United States Court of Appeals for the Federal Circuit 

03-1600,-1616 

MERCEXCHANGE, L.L.C., 

 Plaintiff-Cross Appellant, 

v. 

eBAY, INC. and HALF.COM, INC., 

 Defendants-Appellants. 

Scott L. Robertson, Hunton & Williams LLP, of Washington, DC, argued for 

plaintiff-cross appellant. With him on the brief were Jennifer A. Albert and Brian M. 

Buroker. Also on the brief were Gregory N. Stillman, of Norfolk, Virginia, and David M. 

Young, of McLean, Virginia. 

Jeffrey G. Randall, Skadden, Arps, Slate, Meagher & Flom LLP, of Palo Alto, 

California, and Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, 

L.L.P., of Washington, DC, argued for defendants-appellants. On the brief were 

Timothy S. Teter and Lori Ploeger, Cooley Godward LLP, of Palo Alto, California. Also 

on the brief was Allan M. Soobert, Skadden, Arps, Slate, Meagher & Flom LLP, of 

Washington, DC. 

Appealed from: United States District Court for the Eastern District of Virginia 

Judge Jerome B. Friedman 
United States Court of Appeals for the Federal Circuit

03-1600,-1616 

MERCEXCHANGE, L.L.C., 

Plaintiff-Cross Appellant, 

v. 

eBAY, INC. and HALF.COM, INC., 

Defendants-Appellants. 

___________________________ 

DECIDED: March 16, 2005 

___________________________ 

Before MICHEL,* Chief Judge, CLEVENGER, and BRYSON, Circuit Judges. 

BRYSON, Circuit Judge. 

MercExchange, L.L.C., is the assignee of three patents, U.S. Patent Nos. 

5,845,265 (“the ’265 patent”), 6,085,176 (“the ’176 patent”), and 6,202,051 (“the ’051 

patent”). MercExchange filed suit against eBay, Inc.; Half.com, Inc.; and ReturnBuy, 

Inc., in the United States District Court for the Eastern District of Virginia, alleging willful 

infringement of the ’265 patent by all three defendants, willful infringement of the ’176 

patent by eBay and Half.com, and willful infringement of the ’051 patent by eBay. 

 

*

 Paul R. Michel assumed the position of Chief Judge on December 25, 2004. 
03-1600,-1616 2 

eBay owns and operates a website on the Internet that allows buyers and sellers 

to search for goods and to purchase them by participating in live auctions or by buying 

them at a fixed price. At issue in this case is the fixed-price purchasing feature of 

eBay’s website, which allows customers to purchase items that are listed on eBay’s 

website for a fixed, listed price. Half.com, a wholly owned subsidiary of eBay, owns and 

operates an Internet website that allows users to search for goods posted on other 

Internet websites and to purchase those goods. At the time this action was brought, 

ReturnBuy owned and operated an Internet website that was hosted by the eBay 

website. Customers interested in purchasing goods from ReturnBuy would be directed 

from the ReturnBuy website to the eBay website, where items available for sale by 

ReturnBuy were displayed in an eBay listing. 

Prior to trial, ReturnBuy filed for bankruptcy and entered into a settlement 

agreement with MercExchange. On motions for summary judgment by the other 

defendants, the district court ruled that claims 1-35 and 51-52 of the ’051 patent were 

invalid for lack of enablement, 35 U.S.C. § 112, para. 1. The remainder of the case 

went to trial before a jury. At the conclusion of the trial, the jury found that eBay had 

willfully infringed claims 8, 10-11, 17-18, 20, 22, and 26-29 of the ’265 patent and had 

induced ReturnBuy to infringe claims 1, 4, 7, and 23 of the ’265 patent; that Half.com 

had willfully infringed claims 1, 5-6, 29, 31-32, and 34-39 of the ’176 patent; and that 

neither the ’265 patent nor the ’176 patent was invalid. With respect to damages, the 

jury found eBay liable for $10.5 million for infringing the ’265 patent and $5.5 million for 

inducing ReturnBuy to infringe the ’265 patent. The jury also held Half.com liable for 

$19 million for infringing the ’176 patent. 
03-1600,-1616 3 

 Following the verdict, eBay and Half.com moved for judgment as a matter of law 

(“JMOL”) that the asserted claims of the ’265 patent were not infringed and were invalid. 

In the alternative, eBay and Half.com moved for a new trial on the ’265 patent. 

Half.com moved for JMOL that the asserted claims of the ’176 patent were not infringed 

and were invalid. In the alternative, Half.com moved for a new trial on the ’176 patent. 

In addition, eBay moved to set aside the $5.5 million award for inducing ReturnBuy to 

infringe the ’265 patent. The district court denied the defendants’ motions regarding 

infringement and validity, but granted eBay’s motion to set aside the damages award for 

inducement of infringement. The court also denied MercExchange’s motion for a 

permanent injunction, for enhanced damages, and for attorney fees. 

 The defendants appeal the denial of their motions for JMOL and for a new trial on 

the ’265 and ’176 patents. Because substantial evidence supports the jury’s verdict 

regarding infringement and validity of the ’265 patent, we affirm those aspects of the 

judgment. Because there is no substantial evidence to support the jury’s verdict that 

eBay induced ReturnBuy to infringe the ’265 patent, we reverse that aspect of the 

judgment. We also hold that the claims of the ’176 patent are invalid for anticipation, 

and we therefore reverse the judgment in that regard and direct entry of judgment for 

Half.com on the ’176 patent. 

