A federal Appeals Court has upheld an earlier U.S. District Court ruling that eBay’s Buy It Now feature infringes on a patent held by a small Virgina-based company, MercExchange. The ruling Wednesday also upheld the District Court’s order that eBay was liable for damages of $25 million for violating the patent.
The District Court had also ruled that eBay violated a second patent held by MercExchange relating to search technology, but it ruled against another patent claim by MercExchange relating to online auction technology. But on Wednesday, in addition to upholding MercExchange’s patent on the Buy It Now feature and reaffirming that eBay would have to pay related damages, the Appeals Court also reinstated MercExchange’s patent on the online auction technology.
The Appeals Court denied MercExchange’s claim on the search technology patent. That had the effect of reducing what had been $29.5 million in damages assessed by the District Court to $25 million. The Appeals Court recommend an injunction that would prevent eBay from continuing to use the Buy It Now feature, or require it to alter it in some way or license the technology from MercExchange. According to published reports, MercExchange currently licenses that piece of technology to another auction site, uBid.com.
A statement from eBay on Wednesday focused on the Appeals Court’s ruling to invalidate one of MercExchange’s patent claims, saying it was “pleased” with the decision. “Looking forward, we believe that any injunction that might be issued by the District Court with respect to the other patent will not have an impact on our business because of changes we have made following the District Court’s original verdict,” read eBay’s statement.
On Wednesday, Standard & Poor’s Equity Research reiterated a “hold” rating on eBay shares, noting that the damages addressed in the ruling only covered the period through the first quarter of 2003 and that the damages eventually assessed could rise significantly as a result. Based on a conversation with MercExchange and its own calculations, S & P said in a statement that it believed damages could rise by as much as $100 million for the second quarter of 2003 to the fourth quarter of 2004. It also said it believes “an injunction on eBay’s Buy It Now is possible.”
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