eBay To Appeal Infringement Ruling

The decision regarding eBay’s use of the "Buy It Now" function on its auctions represents a setback since eBay’s earlier success in court this summer. MercExchange won a judgment this week that would have eBay pay about $30 million for infringing the patent related to Buy It Now.

However, eBay still faces the prospect of giving up a lot more money to MercExchange, which demanded eBay account for Buy It Now sales and the revenue those created. EBay announced it would continue fighting the case and appeal the District Court’s ruling:

"We are disappointed with the court’s order and we plan to appeal it. In its ruling, the court concluded that it did not have the legal right to consider the merits of our arguments concerning the ’265 patent, but rather was required to reject our motions based on the procedural posture of the case. We intend to appeal the Court’s ruling on the procedural issues and remain confident that after the appeal, the Court will consider our arguments on their merits.

"Additionally, our motion for summary judgment that our 2003 design-around was effective and there is no ongoing infringement of the ’265 patent, and that no further damages are due, also remains pending before the court."

Buy It Now will continue to be available on eBay. The company developed a work-around for the technology in 2005, following MercExchange’s opening lawsuit in 2003. Subsequent court decisions have knocked down proposed injunctions against eBay’s use of a Buy It Now function.

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In 2003 a jury found eBay guilty of intentional infringement of MercExhange’s ’265 patent and awarded damages. Judge Friedman granted MercExchange’s motion to certify the judgment.

MercExchange said the amount of the judgment with interest, is about $30 million. eBay earlier had changed its second quarter 2003 results to show an operating charge in the amount of $30 million.

Still pending before the court, is a motion by MercExchange which will require eBay to account for additional revenues received since the jury’s verdict through its fixed price sales. Currently those sales account for approximately 39 percent of eBay’s entire revenues.

 "eBay was found to be a willful infringer of our patents over four and one-half years ago, and we are now proceeding to the conclusion of their expensive legal delays," MercExchange President Thomas Woolston said.

"We look forward to returning to District Court to account for eBay’s continuing post-trial infringement, and to completing our appeal of the denial of an injunction against eBay fixed price sales with the Court of Appeals for the Federal Circuit."

eBay Evades ‘Buy it Now’ Injunction

However, eBay could still be on the hook for $25.5 million in damages.

They probably wouldn’t mind paying that sum, as the greater ramifications of the federal court’s decision could make eBay a winner on a broader scale.

A Reuters report on the case said the patent in question is now under review:

The judge stayed further proceedings on a second ecommerce-related patent until the U.S. Patent and Trademark Office has time to reexamine the validity of the patent granted to MercExchange. In effect, the court deferred to the judgment of the patent office to define the issue.

EBay said in a quarterly financial filing with the U.S. Securities and Exchange Commission on Friday that it modified how its Web sites work to try and ensure that they no longer make use of any potentially offending technology.

Patent reform advocates have long claimed the system rewards applicants with software patents for methods that are obvious and unoriginal.

A review of the earlier decision by the Supreme Court, which remanded the case back to the appellate level, showed the higher court believed MercExchange’s claims did not pass a four-factor test.

Such a test has been a long tradition in considering infringement.

It’s a determining factor in whether or not an injunction should be issued.

The one issued earlier by the appeals court against eBay’s use of ‘Buy it Now’ did not consider this test.

Instead, the jury imposed a penalty of $58 million and a 5.5 percent royalty rate for the future, finding Vonage violated patents for connecting Internet calls to telecom-owned phone lines, for call waiting and voice mail, and for wireless connections.

Vonage said there should be no change from the consumer side of this, but Verizon has one more kill shot in its armory. Verizon is requesting an injunction to prevent Vonage from operating altogether.

If the company succeeds in that request, Verizon will get what it wanted more than money – the death of a competitor. Vonage, of course, will be appealing all decisions against them.

TechDirt’s Mike Masnick reminds those following the case of a recent Supreme Court decision regarding MercExchange and eBay, where automatic injunctions were found to be inappropriate, especially when a settlement is a reasonable option. In this case, a settlement would not only save Vonage from being closed down, but would save money in legal expense.

What will likely happen…"writes Masnick, "is that Vonage will just settle the case, because at some point it’s just cheaper to settle than to fight. Apparently, that’s what you get for innovating as a small company these days."

Google (NASD:GOOG) and AOL’s parent Time Warner (NYSE:TWX) finally found the path clear to completing the blockbuster investment announced by the companies in December 2005, AP reported.

Google and Microsoft (NASDMSFT) both battled for the right to partner with AOL. Google’s loss in the deal seemed a foregone conclusion until mid-December, when AOL decided to stick with Google instead of switching to Microsoft.

Along with the $1 billion investment in AOL in exchange for a 5 percent stake in the business, AOL receives a $300 million credit with Google. That credit permits AOL to purchase advertising on Google and have it placed throughout Google’s extensive network of sites, as well as in the search results generated at Google.com.

In an interesting sidebar to the story, both Time Warner chairman Richard Parsons and Goldman Sachs (NYSE:GS) chairman and CEO Hank Paulson have been mentioned as possible candidates for Treasury Secretary.

The New York Times (NYSE:NYT) claimed incoming White House chief of staff Joshua Bolten wants current Secretary of the Treasure John Snow replaced. Paulson’s firm will be the sole underwriter of Google’s new issuance of 5.3 million shares of stock.

Other Internet Financial News saw eBay (NASDEBAY) issue a statement discussing its opportunity to make an oral argument to the Supreme Court in its patent battle with MercExchange over eBay’s use of “Buy It Now” technology.

The Court however was not swayed by eBay’s contention that federal appeals courts enabled patent holders to easily obtain injunctions against firms using those technologies, CNN reported:

Also, eBay received added good news from the US Patent Office concerning the patent in question, #5,845,265, issued to MercExchange, and acknowledged that in its statement:

In Europe, Microsoft continued to fight the European Commission’s antitrust regulators over Microsoft’s fulfillment of regulator requirements.

ABCNews said the hearing in Brussels would be Microsoft’s last chance to avoid fines of $2.4 million per day, backdated to December 15th, 2005, for antitrust violations.

EU regulators had slammed Microsoft’s release of technical documentation for Windows Server 2003, saying the company had not provided exact information third-party developers needed to build products that can interoperate with Windows:

In response, Microsoft senior VP and general counsel Brad Smith said to reporters, “We have complied beyond the requirements of the Commission’s decision. Microsoft is willing to do more … Daily fines are not the solution.”

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David Utter is a staff writer for WebProNews covering technology and business.