 MercExchange cross-appeals, seeking reversal of the summary judgment of 

invalidity of the ’051 patent and reversal of the district court’s denial of a permanent 

injunction, enhanced damages, and attorney fees. MercExchange also cross-appeals 

the district court’s order vacating the award of damages for inducement of infringement. 

Because the district court resolved a dispute of material fact on summary judgment and 
03-1600,-1616 4 

improperly denied a permanent injunction, we reverse the denial of the permanent 

injunction, vacate the summary judgment order, and remand for further proceedings. 

However, we hold that the district court did not abuse its discretion in denying enhanced 

damages and attorney fees. 

I 

A 

We turn first to the district court’s denial of the defendants’ motion for JMOL of 

noninfringement with respect to the ’265 patent. The ’265 patent pertains to a system 

for selling goods through an “electronic network of consignment stores.” ’265 patent, 

col. 1, line 8. To participate in the electronic network, a consignment store must obtain 

a “consignment node,” which uses a computer to upload and save digital images and 

written information about goods to be sold over the network. A prospective buyer can 

electronically browse and search for goods stored in the databases of consignment 

nodes in the electronic network. After browsing and searching, the prospective buyer 

can purchase any good listed on the electronic network. Upon purchasing the good, the 

buyer can decide either to have the good shipped or to resell the good to another buyer 

over the electronic network. The patent refers to the decision to buy and resell as 

“speculating,” because the system does not require the buyer to take possession of the 

good before reselling it and thereby allows the buyer to resell at a price that does not 

take into consideration the delays and costs associated with delivery. 

The asserted claims each include a “transaction processor” that is used to 

complete the financial transaction accompanying the sale of a good. The transaction 

processor limitation of claim 8 reads as follows: 
03-1600,-1616 5 

a transaction processor operably connected to said wide area 

communication network and said storage device, said transaction 

processor adapted to receive a purchase request and payment means 

from said participant, clear said purchase request and payment means 

and if said payment means clears then transfer the ownership of said 

good for sale by modifying said data record of said good for sale to reflect 

the new ownership of said good for sale by said participant. 

The defendants contend that the district court erred in denying their motion for a JMOL 

of noninfringement because there was no substantial evidence from which a reasonable 

jury could conclude that eBay’s system “transfer[red] the ownership” of a good for sale, 

as required by the transaction processor limitation. 

As an initial matter, the defendants’ arguments do not apply to claim 26 and 

dependent claims 27-29. The transaction processor limitation of claim 26 reads as 

follows: 

a transaction processor operably connected to said wide area 

communication network and said storage device, said transaction 

processor adapted to receive a purchase request and electronic payment 

from said participant, transfer said purchase request to said posting 

terminal, and verify electronic payment information from said participant 

and if said electronic payment verifies then notify owner of said good for 

sale by modifying said data record indexed to said data record for sale to 

reflect said purchase request of said good for sale by said participant. 

This claim language differs from the language of claim 8 in a significant way. While the 

transaction processor portion of claim 8 culminates in a step requiring the transaction 

processor to “transfer the ownership of said good for sale,” the transaction processor 

portion of claim 26 culminates in a step requiring the transaction processor to “notify 

[the] owner of said good for sale . . . .” Claim 26 nowhere requires transfer of ownership 

of a good and does not even contain the term “ownership” or the term “transfer.” The 

defendants argue that the transaction processor of claim 26 must be construed as 

limited to a transaction processor that transfers ownership by conveyance of title, but 
03-1600,-1616 6 

nothing in claim 26 supports that argument, and we reject it. Accordingly, we hold that 

the district court did not err in denying defendants’ motion for JMOL with regard to 

noninfringement of claims 26-29. The remainder of our analysis is focused on the 

construction of claim 8 and its related claims.1

 In its instructions to the jury, the district court provided the following interpretation 

of the “transfer the ownership” limitation: 

If the payment made by a participant for a good for sale clears, then the 

legal ownership is transferred by modifying the ownership entry in the data 

record of the good to reflect that the purchasing participant is the new 

owner of the good. 

The defendants do not challenge the accuracy of that instruction, but they assert that 

the district court erred by failing to give two additional instructions. First, they contend 

that because the transaction processor limitation transfers the ownership of a “good for 

sale,” the transaction processor must be capable of transferring legal title, and that the 

district court should have instructed the jury on the requirements for title transfer under 

the Uniform Commercial Code (“UCC”). Second, they contend that the district court 

failed to include in its jury instructions a statement from the court’s pretrial claim 

construction order (the “Markman order”) that transfer of ownership is “not limited to 

merely modifying the record—legal ownership must be transferred.” The defendants 

argue that without that statement the jury was not informed of the requirement that legal 

title to the good must pass to the purchaser. 

 

1

 Although claim 15 was not before the jury and is not at issue on appeal, the 

jury found infringement of various claims that depend on claim 15, i.e., claims 17-18, 20, 

and 22. Because claims 8 and 15 involve the same issues on appeal—the issues 

pertaining to the transfer of ownership limitation—our analysis of claim 8 pertains not 

only to the claims dependent on claim 8, but also to the claims dependent on claim 15. 
03-1600,-1616 7 

In its post-trial order, the district court addressed and rejected both of those 

arguments. The court ruled that the defendants were not entitled to an instruction on 

title transfer under the UCC, because the transfer of ownership limitation did not require 

the transfer of legal title pursuant to the UCC. With respect to the statements from the 

court’s Markman order, the court stated that it had already provided the jury with a 

sufficient claim construction and was under no obligation to include additional language 

that it used in its claim construction opinion. 

