eBay faces partial shutdown in patent dispute

eBay faces partial shutdown in patent dispute

Summary: Does MercExchange deserve the label "patent troll", or is eBay unfairly profiting from Thomas Woolston's "brilliant innovations" for which he deserves millions in compensation?

TOPICS: E-Commerce

I'll try not to make this the typical knee-jerk patent reaction post so read on. The US Department of Justice weighed in today against eBay in its fight with patent holding company MercExchange. The issue in question is rather narrow: whether an injunction that would force eBay to shut down its "Buy It Now" feature should continue to be delayed or if it should be put into force. The normal auction features of eBay would be unaffected.

Denis Crouch, a patent attorney and avid blogger, has been following the case for some time. He writes:

"In the BlackBerry case, the Government sided with RIM, asking the district court to not issue an injunction.  Here, however, the DOJ has apparently flipped and now supports MercExchange. 

This position goes along with my own thoughts that the Supreme Court will hold that a court should weigh the pros and cons of an injunction before shutting down an infringer, but that there will still be a strong presumption that an injunction will grant — especially when the infringement is willful." 

The briefs by MercExchange and eBay (which you can find on Denis' blog) make interesting reading. Both of them sound perfectly reasonable if you only read one side. But put together, there are some interesting clashes.

Patent lawyer/electrical engineer Thomas Woolston, filed his first patent in April 1995.  According to eBay, this one was ultimately turned down. In September 1995, eBay was launched. According to eBay's brief:

"Two months after eBay’s public launch, MercExchange filed another patent application in November 1995, seeking to expand the description in its original, rejected application. As eBay gained popularity, MercExchange continued to add new claims and, in 1998, ultimately convinced the PTO to issue U.S. Patent No. 5,845,265 (“the ‘265 patent”), at issue here. By then, eBay had been operating its website for three years, achieving remarkable growth and success. MercExchange, taking notice of eBay’s success, developed a strategy of suing."

It turns out that several companies including goto.com and AutoTrader have already paid MercExchange for licensing the patent. Another company, ReturnBuy, when faced with the suit filed for bankruptcy and settled.

Unfortunately the mainstream press doesn't go into the details of the patent. But according to MercExchange's brief, it describes an "electronic market" for the sale of goods:

"In such a market, sellers  can display their wares by posting pictures, descriptions, and prices of goods on a computer network, such as the Internet. A prospective buyer can electronically browse the goods on sale by connecting to the network. After selecting an item, the buyer can complete the purchase electronically, with the ?electronic market? mediating the transaction, including payment, on the buyer?s behalf."

It goes on to describe this as a "novel improvement" over previous approaches such as specialty shops, electronic bulletin boards, and TV shopping channels. It seems pretty obvious to me. How else are you going to sell things over the internet?

So what do you think, does MercExchange deserve the label "patent troll", or is eBay unfairly profiting from Woolston's brilliant innovations for which he deserves millions in compensation? The Supreme Court is scheduled to hear oral arguments on March 29th.

Topic: E-Commerce

Ed Burnette

About Ed Burnette

Ed Burnette is a software industry veteran with more than 25 years of experience as a programmer, author, and speaker. He has written numerous technical articles and books, most recently "Hello, Android: Introducing Google's Mobile Development Platform" from the Pragmatic Programmers.

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  • eBay's patent dispute

    eBay should still be able to do the "Buy it Now" function because I don't want to have to go to OTHER websites to get what I want for their higher prices. I don't want to buy software brand new, such as MS Win XP Home, at another website for $149.00 when I can get it brand new at ebay for $89.00 as an example. Some auctions take too long so I choose the "Buy it Now" function. Also, not all websites take PayPal either. I use PayPal a lot. Keep it the way it is. No changes PLEASE.
    • RE: eBay's patent dispute

      I agree with you! =) I do not think they ought to mess with the way eBay is currenty. <B><U> No Changes, PLEASE!</U></B>
  • Just another patent troll

    It is really sad and disgusting to see these patent trolls leverage the failure of both the patent office and the justice department to deal with this issue of intellectual property.

