EBay Loses Patent Case, Hit with $35M Verdict

A federal jury in Norfolk, Virginia, has found that eBay and its subsidiary Half.com willfully violated patented technology and has ordered the auction giant to pay US$35 million in damages.

The jury found in favor of MercExchange LLC, which claimed eBay had infringed on patents that firm held for technology enabling some of eBays fixed price and search options. The verdict came after a four-week trial.

Not Waiting

The ball is now in the court of the judge in the case, who can either set aside the verdict, reduce the jury award or increase it by up to three times.

San Jose, California-based eBay wasted no time, promptly announcing it would appeal the decision. “We are disappointed with the jury’s verdict,” eBay general counsel Jay Monahan said in a statement. “This issue is far from over. We believe that the weight of the evidence presented during the trial did not justify the jury’s verdict.”

Drop in the Bucket

For eBay, even a $35 million payout would hardly be worth losing sleep over. In fact, the news came on a day when eBay shares powered past the $100 mark and stayed there, setting a new yearly high of $103 and boosting eBay’s market cap to more than $32.7 billion.

In early trading Wednesday, the company’s stock fell, but only by a fraction of a percent.

Still, the impact of having to work around the disputed technology or agree to long-term licensing fees may be more important than the proposed payout. EBay alluded to that possibility in a recent U.S. Securities and Exchange Commission filing, saying adverse patent rulings could force it to alter the way it does business.

Chink in the Armor?

Although the patent ruling is unlikely to derail eBay, it is a rare bit of bad news for the auction juggernaut, which has chugged along, pumping out a string of profitable quarters and impressive growth rates.

“The biggest threat to eBay is not competition or even unseen events, but a natural slowing of its growth rate,” Morningstar.com stock analyst David Kathman told the E-Commerce Times. “So far, they’ve managed to keep the growth going, but [over the] long term that’s only going to get more difficult.”

Other analysts seem confident eBay can keep its mojo going. Goldman Sachs‘ Anthony Noto rates eBay as the cream of the Internet stock crop and predicts it will stay above the $100 level for some time.

Victory – For Now

The ruling is a win for Thomas Woolston, a 39-year-old entrepreneur who claims to have invented several of the technologies that power the world’s largest online auction site. Woolston, who also has a patent suit pending against name-your-price travel site Priceline.com, claims he came up with his online auction format months before eBay launched in 1995.

The ruling covered two technologies. Last year, the judge in the case ruled there was not enough evidence to support a claim that Woolston invented the basic platform eBay uses.