December 26, 2000, 9:55 AM

Auction house to courthouse: eBay trades one gavel for another

Don Davis

Editor in Chief

Is the company that started out trading Pez dispensers playing unfair? That’s what the U.S. Department of Justice wants to know. Auction search sites banned by eBay from scouring its listings say antitrust division investigators have interviewed them about the auction giant’s business practices.

The justice department issued its standard refusal to confirm or deny any investigation, and eBay did not return calls seeking comment. But one auction portal executive, Bidder’s Edge CEO James Carney, confirmed that he and other company officials met in early January with government lawyers about their dispute with eBay.

Bidder’s Edge, a comparison site for Internet auctions, routinely searched eBay from December 1998 until last August, when eBay asked the Burlington, Mass., company to stop. The two parties then tried but failed to negotiate a licensing agreement. The sticking point: Bidder’s Edge refused to show eBay search results in a separate window. The dispute heated up again in December when eBay sued Bidder’s Edge for trespassing. Bidder’s Edge countered with a suit charging eBay with anticompetitive behavior.

Executives at AuctionWatch of San Bruno, Calif., describe a similar exchange. Last fall, eBay told the portal to sign a licensing agreement or stay away from its site. “While eBay respects Auction-Watch’s right to compete fairly in the marketplace,” states a Nov. 3 letter from eBay marketing executive Brian Swette to AuctionWatch CEO Rodrigo Sales, “we are concerned that AuctionWatch’s new ‘universal search’ feature compromises and misleads the eBay community, drains our system resources, misappropriates eBay’s intellectual property, and ultimately enables AuctionWatch to ‘free ride’ and profit from the substantial and growing investment that eBay has made in its business.”

Like its demands of Bidder’s Edge, eBay wanted AuctionWatch to show eBay auctions in a separate window. When AuctionWatch balked, eBay blocked the portal’s IP addresses from the site, says Dan Neary, vice president of marketing at AuctionWatch. Engineers later found a technical switch, and in January AuctionWatch resumed its searches of eBay.

So far, Bidder’s Edge is the only company eBay aims to take to court. A source close to the situation who requested anonymity called Bidder’s Edge “a poster boy to show what happens when you mess with eBay.”

RubyLane.com, another auction portal now barred from eBay, used to collect fees for listing eBay auctions, an agreement in place since 1998. But all that changed in October, says RubyLane co-owner Tom Johnson. “They said they did not like our new search engine and would be canceling our contract.”

Johnson wouldn’t say how much eBay had paid him to list its auctions, but eBay turned the tables on this practice in its new licensing agreement. Instead of paying auction aggregators, eBay began charging them one-tenth of a cent for every search, according to an executive familiar with the licensing deals.

At least one portal, Auction-Rover, signed a licensing pact with eBay in December. A spokeswoman says AuctionRover isn’t required to show eBay search results in a separate window but does so anyway. She would not disclose whether the site pays search fees to eBay.

In its letter to AuctionWatch, eBay accused the portal of violating its copyright. But e-commerce attorneys say that’s not clear. “The question is what is copyrightable,” says Tom Smedinghoff, North American coordinator for the e-commerce practice at Baker & McKenzie, Chicago. “Facts are not copyrightable, but a compilation of facts may be.”

Neary and Carney say they’re more concerned with the precedent the dispute may set for the Web. “Being able to search freely,” says Carney, “is core to the Internet.”

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