Ebay stands to lose billions of dollars at its remarkable auction format with the threat of a patent infringement lawsuit.
The lawsuit was filed by a Connecticut-based company, XPRT Ventures, claiming that they gave Ebay a preview of effective “”systems and methods for effecting payments for electronic auction transactions and e-commerce transactions” in 2001. Instead of honoring the company’s contribution, Ebay decided to procure and integrate PayPal to their system i a year after the preview.
The suit filed in the Delaware District court claims that XPRT Ventures was entitled to damages because without the sneak peek provided, Ebay would not have “recognize the advantages it would realize by acquiring, modifying, and integrating PayPal’s payment platform with eBay’s own e-commerce payment platform.”
It also alleges that XPRT Ventures and Ebay had signed a confidentiality agreement when XPRT shared their ideas with Ebay. Although their six patents were pending on September 2001, XPRT Venture’s George Likourezos contacted Ebay’s associate general counsel for intellectual property, Jay Monahan. Likourezos then offered Monahan exclusive preview of XPRT’s technology. When Ebay asked for a preview a month later, XPRT provided it to them upon agreement that the company will be compensated if Ebay decides to use their technology. Instead Ebay decided to acquire PayPal and use it as their payment processor.
Ebay tried to patent their Ebay-Paypal system, but according to XPRT, this has been turned down because of their pending patents.
XPRT also claims that Ebay unilaterally changed the confidential agreement between the two parties to make “it appear that PayPal’s obligation arose on the same day the patent application was filed, when in fact the duty of confidentiality arose much earlier,” according to a report by IT business edge.
Ebay, already on its 15th year, offers a place for a trading community on the Internet. It has globalized trading making it possible for buyers and sellers from across the world enjoy the benefits of online shopping. With the incorporation of PayPal, Ebay offered its users a secure way for payments. PayPal, one of the most popular online payment processors pushed the security of online banking to a whole new level.
With earnings of up to 1.36 Billion dollars for Fiscal year 2009, Ebay has been one of the most stable dot.com companies that hail from the mid-90s. XPRT demands that it receive its fair share of royalties from eBay’s exponential gain from their technology for the last eight years.