Trial Date Nears in eBay Patent Case

Trial is scheduled for next month in a complicated patent infringement lawsuit filed against eBay , according to the auction giant’s annual 10-K report filed with the Securities and Exchange Commission.

And the stakes are high. eBay says in its filing that “if the plaintiff were to prevail on any of its claims, we might be forced to pay significant damages and licensing fees, modify our business practices or even be enjoined from conducting a significant part of our U.S. business.”

The suit was filed by Great Falls, Va.-based MercExchange LLC in September, 2001, but the patents involved date back to the mid 1990s, when MercExchange founder Tom Woolston applied for patents covering methods of creating and searching online marketplaces and auctions.

That was about five months before eBay founder Pierre Omidyar launched the eBay Web site.

There’s a complex history of motions for dismissal in the case, but the upshot, according to the 10-K document, is that claims regarding two patents are scheduled for trial April 22 in the U.S. District Court for the Eastern District of Virginia in Norfolk.

eBay’s 10-K says “We believe we have meritorious defenses and will defend ourselves vigorously… We are unable to determine what potential losses we may incur if this lawsuit were to have an unfavorable outcome.”

eBay’s fixed-price subsidiary is also a defendant in the case. Descriptions of some of MercExchange’s patents are available here.

And, the SEC filing says that another eBay unit, PayPal, also is facing a patent-related lawsuit, this one by First USA Bank, alleging infringement of two patents relating to assigning an alias to a credit card so as to eliminate the need for the physical presence of the card in a transaction and seeking a permanent injunction and damages.

“PayPal believes it has meritorious defenses and intends to defend itself ” the filing said. Other pending legal actions against eBay are discussed in the filing here

In its discussion of legal matters in the SEC filing, eBay concludes that: “We may become more vulnerable to such claims as laws such as the Digital Millennium Copyright Act and Communications Decency Act are interpreted by the courts and as we expand into jurisdictions where the underlying laws with respect to the potential liability of online intermediaries like ourselves is less favorable.”

Meanwhile, eBay said that Thomas Tierney, founder and chairman of the Bridgespan Group, a nonprofit business-consulting firm serving the nonprofit sector, has been named to the company’s board of directors. He replaces Howard Schultz, chairman of Starbucks Corp.

Schultz has decided to limit his outside board commitments due to scheduling pressures, eBay said.

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