    I can see the why the Patent Office is a mess - too few resources and lack of expertise to judge frivolous patent claims. In the case of the justice department - shameful. Shameful they allow trolls to shut down vibrant businesses and employees that rely on them.
    These trolls have nothing to lose and everything to gain. These antiquated laws and loopholes are an extortionists dream.
    • Exactly so...

      Yet another example of a team of lawyers seeking to exploit (extort?) over a so-called 'intellectual property' - seems a patent may be granted for an unexpressed idea, which subsequently will be bought up by an unscrupulous group intent on blackmailing those who actually made a viable expression of that idea, usually arrived at by totally independant means. We do all think alike after all, and it is no surprise that a good idea may germinate in more than one place, with no encouragement from other sources. So sorry, but if there was never a fully expressed example of the idea, it sits as a 'vaporware' concept only. Thus IMHO Mr. Woolston may have concieved the notion but as he never implemented it, he is due nothing. eBay got there first. Sort of like the kids myth of who invented the Frisbee. I am no fan of eBay but I definitely dislike patent vultures much more.
    • Agreed

      this is nothing more than a patent troll. The patent basically describes EVERY web store online right now. I am not surprised that the DOJ is siding with MercExchange though because by shutting down RIM it would have effected THEIR blackberries. But the DOJ has no vested interest in EBay because they don't rely on any of their services. It's amazing how hypocritical the US Gov't can be.
      • Seconded

        'Oh look, HUGE web store, probably takes a cut of every sale... Let's force them to follow our patent that we probably patented for 10 bucks in case e-commerce boomed...'

        Almost every site that uses some form of sale has a 'Buy Now' feature...
        They could bring e-commerce to a grinding halt if they make eBay cave, and know full well, from that point on, they can go to Amazon.com or other stores and wave the same patent in their faces...
        A million in 'compensation' here, A million there...
        They could rob e-commerce blind...
  • troll may as well describe the internet

    the patent sounds like a general description of the inter net to me. It reads like a horrorscope you could read any number of things into it its just far to vague.
  • Extortion is the proper name...

    for this. Please quit issuing patents for obvious ideas.
    This would be a good place to make a stand against these vultures who just wait in the wings to make a buck from other people's successes.
  • Other Interested Party: The Public

    There's a reason software is considered as language. Imagine if people could patent words like 'Bob' or 'Television'... we'd wind up not being able to talk! I don't believe a concept for using the net should be patentable, especially if the concept was never pursued. Microsoft followed Apple & Commodore with windows after all. Implimentation should be patentable- and implimentation should include use.
    Otherwise somebody could just run a bunch of supercomputers to generate all possible sequences of code, and patent them all.

    Also, the public should be represented as a third party in disputes like this. Our interests are not the same as the two litigants. Anybody consider code as a form of free speech?:]
    • Right on!

      Moreover, federal judges swear to uphold the Constitution which provides for the defense of the nation and the welfare of the people(I don't believe corporations should enjoy personhood).
  • ebay patent

    Reading the description of the Woolston?s ?idea? only points out the absurdity allowing ideas to be patented. Had executed his idea then I would agree it is something that should be allowed to be patented
  • Patent Troll

    I understand the ideology of patenting ideas for hardware devices or physical (i.e. chemical) processes. But not for software!

    Software concepts AND the code do to so should be copyrighted.

    This patenting of unoriginal ideas is blatant fraud without accountabilty except for P&TO granting the "privilege" to the first papermill who gets the paper sham through the bureaucracy first.

    It's time to scrap the entire system and create a new one from scratch to handle software/programming concepts rather than to continue to proceed with a system that is inherently wrong!
    • Lawers

      Maybe this will get settled out of court....
      if the Lawer got 7 Mill for hot coffee in the lap think what they will get for this
  • back to basics or the game is lost

    Quite possibly the courts and the patent office are overlooking something rather basic here. A concept or idea that has not been reduced to practice should never be a candidate for a patent. Period!

    Otherwise, many the science fiction writers of the last century would all be due a huge and continuing windfall as each high-tech gizmo they once fantasized about in print (from 1920 to 1960) emerges today as a real-life product.

