EBay settles patent infringement case

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EBay Inc. settled a patent infringement suit with MercExchange LLC on Thursday, ending a seven-year legal battle that went all the way to the U.S. Supreme Court.

As part of the agreement, eBay will buy three patents for e-commerce from its adversary, along with some additional assets. Financial terms of the deal were not disclosed.

In 2001, MercExchange, a tiny Virginia company, sued San Jose online giant eBay in federal court for allegedly infringing on its patents that allow consumers to buy products online for a fixed price. The case centered on eBay's "Buy it now" button, a popular feature for shoppers who prefer to buy products outright rather than bidding in an auction.

A jury eventually handed MercExchange a victory in its David-versus-Goliath tussle. EBay was ordered to pay $35 million, although that amount was reduced by a judge, and now the company must pay $30 million, including interest.

"We're pleased to have been able to reach a settlement with MercExchange," Mike Jacobson, eBay senior vice president and general counsel, said in a statement. "In addition to resolving the litigation, this settlement gives us access to additional intellectual property that will help improve and further secure our marketplaces."

Tom Woolston, MercExchange's president, said of the settlement, "It seemed like the right time to put it behind us," but declined to offer additional details.

The case received national attention for legal nuances that encapsulated broader questions about patent laws, which are currently facing a congressional overhaul. The arguments eventually reached the U.S. Supreme Court, which made a landmark ruling that impacted virtually all industries.

At issue was whether eBay, in addition to paying damages, should also be blocked from using MercExchange's technology. In these types of cases, plaintiffs almost always won permanent injunctions, giving them a huge amount of leverage in negotiating licensing deals with defendants.

In its 2006 opinion, the Supreme Court overturned nearly a century of legal interpretation by giving judges some leeway in deciding whether infringers should be able to continue using contested patents. Parts of the corporate world applauded the decision and the precedent it set, saying that it would potentially protect infringers from being put out of business.

EBay said it does not expect the settlement with MercExchange to impact its 2007 results or 2008 financial guidance. The agreement came as eBay was appealing the case and trying to get MercExchange's patents invalidated.