- The Washington Times - Wednesday, March 29, 2006

ASSOCIATED PRESS

The Supreme Court debated the rights of inventors yesterday, weighing in on a dispute between EBay and a small Northern Virginia patent holder.

The case’s outcome could mean millions of dollars for inventors working in their garages or in large pharmaceutical labs — including those who develop a product and those who opt only to patent ideas.

The dispute between EBay, the Web-based marketplace, and MercExchange of Great Falls is one of several high-profile legal battles that are calling attention to the nation’s patent laws, which some critics — including Amazon.com, Yahoo and Xerox Corp. — say need updating to keep up with rapidly changing technology.

Justices won’t decide whether EBay stole MercExchange’s idea for selling goods over an electronic network. Rather, the high court is being asked whether trial judges must automatically issue orders prohibiting use of an idea after juries find a patent violation.

EBay and other high-tech companies warn that patent-holding companies could use the threat of court injunctions to coerce larger firms into settling lawsuits for huge sums of money.

Attorneys for the two sides traded barbs during the argument, with MercExchange accusing EBay of stealing its idea for selling goods in cyberspace and EBay calling the Virginia firm a “patent troll,” a company that hoards patents for products it never develops.

“Is the troll the scary thing under the bridge,” asked Justice Anthony M. Kennedy, “or is it a fishing technique?”

“For my client,” lawyer Carter Phillips said, “it’s the scary thing under the bridge.”

Mr. Phillips, who represents EBay, urged the court to fix a system that he said favors patent holders who sit on inventions and file lawsuits when someone stumbles across similar ideas.

EBay’s attorney also complained that patent holders file lawsuits in certain parts of the country, such as Marshall, Texas, where they know they are likely to win big-money verdicts against larger companies.

“Everybody’s in this for money,” said Justice Antonin Scalia. “Why can’t we let the market take care of the problem?”

Justice Scalia also said the high court shouldn’t rewrite patent laws “because we have renegade jurisdictions.”

MercExchange’s founder, patent lawyer Thomas Woolston, came up with the idea of using an electronic network of consignment stores that would ensure legitimacy of sales by taking possession of goods being offered. EBay’s system was based on the belief that buyers and sellers could trust each other and deal directly.

A jury sided with MercExchange, finding that its business-method patents had been infringed, and awarded the patent holder $35 million.

A trial judge later reduced the award by $5.5 million and refused to grant a permanent injunction, ruling that MercExchange would not suffer because it had not used its inventions commercially and had expressed an interest in licensing its patents to EBay.

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