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Supreme Court to Hear EBay Appeal in Patent Battle

The U.S. Supreme Court said on Monday that it would consider an appeal by online auctioneer eBay Inc. (EBAY) in its patent battle with MercExchange, a developer of e-commerce technology.

At issue for the justices is whether an appeals court erred in finding that a permanent injunction barring use of a technology must generally be issued once infringement of a valid patent has been determined.

In its appeal, eBay said the ruling reduced a trial court judge's discretion to exceptions involving national health and handed a club to companies that buy patents to make infringement claims.

The justices will hear arguments in the case most likely in March or April, with a decision expected by the end of June. The high court said it would reconsider its precedents, including one from 1908, on when it is appropriate to grant an injunction against a patent infringer.

MercExchange had argued against Supreme Court review, saying the principles involved in the case were well established.

In 2003 a federal court ordered eBay to pay Virginia-based MercExchange $29.5 million for infringing two e-commerce patents that MercExchange charged were key to eBay's "Buy it Now" feature, which handles fixed-price sales.

Such sales accounted for about 31 percent of the total value of goods sold on eBay in the fourth quarter of 2004.

But the U.S. District Court for the Eastern District of Virginia declined to issue a permanent injunction.

In March, the U.S. Court of Appeals for the Federal Circuit ruled one of MercExchange's patents was invalid and trimmed the damages against eBay to $25 million but reversed the lower court's denial of MercExchange's request for a permanent injunction against eBay.

MercExchange said in a statement that it remained confident it would prevail against eBay.

"Since eBay's argument requires overruling long-established legal precedent, we look forward to the consideration of the Supreme Court in this matter," said Scott Robertson of Hunton & Williams, the lead attorney representing MercExchange.

EBay also welcomed review by the highest court. "We are gratified that the Supreme Court has agreed to hear this important case," eBay spokesman Hani Durzy said.

The eBay case has attracted interest among those who believe it has become too easy to hold businesses hostage through patent suits.

A group of 35 patent law professors filed a friend of the court brief arguing that an entitlement to an injunction allows unscrupulous patent owners to threaten products that are predominantly noninfringing. A computer chip, they noted, may include 5,000 different inventions.

EBay shares were off 98 cents or 2.1 percent to $45.73.