The U.S. Court of Appeals for the Federal Circuit made a decision on Wednesday in the appeal of the MercExchange v. eBay and Half.com patent lawsuit. The court affirmed in part, reversed in part, vacated in part and remanded.

Two years ago, a jury declared eBay had willfully infringed MercExchange's consignment fixed-price and software search agent patents. A judge had afterwards denied eBay's motion for a new trial in the MercExchange patent lawsuit and ruled eBay pay MercExchange $29.5 million in damages for patent infringement. A jury originally awarded damages of $35 million, using GMS (Gross Merchandise Sales) as the base in computing the royalty. MercExchange has yet to see a check as the case winds its way through the appeals process.

According to a Blog about patents written by Dennis Crouch, patent attorney at McDonnell Boehnen Hulbert & Berghoff LLP, today's decision sets the stage for a permanent injunction against eBay. But, Crouch told AuctonBytes in an email, "I do not think that there is any real possibility that eBay will be shut down." (http://patentlaw.typepad.com/patent/2005/03/appeals_court_r.html).

eBay's official statement about the ruling is as follows:

eBay is pleased with today's decision by the U.S. Court of Appeals that invalidates one of MercExchange's patents, and as a result, throws out all the related damages. Looking forward, we believe that any injunction that might be issued by the District Court with respect to the other patent will not have an impact on our business because of changes we have made following the District Court's original verdict. The U.S. Patent and Trademark Office is actively reexamining all of MercExchange's patents, having found that substantial questions exist regarding the validity of MercExchange's claims. The Patent and Trademark office has already initially rejected all of the claims of one of MercExchange's patents. We are confident in our position against MercExchange and do not believe that these matters will have any impact on our business.

Tom Woolston, President of MercExchange, said "It's a great day for a small company and a great day for uBid.com." Woolston is a substantial stakeholder in uBid, an online auction site. "uBid is the number two online auction site," said Woolston. "We have to try harder and we do. We have certified online sellers, no fraud, and we are building a better community. Everybody at eBay is welcome to come over." He added jokingly, "except for the management."

Woolston refused to dwell on the patent battle, staying focused instead on uBid, which he claimed had a 5 percent market share in the industry. "I'm a director of a subsidiary at uBid and we're focused on building a better community."

Today's decision is available in a PDF file at: http://www.fedcir.gov/opinions/03-1600.pdf

http://www.ebay.com

http://www.mercexchange.com/docs.htm

Article updated 3/16/05 at 4:30 pm Eastern.