We uphold the district court’s interpretation of the transfer of ownership limitation 

and its decision not to provide the jury with additional instructions regarding that 

limitation. The district court’s interpretation is consistent with the language of the claims 

and the specification of the ’265 patent. Claim 8 states that a transaction processor 

accomplishes the “transfer [of] ownership of said good for sale by modifying said data 

record of said good for sale to reflect the new ownership of said good for sale by said 

participant.” ’265 patent, col. 21, ll. 51-54. The specification contains similar language, 

stating that the consignment node “transfers legal ownership of the good by changing 

the ownership entry in the data record in the consignment node of the good.” Id., col. 

12, ll. 46-48. 

The claim and specification do not suggest that the modification of a data record 

in isolation is sufficient to transfer ownership under the patent. Rather, the specification 

makes clear that the modification of the data record reflects that a buyer has paid for the 

good and that it is the payment for the good, accompanied by the data record 

modification, that accomplishes the transfer of legal ownership. ’265 patent, col. 19, ll. 

11-13. 
03-1600,-1616 8 

It is also important to understand that the patented system accomplishes a 

transfer of ownership in the context of a “trusted network,” in which the owner of the 

patented system “may police the network to give quality control, detect fraud and revoke 

the users,” id., col. 4, ll. 56-57, so that the network maintains a certain “quality and 

performance structure,” id., col. 4, line 60, to guarantee payment and delivery of the 

good. The specification indicates that the “trusted network” of the invention is part of 

what allows ownership to pass upon modification of the data record. In light of the 

specification, we agree with the district court that within the context of the patent, 

transferring legal ownership is accomplished once the data record is modified. 

 The defendants argue that the modification of the data record by itself is not 

sufficient to transfer ownership, but rather that a “legal predicate” such as the UCC must 

be satisfied in order for the modification of the data record to have the effect of 

transferring ownership. In so arguing, the defendants rely on the use of the term “legal 

title” in the specification. The use of that term, however, does not mean that transfer of 

ownership must be equated with a formal transfer of title. Rather, the specification 

treats the term “legal title” as synonymous with the general concept of “ownership” as 

used in the patent. See, e.g., ’265 patent, col. 19, ll. 11-13 (“[W]hen a bona fide 

purchase price is tendered by a participant . . . or another retailer . . . the legal title to a 

good as represented by the record will transfer to the buyer with an immediate or nearly 

immediate finality to the transaction.”). The use of the term “legal title” in the 

specification therefore does not add any legal requirements to the transfer of ownership 

referred to in the claims, and does not negate the statements in the specification and in 
03-1600,-1616 9 

the claim language that the transfer of ownership is accomplished upon the modification 

of the data and the clearing of payment in a trusted network. 

 We also agree with the district court that it was not necessary for the court to 

include excerpts from its Markman order in the jury instructions. A district court’s 

Markman order is an explanation to the parties of the reasoning behind its claim 

construction. The court’s analysis need not be part of the jury instructions. The 

defendants focus on the district court’s statement in its Markman order that transfer of 

ownership is “not limited to merely modifying the record—legal ownership must be 

transferred,” and they assert that the court’s failure to convey the substance of that 

statement prejudiced them because it left room for MercExchange to assert in its 

closing argument that “[t]here is no requirement that legal title in that formal sense be 

transferred.” The claims, however, do not require that title be transferred pursuant to 

any particular steps or legal formalities, and the district court’s statement in its Markman

order does not say so. It was therefore not error for the court to omit the requested 

instruction. 

 In light of the district court’s claim construction, we find that MercExchange 

introduced sufficient evidence to permit the jury to find that eBay’s system infringed the 

’265 patent. MercExchange’s expert, Dr. Alfred Weaver, testified that “eBay has to 

transfer ownership by modifying the data record.” He also made clear that the 

modification of the data record reflected the fact that payment had been made, as he 

stated that “when [ ] payment comes through, [eBay and Half.com] are authorized to 

transfer ownership by modifying [the] data record.” Moreover, while eBay asserts that 

its system is not “trusted,” we agree with the district court’s statement in its post-trial 
03-1600,-1616 10 

order that there was substantial evidence from which the jury could find that eBay’s 

system was trusted, given the evidence in the record that the system provided “escrow 

services, conflict resolution services, insurance, payment intermediaries, authentication 

services, feedback forum, and the policing of the system.” We therefore affirm the 

district court’s denial of the defendants’ motion for JMOL of noninfringement of the ’265 

patent. 

B 

 In reviewing the defendants’ motion to invalidate the ’265 patent as a matter of 

law, the district court focused exclusively on obviousness and found that MercExchange 

“did indeed attack the merits of the defendants’ prior art references and the failure of the 

defendants’ witnesses to show how the prior art invalidated each of the claims of the 

’265 patent, despite the fact that the defendants argue otherwise.” On appeal, the 

defendants argue that a reasonable jury would necessarily have found the asserted 

claims to be invalid because they are anticipated or rendered obvious by a prior art 

reference, U.S. Patent No. 5,664,111 (“the ’111 patent”). The ’111 patent pertains to a 

system for art dealers to sell artwork by using a network of computers. The system 

enables users to store and retrieve images and data pertaining to the artwork and to 

purchase artwork corresponding to the images. 

 As an initial matter, MercExchange argues that because the defendants’ 

invalidity arguments were based solely on obviousness, they have waived their right to 

make an invalidity argument on appeal based on anticipation. We disagree. Because 

“anticipation is the epitome of obviousness,” Connell v. Sears, Roebuck & Co., 722 F.2d 

1542, 1548 (Fed. Cir. 1983), the defendants’ obviousness arguments preserved their 
03-1600,-1616 11 

right to argue invalidity based on anticipation, John Hopkins Univ. v. CellPro, Inc., 152 

F.3d 1342, 1357 n.21 (Fed. Cir. 1998). 

