A U.S. appeals court yesterday upheld part of a $29.5 million patent-infringement verdict against eBay Inc., the world's biggest Internet auctioneer, and said a Virginia company can seek to block some of eBay's functions.
The U.S. Court of Appeals for the Federal Circuit said it upheld a patent-infringement finding on which a jury awarded $10.5 million in damages to MercExchange LLC of Great Falls. A lawyer for that company said the court erred and MercExchange actually is entitled to collect $25 million.
EBay headquarters in San Jose. An appeals court ruling allows MercExchange of Great Falls to sue to block some of the online auction site's functions.
(Paul Sakuma -- AP)
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The court in Washington threw out part of the patent-infringement verdict won in May 2003 by MercExchange , and let the company seek more damages on a third patent claim. MercExchange claimed eBay's Half.com unit infringed patents related to "fixed price" sales. One patent lawyer predicted the ruling will lead to an order blocking some eBay functions.
"They're going to have to either severely redesign their system or shut down, or they could take a license if MercExchange is offering one," said patent lawyer Brad Wright of Banner & Witcoff Ltd. in Washington, who wasn't involved in the case. "I'm sure the price of a license went up after the appeal."
San Jose-based eBay lets people sell items through auctions or at set prices.
EBay said in an e-mailed statement that any court order that may be issued "will not have an impact on our business because of changes we have made following the district court's original verdict." EBay spokesman Hani Durzy said the company modified some functions on its Web site to ensure it doesn't infringe the two patents that went to trial.
The court gave MercExchange a new chance to argue in a lower court that eBay infringed a third patent. The Federal Circuit, which specializes in U.S. patent law, also said MercExchange can seek a court order blocking eBay from using software that infringes the patents.
MercExchange lawyer Scott Robertson said the portion of the verdict upheld by the court relates to fixed price sales. The patent claim revived by the appeals court concerns online auctions, which might affect all of eBay's business, Robertson said.
MercExchange founder Thomas Woolston, when asked if he was willing to license his technology, said it would be "up to eBay." Woolston owns a stake in UBid Inc., which says it's the second-biggest online auction house. Chicago-based UBid is owned by privately held Petters Group LLC.
Shares of eBay fell 59 cents, or 1.6 percent, to close at $36.48 in Nasdaq Stock Market trading.
Robertson said the company will seek a blocking order from a court "that would implicate at least 30 percent of eBay's business operations. They claim they have modified their operations, but clearly they have not."
Buyers purchased about $3 billion of items on eBay at fixed prices during the third quarter of 2004, the company said on Jan. 19. That was about 31 percent of the value of merchandise sold through its sites during the period, eBay said.
