eBay v. MercExchange

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eBay v. MercExchange

• The 8-Year See-Saw Battle
• Jennifer Pang
• University of California, Berkeley
• IEOR 2009
• IEOR 190G Patent Engineering (Fall 08)

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• Online auction site that allows users to buy/sell
  items via 2 primary formats proxy bidding and
  fixed-price buying

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The Issue

• Months before eBay founder Pierre Omidyar came up
  with his first prototype of eBay in 1995, an
  inventor named Tom Woolston (CEO of MercExchange)
  filed patents that covered the eBay idea
• ? After eBay got popular, the company intially
  tried to buy these patents off of Woolston

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The Lawsuit

• 2001 MercExchange founder Tom Woolston sues eBay
  for infringement on 3 of his patents regarding
  eBays Buy It Now feature
• eBay and MercExchange had been in talks for eBay
  to purchase these 3 patents, but eBay decided to
  abandon efforts to come to a purchasing agreement

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The Patents in Dispute

• 2085176 - Method and apparatus for using software
  search agents to find items in electronic
  markets. (Affects Half.com.)
• 6202051 - Method and apparatus for conducting
  person-to-person online auctions. (Auction
  patent)
• 58545265 - Consignment nodes (Fixed-price patent)

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Patent No. 5,845,265

• Specifies a marketplace for goods using a
  database on one computer to store digital images,
  text descriptions, prices, and legally binding
  offers that were previously input from another
  computer and transmitted across the Internet1
• 1. http//news.cnet.com/2100-1017-956638.html?tag
  mncoltxt

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Patent No. 5,845,265
A buyer, hereinafter participant, may
electronically log onto a consignment node via a
network connection by use of a PC with
participant interface software...and present
electronic payment to the consignment node by
entering a credit card number and expiration date
or other forms of electronic payment.
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Patent No. 6,202,051
Bids are received on the item from participants
on the Internet through an auction process that
executes in conjunction with the computerized
database of data records. Auctioning of the item
is terminated when the auction process reaches
predetermined criteria. The auction participant
is notified of the high bid in the auction
process.
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The Initial Ruling

• May 27, 2003 Jury rules eBay guilty of willful
  infringement of MercExchange patents and awards
  35 million in damages
• June 12, 2003 MercExchange files motion for
  entry of a permanent injunction order
• August 7, 2003 Judge DENIES MercExchange's
  motion for an injunction against eBay's Buy It
  Now feature, saying, "If the court did enjoin the
  defendants here, the court would essentially be
  opening a Pandora's box of new problems."

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The Fight Continues...

• 2004-2005 eBay requests to have the patents
  reviewed for legitimacy (even though they had
  tried to buy them before!)
• March 16, 2005 Decision by U.S. Court of Appeals
  for the Federal Circuit reverses the original
  decision on permanent injunction

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Continuing the See-Saw Battle...

• May 15, 2006 Supreme Court REVERSES the Appeals
  Court decision, stating
• That district court judges have discretion in
  determining whether "irreparable harm" would
  result if an injunction is not issued
  (injunctions should not be automatically issued
  to patent holders)
• That although it was getting rid of the
  injunction, the original district court had not
  taken the correct steps to come to an otherwise
  correct conclusion

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Why This Case is Important

• Since then, the Supreme Court has come down with
  a landmark decision designed to make it more
  difficult for patent holders to get courts to
  sign off on shutoffs of infringing products,
  especially if the patent holders dont practice
  their patents2
• http//news.cnet.com/8301-10784_3-9882151-7.html

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Epilogue

• This spring, eBay finally bought MercExchanges
  patents for an unspecified sum, bringing the
  8-year battle to an end

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Questions? Comments?