 On the merits, the defendants argue that the ’111 patent anticipates all of the 

asserted claims of the ’265 patent and that MercExchange’s expert, Dr. Weaver, failed 

to distinguish the system of the ’111 patent from the system of the ’265 patent. First, 

they assert that Dr. Weaver conceded on cross-examination that the ’111 patent 

discloses the same transaction processor that is claimed in the ’265 patent, because he 

admitted that the Patent and Trademark Office (“PTO”) found that the ’111 patent 

discloses a transaction processor and he did not contest the PTO’s finding on that 

issue. However, while Dr. Weaver agreed that the PTO “would understand that [the 

’111 patent] discloses, among other things, transferring an ownership interest in an 

item,” that testimony does not contradict his testimony that nothing in the ’111 patent 

described a modification of the data record subsequent to payment verification. Thus, 

Dr. Weaver did not concede that the ’111 patent disclosed the same transaction 

processor that is claimed in the ’265 patent. 

 The defendants fail to address another distinction regarding the transaction 

processor limitation. In the ’265 patent, a transaction processor is designed to receive 

payments by “entering a credit card number and expiration date or other forms of 

electronic payment.” ’265 patent, col. 5, ll. 6-8. The system claimed by the ’111 patent, 

however, does not receive payments electronically. Rather, the system “requests that 

the buying dealer wire transfer funds to pay for the purchased work.” ’111 patent, col. 

14, ll. 62-64. Instead of being able to complete a transaction on the electronic network, 
03-1600,-1616 12 

a buyer using the invention of the ’111 patent must temporarily leave the system to 

make a payment before the transaction can be completed. 

 The defendants also contend that Dr. Weaver failed to distinguish the ’265 patent 

from the ’111 patent with regard to the posting terminal apparatus limitation and in 

particular the use of an identification code to prevent certain dealers from logging on to 

the system. The defendants argue that Dr. Weaver conceded that the ’111 patent 

discloses the same identification code as the ’265 patent. They cite Dr. Weaver’s 

testimony on cross-examination, in which he stated that the system claimed by the ’111 

patent “used the terminal identification code to limit the access of certain dealers to 

certain pieces of art.” Dr. Weaver stated on redirect examination, however, that the 

identification code used in the ’111 system is not the same as the identification code 

used for terminal authorization in the posting terminal apparatus claimed in the ’265 

patent: “All that’s happening in [the ’111 patent] is that a person is identifying himself 

with a code. And in my mind that’s not at all consistent with the way the Court defined 

the posting terminal apparatus code,” i.e., as a code that “identifies the hardware and/or 

software of the posting terminal apparatus.” From that testimony, a reasonable jury 

could infer that while the identification code in the ’111 patent is directed to preventing 

access by a specific dealer, the identification code in the ’265 patent is not dealerspecific, but serves instead to screen out terminal apparatuses that lack particular 

technical requirements. The evidence thus provided a sufficient basis for the jury to 

conclude that the ’111 patent did not anticipate the asserted claims of the ’265 patent. 

 We also reject the defendants’ argument that the ’111 patent renders the 

asserted claims of the ’265 patent obvious. Dr. Weaver testified that the patented 
03-1600,-1616 13 

invention differs from the ’111 patent in both structure and method and that a person of 

ordinary skill in the art would not be motivated to modify the system covered by the ’111 

patent to create the system claimed in the ’265 patent. For example, with regard to the 

posting terminal apparatus of the ’265 patent, Dr. Weaver testified that one of ordinary 

skill in the art would not be motivated “to change or modify the dealer ID code in [the 

’111 patent system] to conform to the user ID protocols of the ’265 patent’s posting 

terminal apparatus,” as the two are “dramatically different operations” that are used for 

different purposes. In light of Dr. Weaver’s testimony, we agree with the district court 

that there was substantial evidence to support the jury’s finding of nonobviousness. 

C 

 The defendants contend that they are entitled to JMOL on the theory that eBay 

was not shown to have induced ReturnBuy to infringe four of the claims of the ’265 

patent. Claim 1 is representative of three of the asserted claims—claims 1, 4, and 7. It 

provides: 

1. A system for presenting a data record of a good for sale to a market for 

goods, said market for goods having an interface to a wide area 

communication network for presenting and offering goods for sale to a 

purchaser, a payment clearing means for processing a purchase request 

from said purchaser, a database means for storing and tracking said data 

record of said good for sale, a communications means for communicating 

with said system to accept said data record of said good and a payment 

means for transferring funds to a user of said system, said system 

comprising: 

a digital image means for creating a digital image of a good for sale; 

a user interface for receiving textual information from a user; 

a bar code scanner; 

a bar code printer; 

a storage device; 

a communications means for communicating with the market; and 

a computer locally connected to said digital image means, said user 

interface, said bar code scanner, said bar code printer, said storage 

device digital image of said good for sale from said digital image 
03-1600,-1616 14 

means, generate a data record of said good for sale, incorporate said 

digital image of said good for sale into said data record, receive a 

textual description of said good for sale from said user interface, store 

said data record on said storage device, transfer said data record to the 

market for goods via said communications means and receive a 

tracking number for said good for sale from the market for goods via 

said communications means, store said tracking number from the 

market for goods in said data record on said storage device and printing 

a bar code from said tracking number on said bar code printer. 

