November 28, 2005 10:21 AM PST

Supreme Court: We'll review eBay's patent case

The U.S. Supreme Court will review a patent infringement case against eBay, granting the online auctioneer's petition on Monday.

The matter under review is whether to allow MercExchange, the plaintiff in the case, to obtain a permanent injunction against eBay related to the way it handles fixed-price sales. A district court in 2003 found that eBay's "Buy It Now" feature infringed on two MercExchange patents. Buy It Now allows consumers to purchase an item without participating in an auction.

A federal appeals court later ruled in favor of a permanent injunction and awarded MercExchange $25 million in damages. The appeals court also ruled that eBay had infringed on only one of MercExchange's patents.

The nation's highest court rejects a vast majority of petitions for review, so the decision to grant eBay's request for cert, or writ of certiorari, was somewhat unexpected.

"We're gratified that the Supreme Court has agreed to hear this important case," eBay spokesman Hani Durzy said.

The Supreme Court's decision in this case could hold broad implications for patent holders and those accused of infringing on them. Judges commonly issue injunctions against companies found guilty of infringement while their cases are on appeal. eBay wants the high court to question that practice, which has hamstrung numerous high-technology companies. Microsoft and Cisco Systems filed a joint brief with the Supreme Court in support of eBay's petition.

"I am not surprised that the Supreme Court agreed to grant cert, as this is a very hot issue with lots of amicus interest expected," said E. Patrick Ellisen, an intellectual-property attorney at Foley & Lardner. "This issue has also been central in the Congressional debate over patent reform."

MercExchange appeared to be undeterred by the decision.

"MercExchange remains confident in its view that it will ultimately prevail in its struggle against this infringer," Scott Robertson, an attorney representing MercExchange, said in a statement. "Since eBay's argument requires overruling long-established legal precedent, we look forward to the consideration of the Supreme Court in this matter."

eBay must file a brief with the Supreme Court by mid-January. The company expects a hearing after that, eBay's Durzy said.

In the meantime, eBay has revised the way it conducts fixed-price sales on eBay and subsidiary Half.com that avoids the disputed technology. "Any injunction would not have an effect on our operations at all," Durzy said.

Fixed-price sales account for nearly a third of the trading that takes place on eBay in terms of dollar volume, he said.

In addition, the U.S. Patent and Trademark Office is currently re-evaluating the validity of the MercExchange patents related to the case.

5 comments

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Go EBay!
And maybe if you win, donate some of the money you save to lobbying for patent system reform so that you and other companies dont have to be held hostage with rediculously stupid patent claims. 'buy it now'. Wow - what a concept. How can you patent something people have been doing since the days of the caveman?
Posted by (402 comments )
Reply Link Flag
Hmmm
I will patent "Pay with Cash" so when you go to the store, you will
have to pay not only the tax, but also patent surcharge that will go
to my pocket.
Posted by Goose (93 comments )
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eBay The Internet Bullies
I have mentioned in other forums, that Patents are designed to protect the inventor, or creator, of their intellectual rights.
It does not matter that it is over words or phrases or designs, a Patent [if granted] gives that person [or corporation] protection for what they have created.
eBay is an Internet bully, as they [in my opinion] have two rules of operation...

Rule 1. eBay is always right. and,
Rule 2. If in doubt refer to Rule 1.

They just think that due to their size they are above the Laws of any country.
This is evident with the way inwhich eBay has designed their own website, to be so complicated that the layperson has difficulty in communicating with them.
When one has a problem, or complaint, and it is not listed in eBay's Operations Manual, all the sender gets is a stupid computer generated response that treats the writer with distain, and it always take months to even partially resolve the original complaint or problem, and meanwhile eBay steadfastly refuses to grant any 'stay' to the members' registration whilst their is a debate occurring.
In Australia, eBay's offices in Sydney must be automated, because when one attempts to telephone them on their number listed in the directory, all one gets is yet another computer generated voice telling you that they only correspond by email or letter, and do not speak directly to 'members'.
Furthermore, eBay must be running scared, as they have implemented steps to hire a debt collection agency to retrieve their deliquent accounts, and I can bet that they will be charging the 'members' obscurely for doing so.
In the event that eBay is unsuccessful; what happens to one of the largest auction sites on the Internet?
I will be very interested indeed to hear the resultant judgement from the US Supreme Court.
Let Justice Prevail.
Posted by chauffeur2 (4 comments )
Reply Link Flag
Color me confused ...
So let's see if I have this right ...

eBay is a bully because:

1) you couldn't get help out side of their established methods of communication.
2) they have a phone tree system instead of live people answering calls
3) they have hired a collection agency
4) they are fighting against a competitor that is trying to cripple them with a patent (that covers the equivalent of walking up to some one and buying something right away from them instead of taking a seat and bidding on it) instead of just being better than them

Ummm ...

First off, have you ever run a business? Collection agencies are how businesses stay in business or would you prefer them to just eat the losses? Didn't think so. Phone trees are normal too and the fact that eBay doesn't use the phone as a primary method of communication would be a hint that you are not going to get a hold of them that way. They probably have that number JUST so people like you can call and be properly directed to how to contact them. Sounds like a smart idea on their part.

Now as for this lawsuit, you wonder how this will affect eBay but you must have failed to read the article. Only one of the patents was upheld and last I looked eBay still has the "Buy Now" option. They state at the end of the article that they have already modified how they do the option so it's no longer infringing. But the Supreme Court hearing is not just about the patent but about the injunction and it's use against high tech / web companies to attempt to cripple them. Note the following quote: "Judges commonly issue injunctions against companies found guilty of infringement while their cases are on appeal. eBay wants the high court to question that practice, which has hamstrung numerous high-technology companies." In the end this will have NO effect on eBay ether way but if eBay does win then it will prevent companies that file lawsuits from using the courts to hurt their competition, via the court injunction system, before the lawsuit even reaches the court and beyond.

So please stop ranting on eBay because you failed in getting any warm fuzzies when dealing with them. Try tech support at Microsoft or Dell ... then you will know the meaning of the word 'pain'.
Posted by Far Star (82 comments )
Link Flag
eBay brief in eBay v. MercExchange
The eBay brief repeats the urban legend that the Patent Office grants patents on 97% of all applications. It isn't true, and Quillen (and Webster) never said it was. Lousy scholarship by eBay's lawyers, both in the use of the 97% number and in omitting Webster's name. See also
<a class="jive-link-external" href="http://ipbiz.blogspot.com/2006/01/gross-error-in-ebay-brief-to-supreme.html" target="_newWindow">http://ipbiz.blogspot.com/2006/01/gross-error-in-ebay-brief-to-supreme.html</a>

The CAFC does not have a per se rule for granting injunctions. In the MercExchange case, the CAFC referred to exceptional circumstances. In previous cases, the CAFC referred to special reasons. Separately, no one seems to have presented any good reasons for overruling the 1908 case, Continental Paper.
Posted by Cibola (1 comment )
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