eBay in 'Buy It Now' Patent Dispute

smooth wombat writes "The Office of the Solicitor General of the United States has filed a brief with the Supreme Court, taking the side of MercExchange who is in a patent dispute with eBay over eBays Buy It Now feature. Two lower courts have already upheld MercExchange's patents including finding that eBay had willfully infringed on the Buy It Now patent. Later this month the U.S. Supreme Court will hear oral arguments. The Office of Solicitor General is arguing eBay should be barred from using Buy It Now due to the decision of two lower courts that upheld MercExchange's patents. eBay is arguing that infringements should not automatically result in injunctions and shutdowns."

Comments

The Details

[eldavojohn]

What MercExchange LLC (US) has are a handful of patents that are titled as "consignment nodes" which seem to be completely centered around electronic auctions and commerce.

Where I think eBay is in trouble is that in a few of these patents, MercExchange references the idea of two different specified prices, with "buy at" or "sell at" similar to eBay's "Buy it Now" price. Taken from their patent on dynamic pricing information:

The bid control 614 may provide a link to a web page that allows a participant to place a "buy at" or limit type order to bid into a dynamic pricing system. Here, for example, the navigational dynamic instance may appear at the sub-sub-topic or brand level and the bid control 614 may provide a link to a branded web page 632 of a brand participant that is participating in a dynamic pricing system.

There is a lot to read in their patents but the reason this case is so compelling is that MercExchange patented a very descriptive and complete dynamic pricing scheme and hierarchy to auctioning online in patent US6856967. I'm very confused as to why the date on the patent reads 2005-02-15 unless this is a renewal date.

I'm not a lawyer but I do wish that articles covering patent cases would link to the actual patent documents themselves so that the public can become aware of the extreme legalese that enshrouds patents.

What will be interesting is what the lawsuit may entitle MercExchange to receiving. eBay has had this feature for quite a few auctions and I wonder if MercExchange is going to demand a cut of eBay's cut for each auction transaction completed where this feature was available. That's quite a bit of cash.

Honestly, it looks to me like this will hold up in court. Any real lawyers out there have any comments to make? I'd ask you to read the patent and tell us what you think but I lack the $250/hour you charge.

Re:The Details

[servoled]

I'm very confused as to why the date on the patent reads 2005-02-15 unless this is a renewal date.

The 2005-02-15 date is the issuance date, i.e. the date at which the application became a patent. The real date(s) you want to look at is the application date (and the priority date if there is one). In this case, the application date is 1999-10-21 and there is no priority date. Therefore, to qualify as prior art someone would have to have been published or sold to the public prior to 1999-10-21.

Re:The Details

[jaaronc]

Exactly. In classified ads, it's common practice to list a price as "$xxx OBO" (OBO meaning Or Best Offer)... in other words, buy it now for $xxx, or put in your bid. Making this common practice a part of an online auction site seems pretty obvious to me, so what's with giving out a patent for it?

Re:The Details

[jaaronc]

There is. One requirement of a patent is that it be non-obvious.

Re:The Details

[AlterTick]

It's all fuckin' bullshit. In fact, there is ton of prior evidence. Shoot, I myself have said "I'm selling my xyz thing, to whoever offers me the most for it. But if you give x $$$ I'll give it to you now."

Indeed, if you've ever looked through the classified ads and seen something listed for sale at "$50 OBO", then you are looking at an informal auction with a Buy It Now price. The idea that they can patent it because it is via an automated web-based system is just more of the same asinine "[old idea]...on a computer" patent nonsense.

Re:The Details

[DRJlaw]

The parent post is incorrect.

The patent issued on 2/15/2005. The patent was filed on 10/21/1999. There is no disclosed priority date that predates the filing of the U.S. application.

To "qualify as prior art"*, someone would have to show that the claimed invention was "known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent." (35 U.S.C. 102(a)). Since you cannot know when the claimed subject matter was invented simply by looking at this patent document, you cannot simply look for anything published prior to 10/21/1999. You must look for the earliest references that you can find, and if the only art you can locate is within a year of this date, there is a reasonable chance that you are throwing your money away challenging the patent.

More commonly, someone could also show that the claimed invention was "patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States." (35 U.S.C. 102(b)). This provides you with a known date to beat, 10/21/1998, and ensures that the examiner in a reexamination or the judge in a court proceeding will reach the meat of whether or not the claim is anticipated and/or obvious.

The subject matter of this patent could very well have been sold to the public prior to 10/21/1999 and not be prior art. It could have been sold in the U.S. from 10/21/1998 onwards and not be prior art. It could have been sold in Canada in the early 1990s and it would not be prior art, at least in the United States. Posters on Slashdot use "prior art" the way my parents use "CPU" to refer to the entire big beige box. Stop and think about how you think about people like my parents. Then sit down and take some time to actually read the patent statute.



*Things do not "qualify as prior art" simply because they occurred on a particular date. 35 U.S.C. 102 has a rather extensive list of what is and what is not prior art, and at what time prior art events have to have occurred. There are five more subsections that are even more complex, in general, than the ones cited above.

Re:The Details

[thparker]

You can't patent ideas and concepts after all, patents are for tangible things.

Oh, the good old days. Concepts have been fair game for years and things just got worse last September. The courts have said you can't patent abstract ideas, but business method patents have been patentable for years.

Recently, the patent office issued a ruling that removed the so-called "technological arts" requirement. For many years, business method patents have been limited by this requirement -- essentially, if a business method doesn't involve a technology component, then it doesn't qualify. In September, the appeals board voted in favor of a compensation method that can worked out with pencil and paper. This opens the door for even more business method patents.

