Tuesday, February 21, 2006

MERCEXCHANGE REEXAMS AND THE PENDING LAWSUIT AGAINST EBAY: The MercExchange v. EBay case, which is currently pending before the Supreme Court, is one of the most closely watched cases this year. The Supreme Court decision will answer the important question of whether or not a permanent injuction must be granted when a party is held to have infringed a U.S. patent (see amicus briefs on this subject here, courtesy of Dennis Crouch).

During litigation, MercExchange asserted three patents against EBay (US Patents 5,845,265, 6,085,176, and 6,202,051). During the district court proceeding, the '051 patent was held invalid on summary judgment for lack of written description. The '265 and '176 patents were held valid and infringed by Ebay. In the meantime, reexamination requests were launched in the USPTO on all three patents.

When the lower court's ruling was appealed to the Federal Circuit, the court reversed the ruling that the '051 patent was invalid, and remanded the case back to the district court. However, the Federal Circuit invalidated the '176 patent as being anticipated by the Keller reference, but maintained that the '265 patent was valid, and that Ebay infringed. In addition, the Federal Circuit reversed the district court's denial of MercExchange's motion for a permanent injunction with regard to the '265 patent (see Fed. Cir. ruling here). This reversal, and the rationale provided by the Federal Circuit for their ruling is the basis of the current Supreme Court case.

In the meantime, the reexaminations continue to be active in the USPTO, and may provide some interesting twists in the ongoing dispute. Each of the reexams will be summarized below.

The '051 reexam - (90/006,984): A Final Rejection was issued by the USPTO on 12/23/05, rejecting all claims. The final rejection by the examiner dismisses the arguments submitted by the patentee that the USPTO was "bound" to follow the claim construction provided by the Federal Circuit. The examiner pointed out that, while the court's claim construction may provide "guidance" for the examiner, there is no compelling caselaw that requires the examiner to follow the contruction due to the different standard of claim interpretation afforded to the USPTO ("broadest reasonable interpretation"). Surprisingly, the Office rejected the majority of claims using a 4-way obviousness combination of reference. Rejections based on written description were not present in the final office action.

The '176 reexam - (90/006,957): MercExchange filed a response to a Non-Final rejection on January 9, 2006, by substantially amending the independent claims (see "Claims" hyperlink dated 1/09/06). This could be a wild card in the EBay case. If MercExchange was given enough room to amend the claims given the prior art that was cited, it is entirely possible that they could survive reexam with new claims that could still catch EBay. It's a bit of a long shot, but anything is possible.

The '265 reexam - (90/006,956): This is a weird one. A Non-Final Action was issued back in March 24, 2005. However, there is currently no record of MercExchange haing filed a response. A 1-month extension was requested in May 2005, but the USPTO site shows no substantive submissions being made since then. Perhaps the earlier petition spat between MercExhange and Ebay caused some delay, but the reason for it taking this long is unclear. This is the "crown jewel" reexamination for EBay - should the USPTO invalidate this patent, the chances of EBay escaping infringement entirely improves exponentially.

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