A company called XPRT Ventures has sued eBay for patent infringement, asking the court for US$3.8 billion in damages.
XPRT claims that by pitching its technology to eBay, it gave the auction site the idea that buying PayPal could significantly improve its business by reducing costs associated with other forms of payment.
XPRT says the inventor of one of its patents, covering a way to streamline e-commerce transactions, contacted eBay in 2001 and later spoke with an eBay lawyer to gauge the company's interest in using the patent-pending technology.
The inventor failed to get a response to a follow-up letter asking the lawyer if eBay was interested in the technology. Shortly thereafter, eBay announced its intention to buy PayPal.
"EBay's familiarity with the confidential information provided by the Inventors allowed eBay to recognise the advantages it would realise by acquiring, modifying and integrating PayPal's payment platform with eBay's own e-commerce payment platform," the lawsuit, filed in the U.S. District Court for the District of Delaware, reads. "EBay also knew or should have known that such modification and combination would violate Inventors' patent application claims should they issue as patents."
EBay has benefited "enormously" from the use of the ideas in the patents, the suit claims.
The lawsuit says eBay later filed its own patent applications based on technologies that PayPal uses. Those applications use technology in the XPRT patents, yet eBay did not initially cite those patents in the application, the suit alleges. Later, eBay lawyers did add citations of the patents. The U.S. Patent and Trademark Office has rejected eBay's application four times, citing XPRT's patents, the suit says.
XPRT alleges that eBay and related companies including PayPal, Bill Me Later, Shopping.com and StubHub all knowingly infringe six of its patents. It also charges eBay with the misappropriation of trade secrets. It is asking for a minimum award of $3.8 billion in damages.
In a statement, eBay said it is still reviewing the complaint. "We believe it is without merit, and intend to defend ourselves vigorously," it said.