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Waiting Out A Patent Fight With EBay

By Ellen McCarthy
Thursday, January 6, 2005; Page E01

Thomas G. Woolston is trying to start an online travel site named uBid Travel. He's negotiating with hotels, brokering partnerships with airlines and making sure the site looks just right.

The electrical engineer, who once worked for the CIA, is like every other Web entrepreneur who dreams of building a monster online brand like Expedia.com or Amazon.com. Or eBay. Especially eBay.

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Every morning at 11, Woolston stops whatever he's doing, sits at his computer and clicks "refresh" on the Federal Circuit Court of Appeals Web site. Any day now, the court is expected to post a decision on whether to uphold the May 2003 jury verdict that said eBay should pay Woolston $35 million for infringing on his patents.

If the verdict, which was later reduced by a judge to $29.5 million, is upheld, Woolston may finally see a check from eBay, the San Jose company that has become synonymous with online auctions. If it's not, there could be another trial. The Ohio native spent six years working on secure communications systems with the Central Intelligence Agency after a stint flying planes in the Air Force. While working for the government he got an electrical engineering degree from George Washington University and later went back to get a law degree there, which ultimately left him with more than $100,000 in student loans.

A National Public Radio story about a baseball card shop that was closing during the Major League Baseball strike of 1994 gave him the idea to create an online auction system. "If you had a way to help this small business get their inventory up on the Internet it would really help," he recalls thinking.

Eight months later he finished writing the code for an online auction application and filed for three patents to protect the idea. Woolston's first Internet venture was rebuffed by local investors and never really got off the ground. Soon after his first patent was approved in late 1998, Woolston set up a new company, MercExchange, that ran an online travel site and attracted $10 million in venture capital.

But by then, older travel sites such as Priceline.com had strong footholds in the market. In late 1999, Woolston's company ran out of money and laid off its 40 employees. What MercExchange had left were three patents belonging to an indignant inventor with training in patent law. So the infringement suits that became the focus of his life -- and his company -- began to roll.

Some big technology companies and lawyers see patent-holders like Woolston as menaces whose main goal is to sue over fortuitous or frivolous patent claims.

"Some people call this 'trolling' after the old story where trolls sit under the bridge and say, 'Give me a gold coin or I'll eat you,' " says Jay Thomas, a law professor at Georgetown University.

Woolston takes a different view: that he's fighting for the rights of entrepreneurs trying to do business in a world that favors corporate giants. His first suit, against an online advertising company called GoTo.com that was later acquired by Yahoo, was settled. GoTo.com agreed to license Woolston's technology. Woolston says he thought eBay also would settle, or buy his entire patent portfolio, when he filed suit against that company in October 2001.


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