XPRT Ventures sues eBay for $3.8 bn for patent infringement on PayPal

Internet auction site eBay is being sued for $3.8 billion for allegedly infringing on six patents held by XPRT Ventures to develop its money-spinning online payment systems such as PayPal.

Connecticut-based XPRT Ventures, a patent-holding company, yesterday filed a suit in the federal court in Delaware, alleging that eBay broke a confidentiality agreement with the inventors of XPRT's own patents, and used this proprietary information to modify and incorporate these features in its own payment systems, such as PayPal, Pay Later and PayPal Buyer Credit.

XPRT claims that under a confidential agreement, it gave the idea to eBay to buy PayPal and could use XPRT's patent-pending technology run the site by streamlining online transaction and reducing operational costs.

Although eBay did not show any interest in the technology, it later went ahead and bought PayPal but used the confidential information provided by XPRT to run the e-commerce site.

"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," said XPRT in its lawsuit.

"EBay also knew or should have known that such modification and combination would violate Inventors' patent application claims should they issue as patents," the lawsuit added.

The lawsuit says eBay went on to file its own patent application on 30 April 2003 titled "Method and System to Automate Payment for a Commerce Transaction," for the technologies used to run PayPal but it was rejected four times by the US Patent and Trademark Office on the grounds that it is similar to XPRT's patents.

The payments division of eBay generated revenues of $2.8 billion in 2009 and XPRT is claiming a minimum award of $3.8 billion in damages.