eBay's "Buy It Now" Patent Fight Continues

Whether or not you are an eBay (EBAY-NASDAQ) fan, user, or shareholder, you probably know about the "Buy It Now" feature that allows you to stop an auction by the click of a button with the ability to instantly purchase an auction item.  There is/was an old patent case with a company called MercExchange, LLC that claimed to have the patent to "Buy It Now."

The investment community has been mostly (or almost entirely) under the belief that this case was closed, over, and done.  Apparently not.  IN fact, if you look at the eBay 10-K filing at the SEC you will see the disclosure of this and other issues under "Legal" in a search (See the continued page for the excerpt that pertains to this case). The Associated Press is running an article discussing how the patent case is still going, and is actually up in the air with what could be a much longer duration that you’d guess. 

Hopefully someone will admit this opinion as evidence.  It is doubtful this article will make it as ‘evidence’or even as a third party opinion to the Virginia court where the case is.  But this little non-operational MercExchange, LLC should own this patent with just as much authority as the patent on breathing techniques and methods of arching your neck at public water fountains.  In other words, the owners of the MercExchange ‘patent’ should be forced to shred the paper the patent is on and they should have to eat the paper.  At least they would get more fibre that day.  When a big business is crushing a smaller business or a mom and pop for the sole reason that they have deeper pockets we will speak on that issue, but when a little company claims such a nebulous right over such a basic concept then it just would not be fair but to serve them the Guiana fruit punch.

This patent fight on behalf of MercExchange is worthless, or shall we go on record saying "It should be worthless."  If it is ruled otherwise, then you know some smaller courts want five minutes of fame.  The same goes for the "One Click"patent and the "Click To Buy" patents, as they are also as obvious and potentially nebulous as the breathing and water drinking analogies.

Before you think we are anti-patent or anti-intellectual-property, think again.  It’s just that some things go way too far in our legal system and this is one prime example of that.

Jon C. Ogg
June 13, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

FROM 10-K LEGAL PROCEEDINGS:   In September 2001, MercExchange LLC filed a complaint againstus, our Half.com subsidiary and ReturnBuy, Inc. in theU.S. District Court for the Eastern District of Virginia(No. 2:01-CV-736)alleging infringement of three patents (relating to onlineconsignment auction technology, multiple database searching andelectronic consignment systems) and seeking a permanentinjunction and damages (including treble damages for willfulinfringement). Following a trial in 2003, the jury returned averdict finding that we had willfully infringed the patentsrelating to multiple database searching and electronicconsignment systems, and the court entered judgment forMercExchange in the amount of approximately $30 million,plus pre-judgment interest and post-judgment interest. In May2006, following appeals to the U.S. Court of Appeals forthe Federal Circuit and the U.S. Supreme Court, the SupremeCourt remanded the case back to the district court for furtheraction. In parallel with the federal court proceedings, at ourrequest, the U.S. Patent and Trademark Office agreed toreexamine each of the patents in suit, finding that substantialquestions existed regarding the validity of the claims containedin them. In separate actions in 2005, the Patent and TrademarkOffice initially rejected all of the claims contained in thethree patents in suit. In March 2006, the Patent and TrademarkOffice reiterated its earlier ruling rejecting the claimscontained in the patent that underlies the jury verdict, whichrelates to electronic consignment systems. We have requestedthat the district court stay all proceedings in the case pendingthe final outcome of the reexamination proceedings, andMercExchange has renewed its request that the district courtgrant an injunction. The district court recently allowedadditional discovery regarding these matters, and final briefsregarding both claims are due in March 2007. Even if successful,our litigation of these matters will continue to be costly. As aprecautionary measure, we have modified certain functionality ofour websites and business practices in a manner which we believeavoids any infringement of the consignment patent. For thisreason, we believe that any injunction that might be issued bythe district court will not have any impact on our business. Wealso believe we have appropriate reserves for this litigation.Nonetheless, if the modifications to the functionality of ourwebsites and business practices are not sufficient to make themnon-infringing, we would likely be forced to pay significantadditional damages and licensing feesand/ormodify our business practices in an adverse manner.