eBay in Patent Fight Over 'Buy it Now' Feature

By SONJA BARISIC, Associated Press Writer

A small Virginia company in a patent fight with eBay Inc. asked a federal judge Tuesday to stop the online auction powerhouse from using its "Buy It Now" feature allowing shoppers to buy items at a fixed price.

A federal jury found in 2003 that eBay had infringed Great Falls-based MercExchange LLC's patent. But last year, the U.S. Supreme Court handed a victory to patent-reform advocates when it ruled that MercExchange was not automatically entitled to a court order blocking the offending service.

Now, U.S. District Court Judge Jerome B. Friedman must decide whether MercExchange is entitled to a permanent injunction. The judge did not say when he would rule.

Friedman also did not immediately rule on eBay's request to stay the proceedings until the federal patent office has completed a re-examination of the patent -- a process that MercExchange's lawyers said could take 10 years.

Lawyers for San Jose-based eBay told the judge that the company has designed a workaround so that it no longer infringes on the patent and thus an injunction is unnecessary.

Attorney Jeff Randall also said MercExchange has not suffered irreparable harm and that the company is better off now than it was before the trial, citing an investment by a hedge fund.

MercExchange's attorneys, however, argued that the potential for future infringement is at stake and that MercExchange will not be able to sell exclusive licenses for use of its patent without an injunction.

"Without an injunction in the face of an infringing monopolist that now has 95 percent of the market, MercExchange cannot make productive use of its patent in any way," lawyer Seth Waxman said.

Randall said an injunction would give MercExchange "illegitimate leverage," hurting eBay's reputation in the marketplace by making people think eBay is still infringing the patent.

"That's what they want," Randall said of MercExchange.

Randall also said MercExchange is not interested in building its business.

"They sit back and try to collect from businesses for their patents, and that is it," he said.

In arguing for a stay, Randall said waiting for the outcome of the patent re-examination would save a lot of litigation in the meantime.

"I get the impression that, in a nice legal way, the court is being threatened," the judge said.

MercExchange attorney Greg Stillman said it was wrong to wait for patent authorities to sort everything out and that eBay could have avoided a lot of litigation by asking for the re-examination much earlier.

The patent battle focuses on eBay's button for buying products at a fixed price, bypassing the bidding process, and MercExchange's claim that the technology infringes on its intellectual property.

The federal jury that sided with MercExchange awarded the company $35 million. The amount later was reduced to $25 million. Stillman said outside court that MercExchange intends to ask the judge to increase the damages to take into account infringement since the 2003 trial.

The Supreme Court's ruling does not affect the judgment against eBay.

In the closely watched case, the high court ruled that judges have flexibility in deciding whether to issue court orders barring continued use of a technology after juries find a patent violation. The decision threw out a ruling by a federal appeals court that said injunctions should be automatic unless exceptional circumstances apply.

The case became a rallying point for critics who argue the U.S. patent system is riddled with abuse from small businesses that sue established companies to enforce patents for ideas that have never been developed into products.

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