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eBay hit with £21m damages in patent case

EBay plans to ask a judge to overturn a US$35m (£21m) jury award won by MercExchange after the firm claimed eBay and its subsidiary Half.com infringed on two patents related to online auctions.

The judge must now decide whether to approve the verdict, and potentially could force eBay to stop providing fixed-price auctions and other services covered by the two patents

About a quarter of eBay's revenues come from services affected by the claims, according to the company spokesman.

The sizeable jury award, which could be multiplied by the judge, could encourage other patent holders to take action in the hope of a multi-million dollar payday, predicted Steven M. Bauer, a partner at law firm Testa, Hurwitz & Thibeault.

"This is the type of case that only motivates more people to file with the lottery ticket mentality," Bauer said. "No matter how much people rail against business-method patents, in this case, the guy won."

The eBay case is one of several high-profile Internet patent cases in recent years, with Amazon.com Inc.'s business-method patent on its one-click ordering system among the most prominent.

Jay Monahan, eBay’s deputy general counsel, said, "We are disappointed with the jury’s verdict. This issue is far from over

Bauer said it was rare for a judge to overturn a jury verdict in a patent case. "Judges defer to the juries in these cases," Bauer said. "The judge has the right to correct a gross injustice, but in this case, it looks like this was a judge who gave this case an awful lot of attention."

EBay's chances are better before an appeals court, where lower court judgments are reversed about 40% of the time, Bauer added.

Large jury awards on business methods won't ultimately kill innovation in e-commerce, according to Bauer, but such lawsuits can slow down companies who have to fight patent claims.

"What (patent lawsuits) do is slow down fast-moving companies that need to divert resources to battling these things," Bauer said. "When management has to spend $2 m to $3m on legal fees ... it slows people down. It's very costly, but probably doesn't prevent (new) companies from forming."

With the potential for patent lawsuits to include injunctions against using the patents, means companies must take care Bauer added. "They treat them very seriously because the impact is so Draconian," he said. "There's no high-tech company that can risk a $30 million judgment or an injunction."

Grant Gross writes for IDG news service

 


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