Woolston says he first started thinking about virtual markets and online auctions in the late 1980s and early 1990s, when he was working on computer networking projects. But it took the 1994 baseball strike to pull it together. A strike, he figured, would have a big effect on the market for baseball cards -- and he says he envisioned a network of buyers and sellers on the Internet and tried to figure out a way of building a trustworthy and scalable system. He filed his idea with the patent office in April 1995 and founded MercExchange to try to turn the idea into a business. But he couldn't raise the funding and eventually turned to the business of licensing his patents to other companies. Today, two companies license his work. "It was terribly frustrating," he said. "I followed the rules. I was convinced that was the right way to go. Now I'm convinced we're going to have our day in court and win." Let the lawsuits begin
Woolston took steps to protect his patents almost immediately after he got his first one in 1998 -- No. 5,845,265, covering a method of creating a marketplace for used or collectible goods over the Internet. That same month, he filed an administrative action with the US Patent and Trademark Office against Priceline, attempting to have Priceline's patent on its "name your own price" business model thrown out on the grounds that it covered the same process he patented. That dispute is still pending before the patent office, which will decide which patent takes precedence. Frustrated by the slow progress of the patent office, Woolston and MercExchange turned next to the courts, suing search site GoTo.com in 2000 for infringing on his patent No. 6,085,176, which covers auction search engines. GoTo paid MercExchange an undisclosed sum to settle the case out of court. Woolston says he sued eBay last October after it became clear that the company wasn't going to license his patents. So far, the auction site has lost a few legal skirmishes in the case. Last month, US District Court Judge Jerome Friedman denied two motions to dismiss the case and denied a request to move the case to California courts. The judge has postponed ruling on two similar motions to dismiss, eBay said in its regulatory filing. The judge has not translated MercExchange's patent claims into plain English, an important part of a patent dispute. Until he completes this step, known as the Markman ruling, it's hard to tell how big the threat is to eBay, said Carl Oppedahl, an intellectual property lawyer with Dillon, Colorado-based Oppedahl & Larson. But should the case go to trial, eBay could suffer a serious setback, Oppedahl said. "Clearly they have some exposure," he said. "No one can predict with certainty what a jury will do." Woolston said there have been no attempts to settle the case. "We can't agree on anything," he said. "They just want to litigate everything."
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