December 29, 2003 4:49 PM PST

eBay, Tumbleweed settle patent suit

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Capping a year of patent acrimony, eBay put one legal struggle behind it by settling with plaintiff Tumbleweed Communications.

Tumbleweed, an enterprise e-mail, file-transfer and firewall services provider based in Redwood City, Calif., sued eBay subsidiary PayPal last year, alleging infringement of two patents related to electronic notification processes and document storage and retrieval. PayPal, an online-payment service, responded with counterclaims, also dismissed in the settlement. Terms of the agreement were not disclosed.

eBay, which acquired PayPal after the suit had been filed, declined to comment on the settlement, which was disclosed in a court filing. Tumbleweed did not return calls or e-mail queries.

The settlement dismissed the claims and counterclaims "with prejudice," meaning the companies agree not to sue each other again on the same items.

eBay has been on the defensive for much of the year concerning software patents. Most recently, AT&T filed suit against the company.

In May, the company was found guilty of patent infringement in a case brought by MercExchange, of Great Falls, Va., which prevailed on claims that eBay and its subsidiary infringed on its patents with their "Buy It Now" option. eBay has appealed the ruling.

And PayPal this quarter settled patent-infringement suits by First USA Bank, now known as Bank One, and Bank One Delaware.

The settlements come amid a broader intellectual-property tumult on the Internet, as companies and individuals acquire more and more patents, either for offensive or defensive purposes.

Tumbleweed sued PayPal on the basis of three patents: Patent #5790790, "Electronic document delivery system in which notification of said electronic document is sent to a recipient thereof;" Patent #6192407, "Private, trackable URLs for directed document delivery;" and Patent #6487599, "Electronic document delivery system in which notification of said electronic document is sent a recipient thereof."

At the time of its October earnings statement for the third quarter, Tumbleweed had secured 10 licensees of its patents.


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