eBay patent case heads to trial

eBay is set to go to trial Tuesday in a patent infringement lawsuit that could have a major impact on the company.

The suit, brought by MercExchange of Great Falls, Va., in September 2001, alleges that eBay infringed on three patents that MercExchange founder Tom Woolston began applying for in the spring of 1995, some five months before eBay founder Pierre Omidyar launched the auction site.

Losing the case would be a serious blow to the online auction giant, one of the most successful online businesses with more than $1.2 billion in revenue last year and continued profitability.

"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," eBay stated in an annual report filed last month to the Securities and Exchange Commission.

eBay tried unsuccessfully to have the entire case thrown out in a series of motions for dismissal. But eBay did win a small victory in October when a judge ruled that one of Woolston's patents, covering online auction technology, is invalid and therefore unenforceable.

This week's trial, being held in the U.S. District Court for the Eastern District of Virginia in Norfolk, will deal with infringement claims for the other two patents, which cover methods for searching online auctions and marketplaces. eBay's Half.com fixed-price subsidiary is also a defendant in the case.

"We remain quite confident in our position and look forward to presenting our case to the judge and the jury," said eBay spokesman Kevin Pursglove on Monday.

The dispute is one of a number involving business method patents in the tech industry. Since the federal courts legitimized such patents in 1998, companies such as Amazon.com, Priceline.com, Expedia and Barnesandnoble.com have either tried to enforce such patents or have had to defend their businesses against them.

eBay, based in San Jose, Calif., is also scheduled to report first-quarter earnings on Tuesday.