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Tuesday, May 16, 2006 - Page updated at 12:00 AM

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Patent ruling a win for eBay

Knight Ridder Newspapers

WASHINGTON — The Supreme Court handed online auctioneer eBay a narrow victory Monday, saying the company shouldn't automatically lose the right to use its "Buy It Now" sales feature because of a patent dispute.

The justices ruled unanimously that a lower court should have considered a number of factors before deciding whether MercExchange, a small Virginia company that holds the patent on "Buy It Now," can prevent giant eBay from using it.

An appeals court had said previously that courts should issue permanent injunctions unquestioningly when patents are infringed.

The ruling is a victory for technology companies that backed eBay, including Microsoft and Intel, which said they are under siege from small patent owners who use the threat of court orders to seek high licensing fees.

The decision is a setback for Pfizer, Johnson & Johnson and other drug makers, which said any lessening of that threat would reduce the value of their inventions.

"It appeared they were concerned about large corporations held hostage to minor innovations," said Brad Wright, a patent lawyer at Banner & Witcoff in Washington, D.C., who also teaches at George Mason University School of Law.

So-called patent "trolls," who buy patents they don't intend to use then search for products that might infringe them, have become adept at using the threat of permanent injunctions to force big payoffs from the companies.

The eBay case raised issues connected to the highly publicized dispute that had threatened to shut down the BlackBerry e-mail service. BlackBerry maker Research In Motion agreed in March to pay NTP $612 million to avoid an order to halt U.S. service and sales.

But the ruling doesn't end the dispute for eBay or anyone else. The lower court still could find in favor of MercExchange after considering the factors the high court demanded.

And three justices, led by Chief Justice John Roberts, said in a concurrence that they believed even after the court's standards were met, a permanent injunction almost always should follow.

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The eBay ruling springs from a dispute that typifies the problems some high-tech firms are encountering with the features they advertise.

MercExchange holds a patent on certain direct-buy software that allows customers to go onto a site and purchase items at a set price. It invented the technology but hasn't used it since 2000.

The technology is not an invention like the internal combustion engine, as Roberts noted during oral arguments in the case. But it's an idea that MercExchange owns.

It's also almost identical to eBay's "Buy it Now" feature, so much so that a court found eBay had willfully infringed MercExchange's patent when it introduced the feature.

In addition to a monetary award, MercExchange sought a permanent injunction against eBay. The trial court refused, saying MercExchange could be paid for the continued use.

An appeals court reversed that decision, saying injunctions should be routine after patent infringements. eBay then appealed to the Supreme Court.

Information from Bloomberg News

is included in this report

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