Ebay Hit on Patent Infringement

A U.S. Appeals Court ruling in a long-running patent dispute between online marketplace eBay and MercExchange has saved eBay some money, but left the door open for more litigation.

The civil action began in the U.S. District Court for the Eastern District of Virginia in November 2001, when MercExchange, a vendor of custom software for online auctions, messaging and streamcasting, sued eBay and its subsidiaries Half.com and ReturnBuy for infringing three of its patents.

Ebay lost in May 2003, in a jury trial so contentious that one judge said he’d have preferred to have a root canal to handling a hearing, but he couldn’t get a dentist’s appointment.

On May 27, 2003, after a five-week jury trial, the jury returned a verdict finding the defendants liable for $35 million for willfully infringing two of the MercExchange patents, covering a method of using software search agents to locate items in electronic markets or electronic auctions and methods for posting goods for sale to an electronic marketplace. The jury invalidated a third patent.

EBay was ordered to pay $35 million in damages for willful infringement.

In the appeal verdict, which hinged on the two patents upheld in the original trial, the judge invalidated one MercExchange patent, upholding the other. However, the higher court reversed the lower’s decision to deny MercExchange’s request for a permanent injunction against eBay’s use of the processes patented by MercExchange.

MercExchange can go back to District Court and seek an order to stop eBay from using the concepts in question.

In a written statement, eBay said the verdict should have little impact on its business, because it already had changed its business processes after the original verdict. It noted that the U.S. Patent and Trademark Office is reexamining all of MercExchange’s patents.

Executives from the two companies weren’t available for comment.