Court Ruling May Force EBay to Scrap ‘Buy-It-Now’ Feature

EBay Inc.’s U.S. site could be forced to abandon its popular “buy-it-now” feature -- which accounts for nearly a third of the value of goods sold by the online auctioneer -- as a result of a court ruling this week, analysts said Thursday.

The U.S. Court of Appeals for the Federal Circuit in Virginia on Wednesday upheld a key element of a patent infringement case against EBay by MercExchange and said a lower court was wrong to deny a permanent injunction against the online auction giant.

EBay shares Thursday fell 36 cents to $36.12 on Nasdaq. Scott Kessler, Internet equity analyst with Standard & Poor’s, said investors underestimated the potential threat the ruling posed to the company’s business.

“There are potentially far-ranging implications,” he said.

After throwing out a $4.5-million judgment against EBay regarding comparison-shopping technology Wednesday, the court upheld an earlier ruling that ordered EBay to pay $25 million for infringing the no-haggle pricing feature from September 2001 to April 2003.

An attorney for plaintiff Thomas Woolston, president of Great Falls, Va.-based MercExchange, said he would ask the lower court as soon as next month to tack on more than $100 million to cover the nearly two years since then.

Unlike the auctions EBay is known for, the “buy-it-now” feature lets people snap up items immediately for a fixed price. Last year, EBay sold $3 billion in merchandise that way, or 31% of the global total.

The court ruling applies only to the U.S. sales, which EBay does not break out in financial statements.

EBay said in a news release that any injunction would have no effect because it changed its fixed-price system after the court’s original verdict in 2003.

But in a filing with the Securities and Exchange Commission, EBay said that if it failed to persuade the lower court that those changes weren’t infringing, the company “would likely be forced to pay significant damages and licensing fees or modify our business practices in an adverse manner.”