eBay Accounts for Lawsuit Loss

Auction giant eBay has shaved $30 million from its second-quarter results after a patent infringement verdict against it was upheld.

A U.S. federal court judge in Virginia last week lowered the amount eBay had to pay to plaintiff MercExchange by $5 million, but refused to set aside the verdict or order a new trial.

In May, a unanimous jury found eBay violated MercExchange’s patent covering the process of using a credit card to lock in online purchases.

Tom Woolston, a patent lawyer and founder of MercExchange, applied for the disputed patents in the spring of 1995 — about five months before eBay went live. He filed suit about two years ago.

“eBay believes that the trial court verdict in the MercExchange case was incorrect and intends to appeal the court’s judgment,” eBay said in a statement this morning.

Intellectual property law experts say eBay is smart to appeal. By some measures, the appeals court reverses the trial court’s patent claim interpretation around 40 percent of the time.

The charge reduces the company’s diluted earnings per share by 3 cents (on a 2-for-1 post-split basis).

Because the impact is included in the company’s operating results for the quarter ended June 30th, the company’s previously announced quarterly guidance for the third and fourth quarters remains the same.

eBay recently announced second-quarter net profit of $109.7 million, or 33 cents per share, besting Wall Street estimates by 2 cents per share.

CEO Meg Whitman attributed her company’s success to four factors: continued investment and refinement of technology, enhancements to site features and functions, work on trust and safety, and targeted marketing both externally and on the website.

She said there were 580 million page views and 7.1 million bids on eBay’s highest-traffic day.

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