 

The only other asserted claim, claim 23, differs from claim 1 in that claim 23 recites a 

“digital camera for creating an image,” instead of a “digital image means for creating a 

digital image,” and it recites a “printer for printing said digital image of said good for 

sale.” 

 According to 35 U.S.C. § 271(b), “whoever actively induces infringement of a 

patent shall be liable as an infringer.” We have construed that statute to require proof of 

intent, although there is a “lack of clarity concerning whether the required intent must be 

merely to induce the specific acts [of infringement] or additionally to cause an 

infringement.” Insituform Techs., Inc. v. CAT Contracting, Inc., 385 F.3d 1360, 1378 

(Fed. Cir. 2004), citing Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553 

(Fed. Cir. 1990), and Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464, 

1469 (Fed. Cir. 1990). Nevertheless, a patentee must be able to demonstrate at least 

that the alleged inducer had knowledge of the infringing acts in order to demonstrate 

either level of intent. 

MercExchange asserts that the evidence was sufficient for the jury to find that 

eBay had induced infringement based on the testimony of ReturnBuy’s former CEO and 

its former CTO. MercExchange points to testimony that eBay had invested $2 million in 

ReturnBuy and had an “observer” on ReturnBuy’s board of directors; that eBay granted 
03-1600,-1616 15 

ReturnBuy the right to post goods in volume on the eBay system; that eBay was the 

“primary venue” for ReturnBuy’s sales; and that eBay supplied engineers to work with 

ReturnBuy to facilitate the posting of goods for sale through eBay. That evidence, 

however, does not establish that eBay induced ReturnBuy to infringe the asserted 

claims. 

 First, the testimony regarding eBay’s investment in ReturnBuy’s business and its 

presence on ReturnBuy’s board of directors does not demonstrate an intent to induce 

infringement, or even show that eBay had knowledge of any acts of infringement by 

ReturnBuy. Rather, investment and board presence merely indicate that there was a 

business relationship between the two companies and that eBay had a financial interest 

in ReturnBuy’s business. 

 Other testimony presented by ReturnBuy’s CEO and its CTO demonstrates, at 

best, that eBay encouraged ReturnBuy to post goods for sale on eBay’s website. 

Posting goods for sale, however, is relevant to only one limitation of the claims, i.e., “a 

communications means for communicating with the market.” There is no testimony or 

other record evidence that eBay intended to induce ReturnBuy to incorporate the other 

limitations of the asserted claims. For example, claim 1 requires the use of a bar code 

scanner and a bar code printer. The specification explains and the record shows that 

the bar code scanner and printer are used for tracking goods. There is nothing in the 

record to show that eBay had any intention to induce ReturnBuy to use bar code 

scanners and printers to keep track of its inventory. 

 Likewise, claim 23 contains limitations requiring the use of a digital camera and 

printer, but there is nothing in the record to demonstrate that eBay intended to induce 
03-1600,-1616 16 

ReturnBuy to use those devices to create the digital image used for posting. While 

eBay required ReturnBuy to provide a digital image and an accompanying data record 

for the goods that ReturnBuy wanted to sell on its website, nothing in the record shows 

that eBay induced ReturnBuy to use a digital camera or a printer to create either the 

digital image or the accompanying data record, since digital images may be created by 

other means, such as by scanning developed photographs. Therefore, the evidence is 

insufficient to demonstrate that eBay intended to induce ReturnBuy to infringe claim 23. 

 Accordingly, we reverse the portion of the judgment holding eBay liable for 

inducing ReturnBuy to infringe the ’265 patent. In light of our disposition of that issue, it 

is unnecessary for us to address MercExchange’s argument that the district court erred 

when it vacated the jury’s award of damages on the inducement claim as duplicative. 

II 

 We turn next to issues pertaining to the ’176 patent. Each of the asserted claims 

of the ’176 patent recites a method for searching “a plurality of electronic markets” to 

locate an item. That method uses a network of computers to accomplish each search. 

One computer receives and processes a search request from a participant and 

transmits that request to other computers through a software search agent. After 

search results are obtained, they are sent back to the participant’s computer. 

 Following trial, the district court denied Half.com’s motion for JMOL that the ’176 

patent was not infringed and is invalid. We reverse that ruling. Because we base our 

reversal on invalidity, we need not reach the issue of infringement. 
03-1600,-1616 17 

A 

 Half.com’s invalidity argument turns on the construction of the claim term 

“electronic market.” At trial, the district court instructed the jury that the term electronic 

market means a “trusted network or system where participants can buy, sell, search or 

browse goods online.” Half.com asserts that the district court’s construction of 

electronic market requires that each of the searched websites be capable of performing 

four functions: buying, selling, searching, and browsing. As the basis for its 

interpretation of the district court’s construction of that term, Half.com relies heavily on 

the use of the word “and” to connect the four functions in a statement from the district 

court’s Markman order, in which the court said, “Based on the inventor’s clear intent to 

allow users to buy, sell, search and browse for items in the electronic market, the court 

finds that the completion of a transaction between buyer and seller is not required.” 

 In its post-trial order, the district court rejected Half.com’s interpretation of the 

court’s claim construction. The court stated that “[t]here was nothing in [the] claim 

construction that required the electronic market to do all four functions cited.” 

