In a wide-ranging, 30-page ruling on Wednesday, the U.S. Court of Appeals for the Federal Circuit found one MercExchange patent invalid but reversed a lower court's rejection of MercExchange's motion for a permanent injunction.
A federal judge in 2003 ordered eBay to pay Virginia-based MercExchange $29.5 million for infringing a trio of e-commerce patents that MercExchange charged were key to eBay's "Buy it Now" feature that handles fixed-price sales.
Such sales accounted for about 31 percent of the total value of goods sold on eBay in the fourth quarter of last year.
That lower court also denied MercExchange's request for a permanent injunction against eBay.
EBay had appealed the initial judgment and was allowed to suspend payment to MercExchange during appeal.
"Each side can claim partial victory in the appeal," Dennis nCrouch, a patent attorney at McDonnell Boehnen Hulbert & Berghoff in Chicago, wrote in an e-mail to Reuters.
Attorneys for MercExchange said the judgment on the invalidated patent was equal to $4.5 million, meaning that $25 million of the earlier judgment was affirmed.
"In this case, the district court did not provide any persuasive reason to believe this case is sufficiently exceptional to justify the denial of a permanent injunction," the appeals court said in its ruling.
"We're going to go back the district court and ask for the permanent injunction and ask for an additional two years of damages," MercExchange lawyer Scott Robertson, a partner at Hunton & Williams, told Reuters.
"We believe that any injunction that might be issued by the district court with respect to the other patent will not have an impact on our business because of changes we have made following the District Court's original verdict," eBay said in a statement.
The Web marketplace said it was pleased with the appeals court's decision to invalidate one of MercExchange's patent, and as a result, the related damages.
"We are confident in our position against MercExchange and do not believe that these matters will have any impact on our business," said eBay, which in 2003 booked a $30 million charge related to the lawsuit.
The U.S. Patent and Trademark Office is reexamining the validity of MercExchange's patents upon eBay's request, the company said.
Crouch said the legal battle is far from over since the two other patents in the suit will require more litigation in district court.
"There is only a small likelihood that eBay will allow its servers to be shut-down rather than settle the case," Crouch said.
Shares of eBay, which finished down 59 cents to $36.48 on the Nasdaq, slipped to $36.40 in after-hours trade.
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