Supreme Court Will Hear eBay Appeal

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By Yuki Noguchi
Washington Post Staff Writer
Tuesday, November 29, 2005

The U.S. Supreme Court yesterday agreed to hear a case involving eBay Inc. that could determine whether companies must stop using any technology that has been found to violate a patent held by someone else.

The move comes as technology giants such as Microsoft Corp. are pushing for patent reforms on Capitol Hill that, among other things, would give companies greater protections from patent litigation.

The case involves a 2001 lawsuit against eBay by MercExchange LLC, a Great Falls firm that developed software for online sales transactions. EBay uses the technology for its "Buy It Now" feature, which lets sellers post information about products they are selling, fix a price for them and complete the transaction.

EBay was found to have violated MercExchange's patent and was ordered to pay $25 million in damages. The Supreme Court is not taking up that issue, only whether there should be an injunction to prevent eBay from continuing to use the technology.

EBay's appeal asks to overturn a U.S. appellate court's ruling that it should be customary to issue a permanent injunction when a company is found to have violated a patent. In an earlier ruling, a district court decided not to issue an injunction against eBay, despite finding it in violation of a MercExchange patent. EBay argues that judges should have leeway to consider hardship on a company before prohibiting the future use of technology through injunctions.

In considering the case, the Supreme Court is taking on a topic that could have far-reaching implications for patent law. "It potentially means the court is contemplating modifying the test" of what it means to violate a patent, said Stephen Maebius, a former patent examiner and a partner at Foley & Lardner in Washington. "It cuts across all industries."

Small firms argue that they cannot compete against big, wealthy companies such as eBay if the bigger companies are allowed to continue operating in violation of patents.

"We want an injunction. We want to compete with eBay on the marketplace," said Thomas Woolston, inventor of the MercExchange patent and founding member of the company. MercExchange halted its online exchange business and now licenses its software to five companies, including AutoTrader.

EBay spokesman Hani Durzy said the company has already reengineered work-arounds so an injunction would not affect the operations of the company.

"EBay is gratified that the Supreme Court has agreed to hear this important case. We have believed all along that MercExchange -- which does not practice its own patents and only exists to sue others -- should not be entitled to an injunction," eBay said in a statement yesterday.


© 2005 The Washington Post Company

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