eBay, MercExchange end 'Buy it now' patent feud

Editor's note: This story was updated at 2:20 p.m. PST to add comments from MercExchange and correct the company's description and number of employees.

It had to climb all the way to the U.S. Supreme Court and back again, but a long-running patent dispute between eBay and a three-man e-commerce technology company finally appears to be over.

Since 2001, the Virginia-based MercExchange had been at war with the auction giant. It alleged that the Silicon Valley company's online auction interface--namely, its "Buy It Now" feature, which allows users to purchase items without going through the bidding process--infringed upon three of its patents. At the time the dispute began, MercExchange ran three Web sites, including a fine art auction site, and had 45 employees.

The terms of the settlement announced Thursday are confidential, but it may have been a lucrative deal for MercExchange. eBay said in a press release that it agreed to purchase all three patents at issue, as well as "some additional related technology and inventions and a license to another search-related patent portfolio that was not asserted in the lawsuit."

eBay said it was "pleased" to reach the agreement and to have the chance to expand its intellectual property portfolio. It predicted the transaction would have any effect on its 2007 results or 2008 financial guidance.

MercExchange spokesman Michael Caputo said his company was also "happy" with the agreement and looked forward to moving onto other projects.

A federal jury in 2003 found eBay guilty of infringing on two of those patents and ordered it to pay more than $25 million in damages. An appeals court upheld that verdict and also imposed an injunction on eBay, which required it to cease using the technology found to have infringed on the patents.

eBay appealed that decision all the way to the Supreme Court, which ruled in its favor in spring 2006. The justices issued a landmark decision last May designed to make it more difficult for patent holders to get courts to sign off on shutoffs of infringing products. Critics have argued that patent-holding companies use the threat of injunctions to extract disproportionate settlement awards from companies accused of infringing their wares--a practice known as "patent trolling."

From there, the matter was sent back to a district court to revisit, where a judge ruled last summer that monetary damages were enough to compensate MercExchange for any difficulties it had endured as a result of the patent infringement.

Perhaps ironically, eBay in the past has challenged the validity of some of the very patents it admittedly just purchased--and even won an initial round of that re-examination by the U.S. Patent and Trademark Office.

The three patents at issue are Patent No. 5,845,265, Patent No. 6,085,176, and Patent No. 6,202,051.