eBay v. MercExchange Jennifer Pang

eBay v.
The 8-Year See-Saw Battle
Jennifer Pang
University of California, Berkeley
IEOR 2009
IEOR 190G: Patent Engineering
(Fall 08)
Online auction site that allows users to buy/sell
items via 2 primary formats: proxy bidding
and fixed-price buying
The Issue
Months before eBay founder Pierre Omidyar
came up with his first prototype of eBay in
1995, an inventor named Tom Woolston
(CEO of MercExchange) filed patents that
covered the eBay idea
 After eBay got popular, the company intially
tried to buy these patents off of Woolston
The Lawsuit
2001: MercExchange founder Tom Woolston
sues eBay for infringement on 3 of his
patents regarding eBay’s Buy It Now feature
eBay and MercExchange had been in talks
for eBay to purchase these 3 patents, but
eBay decided to abandon efforts to come to a
purchasing agreement
The Patents in Dispute
2085176 - Method and apparatus for using
software search agents to find items in
electronic markets. (Affects Half.com.)
6202051 - Method and apparatus for
conducting person-to-person online auctions.
(Auction patent)
58545265 - Consignment nodes (Fixed-price
Patent No. 5,845,265
Specifies a marketplace for goods using a
database on one computer to store digital
images, text descriptions, prices, and legally
binding offers that were previously input from
another computer and transmitted across the
1. http://news.cnet.com/2100-1017-956638.html?tag=mncol;txt
Patent No. 5,845,265
“A buyer, hereinafter participant, may electronically log onto a
consignment node via a network connection by use of a PC with
participant interface software...[and] present electronic payment to the
consignment node by entering a credit card number and expiration date or
other forms of electronic payment.”
Patent No. 6,202,051
“Bids are received on the item from participants on the Internet through an
auction process that executes in conjunction with the computerized
database of data records. Auctioning of the item is terminated when the
auction process reaches predetermined criteria. The auction participant is
notified of the high bid in the auction process.”
The Initial Ruling
May 27, 2003: Jury rules eBay guilty of willful
infringement of MercExchange patents and awards
$35 million in damages
June 12, 2003: MercExchange files motion for entry
of a permanent injunction order
August 7, 2003: Judge DENIES MercExchange's
motion for an injunction against eBay's Buy It Now
feature, saying, "If the court did enjoin the
defendants here, the court would essentially be
opening a Pandora's box of new problems."
The Fight Continues...
2004-2005: eBay requests to have the
patents reviewed for legitimacy (even though
they had tried to buy them before!)
March 16, 2005: Decision by U.S. Court of
Appeals for the Federal Circuit reverses the
original decision on permanent injunction
Continuing the See-Saw
May 15, 2006: Supreme Court REVERSES
the Appeals Court decision, stating:
That district court judges have discretion in
determining whether "irreparable harm" would
result if an injunction is not issued (injunctions
should not be automatically issued to patent
That although it was getting rid of the injunction,
the original district court had not taken the
correct steps to come to an otherwise correct
Why This Case is Important
Since then, the Supreme Court has come
down with a landmark decision designed to
make it more difficult for patent holders to get
courts to sign off on shutoffs of infringing
products, especially if the patent holders
don’t practice their patents2
This spring, eBay finally bought
MercExchange’s patents for an unspecified
sum, bringing the 8-year battle to an end

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