We agree with the district court that the patent does not require the electronic 

market to perform all four functions. The ’176 patent is designed in part to provide a 

system that allows participants to speculate, i.e., to buy an item and then promptly sell it 

at a higher price. That is the purpose to which Half.com alludes in contending that the 

patent requires the electronic market to be able to handle not only buying but also 

selling. The specification makes clear, however, that speculation is not the only use for 

the system, and that there are other purposes for the system in the context of “the twotiered market of dealer-to-dealer and retail markets.” ’176 patent, col. 16, ll. 28-29. One 
03-1600,-1616 18 

of the main purposes of the patented system is to create a double-tiered market for 

goods, “where the first tier is a retail price and the second tier is a wholesale or dealer to 

dealer price[,] and an authorized dealer has pre-approved access to the dealer-todealer price and may charge and display the retail price to a local store customer.” Id., 

col. 1, ll. 49-51. The specification provides that “[t]he price and reserve price fields may 

be used to structure the two-tiered market of dealer-to-dealer and retail markets.” Id., 

col. 16, ll. 27-29. It further provides that “[a] dealer may be provided with special logon 

identifications and passwords to view the reserve price . . . and reserve price indicator” 

that is not accessible to retail purchasers. Id., col. 16, ll. 31-33. However, if a retail 

dealer purchases an item, he may choose to sell to other retail dealers or to retail 

customers. In that situation, the retail dealer may enter a retail price and a wholesale 

price into the system. Id., col. 16, ll. 40-41. The retail price may then be displayed to 

the retail customer. Id., col. 16, ll. 41-42. 

 Importantly, when a retail customer decides to participate in the system, the retail 

customer, after browsing and searching, has only the option of purchasing goods. The 

customer is not allowed to sell goods to the retail dealer. That is, while dealers are able 

to act as participants in the dealer-to-dealer market by buying from and selling to other 

dealers, customers in the retailer-to-customer market are not allowed the same 

freedom. The description of the retail-to-retail market discloses two types of electronic 

markets—those in which a participant can buy, browse, and search, and those in which 

a participant can sell, browse, and search. The description of the use of the invention 

for speculation discloses a third type of electronic market—one in which a participant 

can buy and sell as well as browse and search. Accordingly, we agree with the district 
03-1600,-1616 19 

court’s definition of electronic markets as markets in which the participants, in addition 

to browsing and searching, may either buy or sell or do both. 

B 

 At trial, Half.com argued that the district court should enter a JMOL of invalidity 

because there was clear and convincing evidence that the asserted claims were 

rendered obvious in view of expert testimony and several publications, including an 

article by Arthur Keller. The district court rejected Half.com’s argument, stating that 

“[w]hen the evidence on invalidity is viewed in the light most favorable to the plaintiff, the 

court cannot find that there was a complete absence of evidence supporting the verdict 

that the jury’s findings could only be the result of sheer surmise and conjecture.” 

 On appeal, Half.com again contends that the asserted claims of the ’176 patent 

were anticipated or obvious in light of the prior art. In response, MercExchange first 

asserts that Half.com waived its right to make any argument on appeal based on 

anticipation because it failed to do so at trial. As we noted earlier, however, making an 

invalidity argument based on obviousness preserves the right to argue anticipation on 

appeal. Because Half.com argued invalidity based on obviousness at trial, it has 

preserved its right to make an argument regarding anticipation on appeal. 

On the merits, we agree with Half.com that no reasonable jury could have found 

the asserted claims of the ’176 patent to be valid. The Keller article discloses each of 

the limitations of the asserted claims, and the article is enabling. The article describes a 

system to conduct a “cross-search of multiple catalogs” by using a network of 

computers hosting online catalogs. The article recognizes the problem of an online 
03-1600,-1616 20 

buyer’s having to search multiple online catalogs, and it solves that problem by 

presenting a system for searching multiple online catalogs using search agents. 

 In addition to disclosing each of the limitations of the asserted claims, the Keller 

article enables a person of ordinary skill to practice its system by disclosing the 

communication language of the search agents, i.e., KQML and KIF ontologies. It also 

provides a flow chart that describes how the system operates, including how the user 

interfaces with the system, i.e., by using HTML/HTTP protocols, and how a search 

agent retrieves product data, i.e., by using SQL. Contrary to MercExchange’s assertion, 

the Keller article that describes how to make the system is not a mere laundry list of 

factors. 

MercExchange argues that the Keller article fails to disclose all the limitations of 

the ’176 patent because it fails to disclose a method for searching “electronic markets” 

but instead searches for “catalogs.” MercExchange asserts that, unlike the electronic 

market claimed in the ’176 patent, a catalog guarantees a participant the right to browse 

and search, but does not guarantee the ability either to buy or to sell a particular good. 

However, the Keller article clearly describes a system that searches catalogs that are 

serviced by what the article calls “vendors,” who offer products for sale. Accordingly, 

the Keller article contemplates a system in which a participant is able to search, browse, 

and buy. Because a participant is able to buy goods in the market, that is sufficient to 

satisfy the “buy or sell” requirement of the asserted claims. In sum, we conclude that 

the Keller article discloses each limitation of the asserted claims of the ’176 patent, and 

for that reason we hold that those claims are anticipated. 
03-1600,-1616 21 

III 

 The defendants contend that they are entitled to a new trial because the district 

court erred in instructing the jury on the definition of several terms used in the ’265 

patent. With respect to the term “transaction processor,” the defendants repeat the 

same argument they made in addressing the district court’s denial of their motion for 

JMOL of noninfringement and invalidity, i.e., that they were prejudiced because the 

instruction on that term differed from the court’s Markman order. As we have explained, 

we agree with the district court’s jury instruction on that claim term, and the court was 

not required to instruct the jury in strict conformity with the language of its pretrial 

Markman order. 

