March 29, 2005, 12:00 AM

U.S Patent Office weighs in again on ongoing eBay technology dispute

The U.S. Patent Office has “initially” revoked a patent claim by MercExchange on technology used by eBay’s Buy It Now feature. But MercExchange, saying last week’s judgment against eBay is binding, will seek an injunction against eBay.

The U.S. Patent Office has “initially” revoked a patent claim by Virginia technology company MercExchange on consignment auction technology currently being used by eBay to support its Buy It Now feature. The patent office ruling may throw into question a $25 million judgment against eBay for patent infringement, which was upheld in a Federal Appeals Court only last week.

The Appeals Court ruling last week had upheld a District Court judgment that eBay’s Buy It Now feature infringed on a patent held by MercExchange, and also upheld the District court’s order that eBay was liable for damages of $25 million for violating the patent.

However, in response to a request by eBay last year, the Patent Office reexamined and this week rejected all of the patent’s claims, deeming them “obvious” or otherwise unpatentable. While MercExchange has an opportunity to respond to the Patent Office’s rejection of its claim, the ruling could have the effect of modifying or permanently revoking the patent claims, according to a statement by eBay.

But MercExchange is labeling as “rank speculation” eBay’s suggestion that the initial revocation of the patent could ultimately result in cancellation of all 29 claims associated with the patent. “Such first office actions are typical in a reexamination proceeding,” according to a statement from MercExchange. “Apparently, eBay did not inform the Patent Office about the appellate court’s binding ruling.” Patent Office statistics show that less than 10% of reexaminations result in cancellation of all of the claims of a patent previously allowed by the Patent Office, according to MercExchange.

In a statement, eBay noted that the Patent Office had similarly rejected all MercExchange claims on another patent, related to technology to support online auctions. The District Court had similarly rejected MercExchange`s claim on this second patent, but the Appeals Court last week reinstated MercExchange`s patent on online auction technology. “eBay has maintained all along that the patents are not valid, and the Patent Office seems to agree,” says Jay Monahan, eBay’s vice president of intellectual property.

The Appeals Court ruling last week upholding MercExchange’s patent claim on technology supporting eBay’s Buy It Now function recommended an injunction against eBay’s continued use of the Buy It Now feature. MercExchange says it will continue to pursue that injunction. “The Federal Circuit has spoken, and that should be the end of it,” says Thomas G. Woolston, the patent’s inventor and a principal of MercExchange.

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