eBay, MercExchange Bury The Hatchet

eBay reached a settlement with MercExchange today, putting to rest a long-running legal squabble that dates back to September 2001.

eBay said that it would purchase the three patents from MercExchange which had been at the center of a high-profile infringement case that eventually made it to the U.S. Supreme Court. Terms of the settlement were not disclosed.

The disputed patents relate to eBay’s “Buy It Now” feature, which allows consumers to lock in the purchase of an item being sold at auction at a fixed price.

“We’re pleased to have been able to reach a settlement with MercExchange,” eBay General Counsel Mike Jacobson said in a statement. “In addition to resolving the litigation, this settlement gives us access to additional intellectual property that will help improve and further secure our marketplaces.”

That additional intellectual property includes technology that eBay said will improve security on its sites, which incoming CEO John Donahoe has declared a top priority for the e-commerce giant.

In the settlement, eBay also acquired the license to search technology patents unrelated to the litigation. The company did not respond to a request for comment on the new technology by press time.

In 2003, a district court ruled that eBay had willfully infringed on the MercExchange patents. The court awarded $29.5 million in damages, but stopped short of granting permanent injunctive relief.

Two years later, a federal appeals court upheld the district court ruling, but imposed a permanent injunction against eBay.

In 2006, the Supreme Court ruled that both courts had erred in their ruling on the matter of permanent injunction, a landmark interpretation that limited courts’ power to authorize injunctive relief against businesses in patent-infringement cases. On that ruling, the matter was returned to a lower court.

In July 2007, a district court in Virginia again denied MercExchange injunctive relief, finding that MercExchange had failed to prove that the infringement caused irreparable harm.

But eBay still faced monetary damages. In December, the company announced that it would appeal the district court’s ruling that it owed MercExchange $30 million in monetary relief.

Coming little more than two months afterward, however, today’s developments signal that both parties saw a settlement making more sense than continuing the legal battle.

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