opinion for eBay Inc. v. MercExchange, L.L.C., Justice Kennedy, joined by Justices Stevens, Souter and Breyer, expressed concern about the potential misuse of injunctions in patent infringement cases. They argued that when a patented invention is but a small component of a larger product or process, an injunction can give undue leverage to the patent holder leading to exorbitant royalties. The justices also pointed out that an industry has developed where firms use patents not as a basis for producing goods or services but as legal weapons to obtain licensing fees which could distort negotiations over settlements and licenses if courts automatically grant injunctions against infringers without considering other factors such as economic consequences or public interest considerations.