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Supreme Court to hear eBay patent case

Justices could overturn ruling that favored MercExchange

By Grant Gross
November 28, 2005 12:00 PM ET

IDG News Service - The U.S. Supreme Court has agreed to hear a case in which eBay Inc. was successfully sued for patent infringement by a developer of a Web auction site.

The Supreme Court said today it will examine whether the U.S. Court of Appeals for the Federal Circuit was correct in granting a permanent injunction against eBay's use of a technological process patented by MercExchange LLC and its owner, Thomas G. Woolston. The appeals court had reversed a decision by the U.S. District Court for the Eastern District of Virginia, which declined to issue an injunction after a jury awarded Woolston $35 million in May 2003.

The appeals court agreed to suspend the permanent injunction pending eBay's appeal to the Supreme Court.

The jury decided that eBay had violated two MercExchange patents related to software search agents and for selling fixed-price items by auction. The appeals court later trimmed the award to $25 million and ruled one of the patents invalid but upheld the patent infringement against eBay's "buy it now" feature.

Woolston began applying for auction-related patents in the mid-1990s, just before eBay was launched. As the court case unfolded, eBay asked the U.S. Patent and Trademark Office to review Woolston's patents, and early this year, the office initially rejected the two patents covered in the lawsuit.

EBay is "extremely gratified" that the Supreme Court agreed to take the case, said Hani Durzy, a company spokesman. "We've always said that MercExchange, which doesn't practice its own patents and only exists to sue others, shouldn't be allowed a permanent injunction," Durzy said.

A MercExchange spokesman wasn't immediately available for comment.

The case could have far-reaching implications for the software and pharmaceutical industries, both of which rely heavily on patents, said Steve Maebius, a patent lawyer at the Washington office of law firm Foley & Lardner LLP. EBay and other technology companies have argued that permanent injunctions can be too stiff a penalty, and the Supreme Court announcement Monday suggested it will broadly look at permanent injunctions in patent cases.

Critics of current U.S. patent law say it's too easy for prospectors to receive bogus patents and then attempt to use courts to collect judgments against other companies. As Congress has looked at patent reform this year, eBay has argued that a permanent injunction against using the patented invention, now the prevailing standard following a patent violation ruling, is not appropriate when the patent holder does not use the invention.

The Supreme Court's decision to hear the case could lead to a move away from the permanent injunction standard, established in 1908,

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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