    Ya gotta keep it simple, stupid...or the lawyers are gonna walk off with everything. Talk about a profession lacking both integrity and originality. Yet today the patent merry-go-round is proving to be an overly-generous free meal ticket for these undeserving beasts.
    • back to basics

      You're right with KISS. Wouldn't Buck Rogers have a field day now??? I think the dude should be paid---about $10 for patenting a concept someone else was already using. Then, there's the concept of lawyers going thru patents to find something, go the the holder, and talk him into sueing. Hellova way to make a living.
  • application dates support Woolston

    IF the issue is the "Buy It Now" feature on Ebay, then application dates supports Woolston.
    The Ebay domain name was created Aug 4, 1995 and subsequently the public launch.
    Woolston had submited a complete application on November 7,1995, because I am an inventor
    and I have patent (5,784,451) I understand what the process was in 1995 to create such a document.
    Ebay sought to register the "Buy It Now" wordmark and in that application it states first used in
    commerce Dec 1, 2000. This is 2 whole years after the patent application was accepted.

    As to who is a patent troll, I do not know MercExchange or what they do. But if they never put up as much as a website to attempt to deliver this improvement to the prior art of auctions then they were not harmed.
    In 1995 when the patent was filed there should have been an example of their service. Ebay lauching at the same time represented no impediment to them.
    And you are not supposed to be able to patent an idea. Patents are blueprints for those "skilled in the art" to duplicate the invention.
    Before I could file my application I had to build it. Then just like Woolston I had to wait 2 years for the application to be accepted,
    but I was not allowed to add claims or change the application.
    What could Woolston do while waiting for the application to be accepted, call Ebay and say "hey your stepping on my invention!"
    The issue is how these parties handled themselves once the patent was assigned a number.
    Ebay IPO was in Sept 1998, that was when the die was cast, 60 days before Woolston gets his patent.
    IF there is any record of contact between these parties in the end of 1998 or beginning of 1999, due diligence says Woolston should have
    been paid a license fee. To wait 3 1/2 years to file a trademark for a feature specified in someone else's patent, is a smoking gun.
    Unless Ebay was NEVER approached. In that case it is absence of malice.
  • might as well sell every storefront on the web to the troll if the article

    description is correct. the article makes it sound like this guy watched ebay form and put everything into his patent app. i wonder why ebay didn't try to patent the online buying procedure. this is one of those that is so far-reaching that it never should have been granted.

  • Intellectually bankrupt patents

    If eBay looses the case, every store on the web will have to shut down. "Buy it Now" is not just an eBay thing. That is what happens at every website that you can look at a product, decide if you like it or not and make the purchase.
    Common sense(which unfortunately is not used in the legal community}, would dictate that an idea to do something cannot be patented. If eBay had used someones intelectual property illegally to do what it did, then I would say that eBay was wrong.
    An idea cannot be intellectual property, but the program or tools used to make that idea work would be.
    I don't believe that Woolston invented the internet or the means of selling things on the net. Patent troll is to nice of a word.
    Clueless Jim
    • Indeed, 'patent troll' is too nice ...

      descriptive to a point- I would prefer 'bloodsucker' as being more aligned to the spirit of the act. How about 'pseudo-intellectual property thieves'. A concept alone is not 'intellectual propery', sanity dictates that one cannot apply for a patent of essentially what could be called a daydream. First it must have a real world expression and function. Without at least a functional model of the 'product', a patent ought not to be granted, else all play into the hands of the legal extortionists you have politely referred to as patent trolls.
  • Ridiculous

    Patent Troll, as well as Bloodsucker, are both TOO Nice.

    Merc's "VAGUE" description of services in the patent application, could be applied to literally EVERY web site in the world, that sells items via a web site.

    Our Country's courts should NEVER uphold judgement, for something as ridiculous as this. Lawyers should be disbarred for even participating in such a law suit. This is why our country in it's current state ... having to pay TOO Much for things, since companies have to pay ridiculous sums of money to settle Illegitimate law suits.
    zd comment user