With regard to the terms “electronic markets” and “market apparatus,” the 

defendants assert that the district court erred by failing to give jury instructions that 

those terms do not encompass “person-to-person” systems, but instead include only 

trusted networks that could transfer ownership. The defendants contend that the district 

court should have instructed the jury that electronic markets do not include “person-toperson” contacts. If it had done so, they argue, no reasonable jury could have found 

that eBay infringes, because eBay uses a “person-to-person” system. 

 The defendants’ contention that the ’265 patent prohibits buyers and sellers from 

having direct contact finds no support in the ’265 patent. The court was therefore 

correct not to include that interpretation in the jury instructions. Moreover, to the extent 

that the defendants contend that the district court’s Markman order embraced their 

theory that the patent excluded person-to-person systems, they are incorrect. In its 

Markman order, the district court stated that “the patent teaches away from person-to-
03-1600,-1616 22 

person auctions, favoring a system with a trusted intermediary.” However, the court 

never defined what a “person-to-person” system entails. Rather, it merely determined 

that an electronic market must be a “trusted network or system,” which is the correct 

interpretation. 

IV 

 In its cross-appeal, MercExchange contests the summary judgment of invalidity 

as to the asserted claims of the ’051 patent, and it asserts that the district court erred in 

construing certain terms used in that patent. MercExchange also challenges the district 

court’s post-trial order denying MercExchange’s request for a permanent injunction, 

enhanced damages, and attorney fees, and reducing the amount of the damages award 

by eliminating the $5.5 million in damages for eBay’s inducement to infringe. 

A 

 Prior to trial, the defendants asserted that the claims of the ’051 patent were 

invalid because the written description is inadequate to support either “establish[ing] a 

seller’s account” or “debiting [or charging] a seller’s account” for a fee. Claim 12 

contains both terms and is representative of the independent claims at issue with regard 

to the ’051 patent: 

A computer-implemented method for facilitating Internet-based auctions, 

the method comprising: 

Requiring a seller to establish a seller’s account, the seller’s account 

being based at least on the seller’s identity and a financial instrument 

associated with the seller; 

Initiating an Internet-based auction for an item offered by the seller; and 

Debiting the seller’s account for a fee amount corresponding to a result 

of the auction. 
03-1600,-1616 23 

The district court concluded, on summary judgment, that the reference to “establish[ing] 

a seller’s account” was adequately supported by the written description, but that the 

process of “debiting the seller’s account for a fee” was not. The court therefore held the 

asserted claims of the ’051 patent invalid. 

 The district court construed the term “debiting a seller’s account” to mean 

“record[ing] a debt (or charge) against a person’s name or account.” The court held that 

the written description of the patent provided support for recording a credit to a seller’s 

account, but not for recording a debit against the seller’s account. In so ruling, the court 

relied heavily on a statement from the written description that “[a]fter the transaction 

clears the charge . . . , the consignment node credits the consignment node user’s 

commission account . . . to extract the consignment node transaction fee.” ’051 patent, 

col. 12, ll. 52-55. The court interpreted that statement as describing a process in which 

the consignment node takes the proceeds of a sale from the buyer, takes a commission 

or fee, credits the seller’s account with the balance, and transfers that amount to the 

seller. Because the seller never owes money to the node, the court concluded that 

debiting never occurs in the disclosed process. 

MercExchange argues that the joint declaration of its experts created a genuine 

issue of material fact as to the adequacy of the written description. The declaration 

explained that a person of ordinary skill in the art would understand the process of 

extracting a fee or commission, as described in the written description, to involve 

“debiting a seller’s account.” We agree. The written description refers to the seller’s 

agreement to allow the consignment node user to extract a consignment fee or 

commission following the sale. See ’051 patent, col. 4, ll. 30-34; col. 5, ll. 37-39. It also 
03-1600,-1616 24 

refers to the consignment node user’s creating a credit or deposit account for the 

participant and crediting the consignment node user’s commission account to extract 

the commission. See id., col. 12, ll. 44-46, 52-55. According to MercExchange’s 

experts, a person of ordinary skill in the art would understand that creating a credit, as 

described in the specification, would require creating a corresponding debit against the 

proceeds due to the seller. Hence, MercExchange provided evidence that the 

specification would be understood by a person of skill in the art to describe a process 

that includes debiting the seller’s account. 

 We thus conclude that MercExchange introduced sufficient evidence that the 

’051 patent was not invalid for lack of written description to create a genuine issue of 

material fact on that issue. Accordingly, we vacate that aspect of the judgment and 

remand for further proceedings. 

B 

 In connection with its challenge to the court’s order invalidating the ’051 patent, 

MercExchange argues that the district court made three errors in construing the claims 

of that patent. As an initial matter, the defendants assert that this court lacks jurisdiction 

to hear MercExchange’s appeal regarding those errors because the construction of 

those terms was not relevant to the final judgment. Specifically, the defendants argue 

that this court should address only claim construction issues pertaining to the term 

“debiting,” because that term was the sole basis for the district court’s summary 

judgment determination. Because we are vacating and remanding with respect to the 

’051 patent, we have jurisdiction to address issues that may arise on remand, as part of 

our statutory authority to “require such further proceedings to be had as may be just 
03-1600,-1616 25 

under the circumstances.” 28 U.S.C. § 2106. It is likely that the district court will be 

required to deal not only with the application of the term “debiting,” but also with the 

application of other terms used in the ’051 claims. Accordingly, we elect to address 

MercExchange’s challenges to other claim construction issues at this juncture. 

First, MercExchange challenges the construction of the term “auction,” asserting 

that the district court erred in construing the term as “a process over a trusted network, 

or with a trusted intermediary.” MercExchange argues that the district court should not 

have required a “trusted” element. We disagree. The district court’s construction is 

supported by the language of the specification, which states that the purpose of the 

patented system is “to provide a trusted network of consignment nodes that act as 

brokers to provide a means to electronically present a used good or collectable to an 

electronic market.” ’051 patent, col. 2, ll. 12-14. 

