eBay Hit With $3.8 Billion Patent Lawsuit Over Payment Technology

eBay (EBAY) got slapped Tuesday with a $3.8 billion patent infringement lawsuit over its payment system technology, potentially setting the stage for another protracted patent lawsuit for the e-commerce giant.

XPRT Ventures, a Connecticut company that represents patent holders, is alleging that eBay and its subsidiaries PayPal, Bill Me Later, Shopping.com and StubHub violated six of its patents, according to an Associated Press report. XPRT is claiming eBay pilfered its ideas for creating alternative payment systems that go beyond the use of credit cards.

As part of its lawsuit, XPRT Ventures is seeking to be "fairly compensated," rather than going after an injunction to halt eBay's use of the technology, according to the report. For XPRT, that's be a smart move, considering how the U.S. Supreme Court ruled in 2006 in the MercExchange patent lawsuit against eBay.

MercExchange alleged eBay had infringed on three of its patents with its "Buy It Now" feature, and a federal district court in Virginia sided with MercExchange in 2003. The case made its way up to the U.S. Supreme Court, which ultimately ruled in eBay's favor.

The Supreme Court lifted a permanent injunction that MercExchange had won against eBay in the appeals court, according to a blog post in General Patent, a patent advisory service:

The legal saga began when MercExchange, LLC sued eBay Inc. for infringement of its patent related to eBay's "Buy it Now" feature. In 2003, a Virginia jury in the US District Court for the Eastern District of Virginia found eBay guilty of willful patent infringement, but the court did not grant a permanent injunction to MercExchange – a move which would have forced eBay to stop offering the popular "Buy it Now" service to its sellers, unless it took a license under the patents-in-suit. The District Court ruled that since MercExchange did not practice its invention it was not entitled to injunctive relief.

MercExchange appealed the verdict to the Court of Appeals for the Federal Circuit (CAFC), which hears appeals on patent cases, and the CAFC reversed the District Court – granting MercExchange an injunction and citing the "general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances." The practice of granting permanent injunction upon finding of infringement has been consistently applied by courts for well over 100 years.

eBay appealed to the Supreme Court, which granted certiorari. The Supreme Court reversed the CAFC's ruling – taking away MercExchange's permanent injunction.

Moreover, the Supreme Court stated in dicta that just as the District Court erred in creating a general rule that an entity not practicing its invention cannot be entitled to injunctive relief, so too the CAFC erred in enunciating another general rule that a permanent injunction is automatic upon finding of infringement.

XPRT Ventures' patent holders apparently feel that $3.8 billion would suit them just fine, as opposed to preventing eBay from using its technology.