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Judge Awards Inventor $29.5 Million In Damages Against Ebay

The verdict in a Norfolk, Va., federal court will bring changes in how the online auctoneer conducts sales of fixed-price merchandise.
NORFOLK, Va. (AP) -- A $29.5 million verdict in a patent infringement lawsuit against Internet auction house eBay will bring changes in how the company conducts sales of fixed-price merchandise.

Jay Monahan, eBay's vice president for litigation, said the company still believes the patents belonging to Virginia inventor Thomas G. Woolston are invalid, but nonetheless plans to implement design changes that will avoid infringing on them in the future.

A federal judge Wednesday ordered the award paid to Woolston and his Great Falls, Va., company, MercExchange. In May, a federal jury in Norfolk found that eBay willfully infringed on Woolston's patents with features like eBay's "Buy It Now" option, which offers a way for people to buy auction items at a fixed price.

After a five-week trial, the jury awarded Woolston $35 million in May.

In his ruling, U.S. District Judge Jerome B. Friedman said he would not require the Internet giant to abandon the disputed technology, saying lawyers for Woolston failed to show that he would suffer irreparable harm if the court did not issue an injunction.

But the judge cautioned eBay that if it continued to infringe on the patents, he would be "more inclined to award enhanced damages for any post-verdict infringement."

Both sides plan to appeal the ruling.

Monahan said the changes should be easily accomplished and invisible to users, but declined to disclose any details.

"We're going to appeal the refusal to grant an injunction, but that said, eBay has definitely been put on notice about what could happen if it continues to infringe," said Greg Stillman, an attorney for MercExchange.

He said he was pleased with the financial award.

Friedman's award is less than the $35 million that the jury recommended at the end of the five-week trial earlier this year.

Because the jury found that the violation was willful, the judge could have tripled the jury's award. In Wednesday's ruling, Friedman wrote that he rejected the option because there was an "insufficient basis" for doing it, in part because the outcome of the case was close.

Friedman also refused to order an injunction, saying MercExchange had never asked for a preliminary injunction.

"Substantial evidence was added at trial showing that the plaintiff does not practice its inventions and exists merely to license its patented technology to others. Indeed, the plaintiff has made numerous comments to the media before, during, and after this trial indicating that it did not seek to enjoin eBay but rather sought appropriate damages for the infringement," Friedman wrote.

The jury award does not affect eBay's primary auction bidding system. In his original suit, Woolston claimed that the entire auction house infringed on his patents, but Friedman threw out those claims.

Instead, the case hinged on how eBay sells fixed-price merchandise, which accounts for roughly 26 percent of the auction house's total sales.

EBay is one of the last remaining winners from the dot-com bubble and one of the Internet's great business successes. The San Jose, Calif., company expects 2003 revenue of $2.75 billion and had 75.3 million users at the end of July, a 51 percent jump from the previous year.

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