March 29, 2005 12:02 PM PST

eBay wins first round in patent re-exam

eBay claimed victory in the first round of a patent re-examination that could rescue the auction giant from a costly patent infringement judgment.

The U.S. Patent and Trademark Office on Thursday sent out an initial office action that, if upheld, would invalidate the patent behind a $25 million judgment against eBay.

"We certainly believe that the recent office action in particular is a very positive development," Jay Monahan, eBay's vice president of intellectual property, said in an interview. "These claim rejections will certainly be a very significant factor that will have to be considered in any future court proceedings."

Patent owner MercExchange, based in Great Falls, Va., released a statement that called eBay's response to the office action "rank speculation."

"Such first office actions are typical in a re-examination proceeding," said Thomas Woolston, the patent's inventor and founder of MercExchange. "We will deal with this office action, like all previous office actions during the prosecution of our patents, in the ordinary course."

Technology companies are increasingly turning to the patent office to dispose of patents that judges and juries have held against them in infringement cases. Microsoft is defending itself against a patent owned by the University of California and its Eolas spinoff both in the courts and through the obscure and bureaucratic re-examination process. Research In Motion, likewise, is defending itself against patent infringement claims in both venues.

The subject of the recent Patent Office action, patent 5,845,265, is one of three owned by MercExchange that have dogged San Jose, Calif.-based eBay in a years-long legal dispute. The patent describes a system for purchasing auction items at a fixed price, and the courts have held that eBay's "Buy It Now" option infringes on it.

On Tuesday, MercExchange reiterated its plan to seek an injunction against eBay for infringing the patent, which remains in force while the patent office pursues its re-exam.

Earlier this month, a U.S. appeals court held crucial claims of MercExchange's patent 6,085,176 invalid but allowed MercExchange to ask a lower court for an injunction against eBay, based on the remaining patents. Patent 6,085,176 describes a method for searching electronic marketplaces.

eBay requested the Patent Office's ongoing re-examination of the three patents in March 2004. In January, the Patent Office issued an initial office action on patent 6,202,051, preliminarily invalidating its claims as well. That patent describes a system for online consignment auctions.

The Patent Office has yet to issue any office actions on patent 6,085,176, whose claims the appeals court invalidated midmonth.

The re-examinations are what are known as "ex parte" proceedings. That means that eBay, beyond requesting the re-exams, has no formal role in them, leaving MercExchange to make its case to the examiner.

 

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