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EBay Has to Pay in Patent Suit
By Associated Press
Posted on May. 27, 2003 PT, 05:17 PM
NORFOLK, Virginia -- A federal jury on Tuesday ordered
the online auction house eBay to pay $35 million for violating patents
filed by a northern Virginia attorney.
Jurors ruled for MercExchange, based in Great Falls,
Va., which had claimed that its founder, Thomas G. Woolston, filed three
patent applications for programs and procedures to operate an Internet-based
MercExchange filed suit in federal court in September
2001 accusing eBay of using Woolston's ideas to operate its online auction
house, without his permission and without paying him.
EBay countered that the company's procedures didn't
infringe Woolston's patents, and that those patents are unenforceable
anyway because other people had proposed similar systems and methods before
Woolston filed his applications.
Jurors found eBay had acted "willfully,"
meaning U.S. District Judge Jerome B. Friedman can triple the damages.
The verdict involved eBay's Buy It Now and Half.com businesses and does
not involve its auction side.
Friedman is expected to rule later on whether eBay
must change any of its practices, in light of the verdict.
At the core of the dispute is one of three patents
issued to Woolston in 2000 and 2001 that were spawned from an original,
or "parent," application he filed in April 1995.
The 1995 filing was several months before eBay founder
Pierre Omidyar launched the auction site using a combination of his own
programming and software obtained for free over the Internet.
A San Francisco patent attorney, Neil Smith, called
the $35 million damages a "drop in the bucket to eBay." He noted,
though, that the judge could order the company to halt parts of its business
affected by the verdict.
"If it's upheld that the patents were violated,
then the court could issue an injunction against practicing the patents,"
The trial began April 24. Friedman said the case was
one of the most contentious he had seen in nearly 20 years on the bench.
"I'm walking on sunshine," Woolston said.
"We are thankful that a small company got its day in court and was
vindicated by a jury."
In a statement, eBay executives said they will ask
the judge to set aside the verdict and will then appeal if he doesn't
vacate the ruling.
"We believe the weight of evidence does not support
the verdict," said Jay Monahan, eBay's deputy general counsel. "The
verdict is still very much in dispute, and the battle is still far from
over. This was really the first step."
Both sides presented thousands of pages of briefs and
reports from experts and disputed -- sometimes almost line-by-line --
the admissibility of the other side's evidence. The battling continued
right up to the end of the trial, with both sides hotly disputing each
other's proposed final instructions to the jury.
The level of contentiousness led Friedman to comment
at a pretrial hearing that it was not a question of if but when an appeal
would be filed.
EBay, based in San Jose, Calif., said in its most recent
annual report filed with the Securities and Exchange Commission that it
"might be forced to pay significant damages and licensing fees, modify
our business practices or even be enjoined from conducting a significant
part of our U.S. business. Any such results could materially harm our