Saturday, January 28, 2006

ebaY = Convicted Thief

ebaY = Convicted Thief
28 Jan 2006

ebaY has been convicted by a court of law for theft. In the polite parlance of white collar business crime, instead of stealing, it is called patent infringement. But theft is when one person knowingly and illegally takes something that does not belong to them, and that is what ebaY did, and for which they have been convicted, guilty as charged.

When Pierre Omyidar first opened AuctionWeb's site on 5 Sep 1995, he allegedly had spent a weekend thinking up the programming code that allowed the auctioning of items on his site. If we give him the benefit of the doubt, we can assume that he failed to do what any inventor of a commercial product should do, and that is check to see if anyone had invented, and patented, the idea first. If Pierre had checked, he would have seen an auction process patent filed in April 1995 by someone named Thomas Woolston, and his company MercExchange. In 1995, it was not as easy as it is today to do such a search, so we give Pierre the benefit of the doubt that he did not know (or care - he was working for General Magic at the time, and probably subject to an invention agreement with them for anything patentable) of the patents existence, but the success of AuctionWeb, which changed to the name ebaY in 1997, would make knowledge of such patents important to the company.

With the growth of ebaY, and the company going public, auction and trading sites started to sprout like mung beans at a vegetarian restaurant. Moves made by ebaY in 1999, adding advertising banners tied to search, interfering with the auction ads already paid for by sellers, along with fee increases, caused seller rebellions and gave birth to a movement called the Million Auction March. This movement moved 2 million listings to Yahoo Auctions, making it a possible contender of note (action on Yahoo's part soon destroyed this advantage). This along with other's wanting to cash in on what appeared to be a goldmine, might have been the impetus for ebaY to get serious about researching the status of patents and see what kind of control they could get on the industry. It was early in 2000 that ebaY contacted Mr Woolston to see if they could buy the several auction and instant buy patents he had invented and registered, some before AuctionWeb/ebaY's launch, and some since.

Negotiations quickly broke down, very unsurprising given ebaY's arrogant attitude, and ebaY dared Mr. Woolston to sue them. Made of stern material, forged in the fire of service in the military and with the CIA, Mr Woolston, an inventor, electrical engineer and patent attorney, did just that. So far Mr Woolston and his company MercExchange, has won against ebaY in federal district court in 2003 for patent numbers 5,845,265 and 6,085,176, the instant buy patent (what ebaY calls buy it now) and a search patent that directly affects Half.Com. The district court would not let Mr Woolston sue for the auction process patent, and would not let him file an injunction against ebaY, shutting down the functions used by ebaY in the violated patents. The case then went to the U.S. Court of Appeals for the Federal Circuit (case 03-1600,-1616). This court ruled in 2005 and upheld ebaY's conviction on the instant buy patent, (5,845,265), said Mr Woolston could sue on the auction process patent (6,202,051), and allowed an injunction against ebaY to stop their willful infringement of Mr Woolston's patents,. This conviction is final as only the Supreme Court of the United States could overturn it, but ebaY chose not to seek such a losing appeal. Instead ebaY filed an appeal to the Supreme Court, (docket 05-130) to try to stop the injunction ordered by the US Court of Appeals. The Supreme Court will hear arguments in March of 2006.

In the interim, ebaY has tried to insult, discredit and isolate Mr Woolston. ebaY has successfully demanded that the Patents and Trademark Office (PTO) review all Mr Woolston's patents ( a common acquiescence on the apart of the PTO in such disputes). So far the PTO has confirmed the validity of Mr Woolston's auction process patent (number 6,202,051), but TAG has no confirmation on the status of 5,845,265 or 6,085,176. ebaY has represented Mr Woolston as a liar, denying that ebaY ever negotiated with him for his patents, and claiming that Mr Woolston changed his patents to cover what ebaY was doing after the fact. As recently as the fall of 2005, when Mr Woolston and some other personnel from MercExchange were invited to attend a non-ebaY run conference of online sellers, ebaY President, Bill Cobb, threatened the folks running the conference that if the folks from MercExchange remained at the conference, he and the ebaY team would leave. The sellers running the conference did what they felt they had to, given ebaY's immature spoiled brat that thinks it is god attitude, and asked the MercExchange folks to leave. The MercExchange folks, being grown ups, left the conference without a fuss, leaving conference attendees to shake their heads at ebaY's adolescent behavior.

Information Sources
USPTO Patent Number Search -

Supreme Court MercEx vs ebaY Docket

US Court of Appeals decision PDF download

Various people at MercExchange

ebaY SEC filings