Ebay Finally Loses a Lawsuit...

[14 of spades]

EBay Ordered to Pay $35M in Patent Case

 

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030528/ap_on_hi_te/ebay_lawsuit_12

[joe_collector]

I really hate these new "business process" patents, as very soon you won't be do anything business-related without paying a royalty.

[fantastic_four]

I'd like to see EBay lose a lawsuit, but not this one...I'd much rather it be a suit related to negligence related to allowing their users to perpetuate fraud.

[supapimp]

doesn't matter, they just hit their 52 week high today on the nasdaq. now that's one tech stock i wish i had bought.

[FlyingDonut]

I bought eBay at the IPO...

 

Jury Rules Against EBay in Patent Suit

Online Firm Protests $35 Million Award

 

By Jonathan Krim

Washington Post Staff Writer

Wednesday, May 28, 2003; Page E01

 

 

A Washington area entrepreneur yesterday won a $35 million judgment against eBay Inc., prevailing in a patent dispute that could cause the online auction giant to change some of its business practices.

 

The jury award is a victory for Thomas G. Woolston, 39, a Great Falls-based electrical engineer who claims to have invented, and patented, much of how the most successful Internet business to date runs its popular auctions.

 

U.S. District Court Judge Jerome B. Friedman must now approve the verdict and decide whether eBay will have to pay Woolston's company ongoing licensing fees or alter how it runs parts of its business.

 

Ongoing royalties could cost the high-flying Internet company significantly more than one-time damages. Woolston's attorneys -- who claim that Woolston always has wanted to license his method to eBay -- estimate that 26 percent of eBay's revenue come from the parts of its operations that infringe on Woolston's patents.

 

Last year, eBay earned $249 million on revenue of $1.2 billion. Its stock hit a three-year high of $103.05 a share yesterday, before the verdict was announced.

 

Jay Monahan, eBay deputy general counsel, said that the verdict is not supported by the evidence and that the company will ask the judge to throw it out. Both sides expect Friedman, based in federal court in Norfolk, to rule within the next month.

 

Woolston, whose career includes work for military and intelligence services, also claimed to have patented the core auction system that eBay has turned into a runaway success. But the judge threw out this claim before the case went to trial. Instead, the jury found that eBay willfully infringed on Woolston's patents for integrating an automated payment system and for selling fixed-price items as part of its service.

 

"I'm just thankful that a small guy can get his day in court," said Woolston. "It's an amazing thing to watch."

 

Many legal experts were surprised the case even went to trial, noting that judges set high thresholds for allowing patent claims to advance. EBay has fought the case furiously, committing more that 20 lawyers and legal staff from California to the Norfolk trial.

 

The case highlights the increasingly contentious world of patents, especially "business method" patents that took off with the advent of the Internet.

 

Four years ago, courts upheld a patent on Amazon.com's "one-click" system for online purchasing. That patent, like the one Woolston received in 1995 for an online auction system, focused not on a product or its underlying technology, but on a method of doing business on the Internet using available technology.

 

According to the U.S. Patent and Trademark office, applications for business-method patents soared from 584 in 1996 to 8,700 in 2001.

 

Woolston said he first conceived his auction idea as a way for baseball enthusiasts to exchange trading cards during the 1994 Major League Baseball strike. But he could not convince any Washington-area venture capitalists to back the idea.

 

EBay launched several months after Woolston got his first patent in 1995. Woolston said he tried to compete in the auction business, but eBay got so big so quickly that it became impossible.

 

After letting most of his 30 employees go, he decided to enforce his patents through licensing, and renamed his company MercExchange.

 

Woolston also has a pending claim against Priceline.com on a similar patent.

 

 

[murph0]

That's one stock I wish I hadn't sold. All those damn splits and reverse splits spooked me a while back...

 

Brian

[BronzeBruce13]

Seems like Ebay paid for the most expensive "Buy It Now" ever (35m)... and never received anything for it. Sounds like many a buyer's Ebay experience at one time or another.

 

The "BIN" and "half.com" concepts were the offending infringements if I understood it correctly... I wonder if these options/services will be abandoned changed much?

[Darthdiesel]

Looks like we should expect even less free listing days and higher auction fnal value and listing fees in the months to come

[musicmeta]

Looks like we should expect even less free listing days and higher auction fnal value and listing fees in the months to come

 

[Room 237]

Yep, its us who will pay, not eBay.... increased fees etc...

 

I can't wait till someone gets them for all the fraud that goes on there. I lost a few thousand last year on a laptop purchase and they won't even reply yo my emails...!!!!!! they are scum when it comes to customer service

[BronzeBruce13]

Yep, its us who will pay, not eBay.... increased fees etc...

 

I can't wait till someone gets them for all the fraud that goes on there. I lost a few thousand last year on a laptop purchase and they won't even reply yo my emails...!!!!!! they are scum when it comes to customer service

 

I concur... Ebay left me with a permanent resentment of them too... when I was ripped off. No compassion, no real help, not willing to discuss it by phone if I paid (I was livid when I found out they'd talk to powersellers after telling me hey talk to noone), no urgency to reply to the emails when time was a factor, not specific enough answers to my detailed request of info.

