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Lawsuit Jeopardizes eBay’s Shipping Calculator

eBay’s shipping calculator is in violation of another company’s patents, according to a lawsuit filed on December 20th. Paid Inc. is suing eBay for patent infringement, claiming it had demonstrated its online shipping calculator to eBay in 2001, over a year before eBay launched its own shipping calculator on the marketplace.

The outcome of the lawsuit is important for eBay and for its third-party sellers, since buyers would be handicapped if they could not determine the total costs of items for sale on the site. eBay also factors shipping costs into how it displays search results.

Many call the initiators of patent infringement lawsuits “patent trolls,” but Paid Inc. is different than most in that it filed the patents as a practicing marketplace trying to solve a real problem as opposed to a company formed solely to file patents for monetary gain. Not only did it use its own shipping calculator on its eBay marketplace listings, but in 2005, Paid licensed its technology to Overstock.com, which integrated the Paid shipping calculator on its Overstock Auctions marketplace, which has since been retired.

Paid said eBay had expressed interest in possibly licensing its technology or entering into another relationship with Paid to utilize Paid’s technology on eBay’s platform. “eBay’s representative told Paid that a checkout function including an automated shipping calculator was a high priority for eBay.”

Paid hired Hunton & Williams, LLP in 2003 – that’s the same law firm that sued eBay in on behalf of MercExchange. eBay is likely taking the lawsuit seriously. Attorney Greg Stillman successfully convinced a jury in Norfolk, Virginia that eBay had willfully infringed its auction patents, and Stillman is named as Paid’s counsel in the lawsuit filed in Massachusetts, where Paid Inc. is located.

According to Paid’s complaint, eBay’s PayPal unit saw its patent application for an online shipping calculator rejected because of Paid’s patents, giving credence to its argument:

By mid-2002, Paid began offering its online shipping calculator in connection with its own auctions on eBay’s website, and subsequently offered the technology for use by other merchants and online sellers, including sellers on eBay’s platform.

eBay declined to license Paid’s shipping calculator technology. Nevertheless, in approximately June, 2003, eBay introduced its own automated, online shipping calculator that bore striking similarities to the one Paid had demonstrated to eBay over a year earlier.

Also in 2003, PayPal, now an affiliate of eBay, filed its own patent application for an online shipping calculator. PayPal’s application claims, however, were rejected as unpatentable in view of Paid’s earlier patent application.

Paid Inc. says it is entitled to a permanent injunction for the three patents – ‘357, ‘237 and ‘642 and to recover damages “adequate to compensate for the infringement of the patents.” It’s also asking the court to enter an award for damages adequate to compensate Plaintiff for the infringement to be no less than a reasonable royalty together with prejudgment interest and costs; and to award costs and reasonable attorneys’ fees; and “relief as may be just and proper.”

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.