Ruling Against EBay Is Upheld
In a decision that could force EBay Inc. to change some of its auctions, a federal appeals court Wednesday upheld a ruling that the e-commerce powerhouse infringed a patent owned by a small Virginia business.
The U.S. Court of Appeals for the Federal Circuit said EBay’s fixed-price auctions and some of its online payment methods violate a patent obtained by Great Falls, Va.-based MercExchange Inc., which sued EBay in September 2001.
A lower court jury in Virginia ruled in May 2003 that EBay infringed two MercExchange patents, and a judge ordered the company to pay MercExchange President Thomas Woolston $29.5 million in lost licensing fees and damages.
The Washington, D.C., appeals court agreed Wednesday that EBay infringed the patent involving no-haggle sales but invalidated a second MercExchange patent involving an online comparison shopping tool that Woolston said was worth $4.5 million.
As a result, the ruling could force EBay to pay $25 million in damages.
Woolston’s attorneys said they would ask for an injunction within several weeks that would require EBay to pay Woolston for use of the patent or stop using online sales techniques that infringe it. Many patent experts had expected San Jose-based EBay to prevail.
Woolston, who is working with Chicago-based auction firm UBid.com, hailed the ruling as a major victory for inventors and small-business owners.
“We’re trying to build a better, faster EBay, and this could make it easier for us to compete against the company that has 95% of the market,” he said.
MercExchange had 40 workers when Woolston sued in September 2001. It has since shrunk to three employees. EBay is forecasting 2005 sales of $4.25 billion to $4.35 billion.
EBay said in a statement that it was “pleased” that the comparison shopping tool patent was invalidated and said the infringement ruling wouldn’t hurt earnings.
“Looking forward, we believe that any injunction that might be issued by the district court with respect to the other patent will not have an impact on our business because of changes we have made following the district court’s original verdict,” EBay said. “We are confident in our position against MercExchange.”
EBay shares closed Wednesday at $36.48, down 59 cents. They lost 8 cents more in after-hours trading on Nasdaq.
Investors have largely disregarded the case because it does not involve EBay’s tremendously popular auctions and is not expected to affect the millions of competing bids that EBay processes each day.
