EcommerceBytes-NewsFlash, Number 1247 - March 29, 2006     2 of 5

eBay Patent War: Best Case/Worst Case Scenarios

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Although eBay lost a patent lawsuit in 2003, it's been business as usual at the global online auction site. Sellers are selling and buyers are buying. But the ramifications from that 2003 verdict may be on the way. Today, the Supreme Court reviews eBay's argument that there should be no injunction against its Buy It Now features (See background at URL). Its decision will have a major impact on what comes next.

Let's take a look at two possible outcomes, a best case and a worst case scenario for eBay and its buyers and sellers.

Best Case Scenario
Two issues are now at stake. The first is whether the District Court that heard the case will be forced to issue an injunction against eBay. If not, eBay can continue to offer the Buy It Now feature on its site. Thirty-four percent of Gross Merchandise Sales from eBay comes through Buy It Now sales.

The second issue at stake is whether eBay continues to infringe on MercExchange's patents. eBay said its design workaround put in place after the trial in 2003 makes it non-infringing. If the District Court finds it is not infringing, life goes on as usual for eBay once it pays damages awarded to MercExchange for infringement that took place before the workaround.

Worst Case Scenario
The worst case scenario for eBay would be a decision from the Supreme Court that the District Court must grant MercExchange's request for a permanent injunction against eBay's Buy It Now feature and a ruling from the District Court that eBay continues to infringe on MercExchange's patent.

This would mean eBay sellers could no longer sell items at fixed prices and MercExchange would likely go after eBay's auction listings as well. The Appeals Court cleared the way for another lawsuit against eBay for infringing MercExchange's '051 patent.

In that case, MercExchange patents are potent, and the company could conceivably sell its patent portfolio to an eBay compeititor.

Whether that competitor would allow eBay to license the patents and at what price is unknown, since this is all speculation. But sellers should be paying attention, because it seems anything could happen.

Wild Card
The wild card in the eBay Patent War with MercExchange is the U.S. Patent and Trademark Office. eBay ordered a reexamination of the patents, and the USPTO agreed. If it should make adjustments to the '265 patent before the District Court gets the caes back, it could affect the jury verdict, and could be another "best case" scenario for eBay.

It's no surprise all eyes are watching what takes place in Washington today.


About the author:

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). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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