 

In part, that's what gave me motivation to find other ways to sell besides an Ebay auction. They really don't show that they care much who gets ripped off, so long as they are making money.

 

If we did not police the system ourselves and have several more motivated watchdogs looking out for the oblivious, I imagine the fraud would be at stunning levels with little action to answer the problem by Ebay.

[fantastic_four]

In part, that's what gave me motivation to find other ways to sell besides an Ebay auction. They really don't show that they care much who gets ripped off, so long as they are making money.

 

I couldn't agree more!!! If their profits weren't so insane over the last year, I'd be able to forgive them. But given that they're doing so well, it's WAAAAAY past time for them to reduce fraud. 1% fraud is NOT a good percentage...nor is 0.1%....it needs to be less than 0.1% to not constantly be on guard.

[tb]

Sorry to hear that several of you have gotten burned as well...

 

What really bothers me more than anything else is that eBay keeps claiming that they only receive 25-30 fraud complaints for every million transactions, ie. 1 in 30-40,000 deals. I saw one of the founders (what's his name?) reiterate that in "60 Minutes" just a few months ago. If they would only be honest and admit that they have a problem that they are working on instead of keeping up this blatant, arrogant, and obvious lie, maybe I'd feel that those billions had gone to someone who could claim to deserve it.

 

 

 

[fantastic_four]

Sorry to hear that several of you have gotten burned as well...

 

What really bothers me more than anything else is that eBay keeps claiming that they only receive 25-30 fraud complaints for every million transactions, ie. 1 in 30-40,000 deals. I saw one of the founders (what's his name?) reiterate that in "60 Minutes" just a few months ago. If they would only be honest and admit that they have a problem that they are working on instead of keeping up this blatant, arrogant, and obvious lie, maybe I'd feel that those billions had gone to someone who could claim to deserve it.

 

I didn't see that 60 Minutes piece; wish I would've!!! Usually, those reporters structure the piece to portray the subject with a bias towards however that reporter thinks they should be portrayed. How did they portray E-Bay? Did you come away thinking E-Bay was fraud-free or that they had problems?

[tb]

> Usually, those reporters structure the piece to portray the subject with a bias

> towards however that reporter thinks they should be portrayed. How did they

> portray E-Bay? Did you come away thinking E-Bay was fraud-free or that they

> had problems?

 

It was portrayed as an internet success story. The reporter asked one softball

question after the other, and then they showed a couple of eBayers running small,

successful businesses from their homes. When the fraud issue came up and

the founder (guy with the beard) stated the above fraction, the reporter went

something like "Wow!, really??!" and the segment ended in awe over how

remarkably low this number was. You missed out on a sad day for critical

journalism.

 

 

[garthgantu]

A few points...

 

I think you're referring to Pierre Omidyar (sp?), who co-founded eBay, allegedly because his girlfriend wanted someplace online to trade Pez dispensers.

 

eBay claims the amount of fraud on its service is "less than 0.01% " ...That's 1 case of fraud for every 10,000 auctions, for you mathematically-challenged types

...eBay substantiates this claim by pointing to the number of fraud inquiries/complaints filed - generally by buyers, but occasionally by really naive sellers. However, given that eBay only covers $175 worth of losses in a case of fraud (if you're able to prove the fraud, which takes months), there are many industry analysts who believe that the % of fraudulent auctions is much higher, and that people who either lose relatively small amounts of money, or who lose amounts well over $175, often don't bother filing complaints because there's little motivation to do so.

 

It would be interesting to conduct an informal poll of everyone on this board and see how many times each of us has been scammed, regardless of the amount of $ involved. I've been taken only once, for about $30, as I recall...a lesson cheaply learned.

 

I'm going to guess that fraud occurs in one out of every 50-100 auctions, not the 1-in-10,000 that eBay claims.

[garthgantu]

One other point re: this lawsuit...

 

I remember hearing about this several months ago, in a trade mag. I believe the plaintiff in this case actually received a patent on the general concept of online auctions, not just the BIN and "Half.com" aspects of eBay's business.

 

It wouldn't surprise me if the plaintiff either picked the couple of areas of patent infringement that he felt eBay (or a jury) would accede to him, or perhaps he's looking to win a smaller battle first, to support a more costly and protracted legal battle later on.

 

Not that I'm in favor of the lawsuit per se... it's a bit like the founder of Priceline.com (Jay Walker?) receiving a patent for "e-commerce." His patent was eventually invalidated, I think.

[tb]

My own stats:

 

215 eBay transactions

 

Buyer: 170 items (avg. ~$200) ~125 sellers

Good: 160

Bad (item delivered but overgraded): 9

Ugly: 1 ($1,800 fraud)

 

Seller: 45 items (avg. ~$200) ~35 buyers

Good: 44

Bad (NPB): 1

 

My own feedback: 103/0/0