eBay Sued for $3.8 Billion in PayPal Patent Infringement Case

EBay Inc. was sued for at least $3.8 billion on Tuesday by a Connecticut company that accused the online auctioneer and retailer of infringing six patents to develop lucrative payment systems such as PayPal.

According to the complaint filed Tuesday by XPRT Ventures LLC in the federal court in Delaware, eBay allegedly stole information shared in confidence by the inventors on XPRT’s own patents, and incorporated it into features in its own payment systems, such as PayPal Pay Later and PayPal Buyer Credit.

XPRT said that when eBay on April 30, 2003 filed a patent application titled “Method and System to Automate Payment for a Commerce Transaction,” it failed to tell the U.S. Patent and Trademark Office it knew of XPRT’s own patent applications.

By filing for a similar patent, eBay “admitted the patentability of the inventors’ claims,” the complaint said.

“This involves a trade secret theft, along with sheer patent infringement,” said Steven Moore, a partner at Kelley Drye & Warren LLP representing the plaintiff, in an interview. “It is bad enough to take someone’s technology, but it is a bit much to use it in your own patent application.”

EBay did not immediately return calls and an email seeking comment.

According to its latest annual report, eBay’s payments business generated $2.8 billion of net revenue in 2009, or 32 percent of the company’s $8.73 billion total.

XPRT is seeking a minimum $3.8 billion in monetary damages, based on their estimated present value. It is also seeking treble damages resulting from eBay’s alleged “willful and malicious conduct,” punitive damages, and other remedies.

The complaint also names eBay affiliates PayPal, Bill Me Later, Shopping.Com and StubHub as defendants.

XPRT is based in Greenwich, Connecticut, and eBay in San Jose, California.

Shares of eBay closed Tuesday up 80 cents, or 4 percent, at $21.02 on the Nasdaq.

The case is XPRT Ventures LLC v. eBay Inc et al, U.S. District Court, District of Delaware. A case number was not immediately available.

(Reporting by Jonathan Stempel in New York and Emily Stephenson in Chicago, editing by Bernard Orr)