If the current system existed back in the 40s, the only drive-thru in the country might be Red's Giant Hamburgs.

Re:The Details

[Zeinfeld]

This concept is not exclusive to e-commerce and is likely as old as the concept of auctioning. It is certainly as old as the concept of haggling. Regardless, an existing concept does not become unique or non-obvious simply because it is implemented online

The root of the problem here is that the USPTO definition of 'obvious' is not the usual understanding of the term. I did an essay about this recently

In particular the USPTO thinks that taking an obvious idea and taking the obvious to any idiot step of doing it on the Internet using standard engineering approaches merits a state sponsored monopoly.

What I am trying to get at here is that there are three tracks to patent reform. The first is write new rules to make the patent system more relevant to the modern economy. The second is to abolish patents altogether. The third is to make the USPTO implement the same longstanding principles that other PTOs have always enforced and the USPTO did a good job of from about 1930 up till the 1980s.

I think that the first track is certainly necessary, some changes are needed. But this is going to take a lot of time, will be very complex and will require a lot of political capital. The second track ain't going to happen. The third track is immediately implementable and gets 80% or more of what the industry desperately needs.

At present the patent system is not only failing the software provider, it is also failing the legitimate inventor with a legitimate, defensible invention.

Re:Easy Fix

[Anonymous Coward]

Or perhaps more appropriately, the button should say...

"BUY THIS ridiculously overpriced, overvalued item, with an overinflated shipping rate so the seller can scrape a bit more off the top by calling it a 'handling and packaging' fee and then maybe you'll receive the item in a week's time in a condition that's not exactly inline with what the seller described in the auction but you'll leave positive feedback anyway because you don't want negative feedback posted to your measley 3 feedback rating you currently have RIGHT NOW!"

Constitutional Import

[NoData]

I think one of the big issues is whether or not a given business activity should be shut down/suspended when a patent challenger indicates infringement.

Yeah, I think you've hit the nail on the head. This case would not be heard by Supreme Court unless there was a matter of law that needed clarification in regard to its constitutionality. From what I gather this is the only matter that the Supremes will be considering. From the article:

EBay filed an appeal with the Supreme Court, which will hear oral arguments later this month. In its filing with the Supreme Court, eBay argued that infringements should not automatically result in injunctions and shutdowns. The company also pointed out that MercExchange has not been in the online auction business since 2000, so eBay's use of Buy It Now was not sufficient to merit an injunction.

So it sounds like the issue is "when is an injunction a fair remedy?" Unfortunately, it does not sound like they will be considering whether business methods, virtual devices, etc. are patentable, which is of course what most Slashdotters are debating here. If someone has more detailed insight, that'd be great to hear.

Patent Link

[Crilen007]

http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PT O2&Sect2=HITOFF&u=/netahtml/search-adv.htm&r=2&p=1 &f=G&l=50&d=ptxt&S1=MercExchange&OS=MercExchange&R S=MercExchange

Patent information.

Re:Non-obvious?

[nickname225]

I'm a lawyer - although patents is not my area of expertise. I've been looking at the upcoming Supreme Court schedule and it is looking to be a banner year for patent cases. In addition to the Ebay case, which centers on the issue of the automatic injunction, there are several cases that will allow the court to review the USPTO practice of granting patents to business processes and algorithms. So this is going to be a very interesting year for patent issues in the Supreme Court. If they get it right - it will resolve many of these problems - of course if they get it wrong....

Re:Buy It Now and dealers are killing eBay

[scharkalvin]

Ebay is BOTH an auction house AND an online store. Dealers selling with buy it now are not really using the auction feature, but rather the online store. The problem comes with an auction that has both the biding AND buy it now enabled.

There is nothing wrong with the buy it now in an auction, provided that the feature dissolves as soon as the first bid above any possible reserve price is received. Also, buy it now should NOT be allowed (in an auction) when the reserve price is equal to the buy it now price (or less than it by an amount less than the bid increment). This case is NOT an auction, it is an online store, and the seller should be forced into such (with higher selling fees).

Finally Ebay should allow the buyers to have the search engine ONLY find auctions, online stores, or both at the buyers choice.

Re:Non-obvious?

[torokun]

I am not a lawyer, just a law student. This is not legal advice.

The nonobviousness requirement is a legal requirement that has a particular meaning in patent law. It's not the same as the ordinary words "not obvious".

Often people would take the words "not obvious" to mean "hard". But this is a mistake. For example, the term "non-increasing sequence" does not mean a decreasing sequence. It means a non-increasing sequence. Similarly, the term nonobvious simply means something not obvious, and doesn't mean it's necessarily very hard.

What it really means in terms of the law is that the invention would not be obvious to one of ordinary skill in the art, sitting in a room at the time of invention, with all the then-existing relevant references in the world arrayed around him. In practical terms, to be obvious, all the elements of the invention must have been disclosed at the time of invention in some reference, and there must be shown some motivation or reason to combine disparate references to create the invention.

For instance, if one reference taught a razor, and another reference taught a harvester with three blades and blade-guards, without more the invention of a modern three-blade razor would not be obvious, because there is no motivation to combine those references. Now, if the razor reference had said "I looked at some farming technology in developing the razor", you might be able to say it's obvious.

One problem in evaluating obviousness is that courts often improperly evaluate obviousness in hindsight, while the proper consideration is whether it would have been obvious at the time of invention. But on the other hand, it is harder to prove obviousness than other invalidity arguments, because it involves multiple references, and requires a motivation to combine them.