Second, MercExchange challenges the district court’s construction of the 

following claim limitation, which appears in claims 10 and 12: 

Requiring a seller to establish a seller’s account, the seller’s account being 

based at least on the seller’s identity and a financial instrument associated 

with the seller. 

 

In its Markman order, the district court ruled that “a seller’s account must be established 

based at least on the seller’s identity and a financial instrument associated with the 

seller.” MercExchange disagrees with the district court’s construction on the ground 

that the comma between the words “account” and “the” in the claim makes the “identity” 

and “financial instrument” features optional. If the patentee had intended the two to be 

mandatory, MercExchange argues, the limitation would not have used a comma and 
03-1600,-1616 26 

would have read: “requiring the seller to establish a seller’s account based at least on 

the seller’s identity and a financial instrument associated with the seller.” 

MercExchange’s textual argument is unconvincing. The claim states that a seller 

must establish “a seller’s account,” and then, after the comma, the word “seller’s 

account” is used a second time and is directly preceded by the article “the.” The use of 

the definite article indicates that the second use of the term “seller’s account” refers to 

the term directly preceding the comma. We uphold the district court’s construction. 

 Finally, MercExchange asserts that the district court erred in construing the 

preamble phrases “automated method, performed by a computer-based auction 

system,” and “computer-implemented method of conducting Internet-based auctions” in 

various claims of the ’051 patent. The district court held that those phrases do not 

require that all steps following the preamble be performed by an automated process, as 

argued by MercExchange. Rather, only the steps that are claimed to occur 

automatically are required to be performed in that manner. MercExchange contends 

that the court’s interpretation is inconsistent with the portion of the specification entitled 

“Computer Implementation,” which provides different operating systems and platforms 

for use in a preferred embodiment of the invention. ’051 patent, col. 7, line 59 through 

col. 8, line 9. That portion of the specification does not support MercExchange’s 

argument, however. Various limitations of the relevant claims require actions by 

participants and cannot be “automatically performed via an automated process.” For 

example, as the district court stated in its Markman order, claim 1 contains a limitation 

requiring that the computer system “receiv[e] bids on the item from participants.” That 

step requires that participants enter their bids manually and cannot occur automatically. 
03-1600,-1616 27 

Likewise, one step of claim 12 requires that a seller “establish a seller’s account.” That 

step also requires that a seller manually enter relevant information into the system. 

Accordingly, the district court was correct in holding that not all steps had to be 

performed by way of an automated process. 

C 

 MercExchange challenges the district court’s refusal to enter a permanent 

injunction. Because the “right to exclude recognized in a patent is but the essence of 

the concept of property,” the general rule is that a permanent injunction will issue once 

infringement and validity have been adjudged. Richardson v. Suzuki Motor Co., 868 

F.2d 1226, 1246-47 (Fed. Cir. 1989). To be sure, “courts have in rare instances 

exercised their discretion to deny injunctive relief in order to protect the public interest.” 

Rite-Hite Corp. v. Kelley, Inc., 56 F.3d 1538, 1547 (Fed. Cir. 1995); see Roche Prods., 

Inc. v. Bolar Pharm. Co., 733 F.2d 858, 865-66 (Fed. Cir. 1984) (“standards of the 

public interest, not the requirements of private litigation, measure the propriety and need 

for injunctive relief”). Thus, we have stated that a court may decline to enter an 

injunction when “a patentee’s failure to practice the patented invention frustrates an 

important public need for the invention,” such as the need to use an invention to protect 

public health. Rite-Hite Corp., 56 F.3d at 1547. 

 In this case, the district court did not provide any persuasive reason to believe 

this case is sufficiently exceptional to justify the denial of a permanent injunction. In its 

post-trial order, the district court stated that the public interest favors denial of a 

permanent injunction in view of “a growing concern over the issuance of businessmethod patents, which forced the PTO to implement a second level review policy and 
03-1600,-1616 28 

cause legislation to be introduced in Congress to eliminate the presumption of validity 

for such patents.” A general concern regarding business-method patents, however, is 

not the type of important public need that justifies the unusual step of denying injunctive 

relief. 

Another reason the court gave for denying a permanent injunction was that the 

litigation in this case had been contentious and that if a permanent injunction were 

granted, the defendants would attempt to design around it. That strategy, in turn, would 

result in “contempt hearing after contempt hearing requiring the court to essentially 

conduct separate infringement trials to determine if the changes to the defendants’ 

systems violates the injunction” and in “extraordinary costs to the parties, as well as 

considerable judicial resources.” 

The court’s concern about the likelihood of continuing disputes over whether the 

defendants’ subsequent actions would violate MercExchange’s rights is not a sufficient 

basis for denying a permanent injunction. A continuing dispute of that sort is not 

unusual in a patent case, and even absent an injunction, such a dispute would be likely 

to continue in the form of successive infringement actions if the patentee believed the 

defendants’ conduct continued to violate its rights. 

 The trial court also noted that MercExchange had made public statements 

regarding its willingness to license its patents, and the court justified its denial of a 

permanent injunction based in part on those statements. The fact that MercExchange 

may have expressed willingness to license its patents should not, however, deprive it of 

the right to an injunction to which it would otherwise be entitled. Injunctions are not 

reserved for patentees who intend to practice their patents, as opposed to those who 
03-1600,-1616 29 

choose to license. The statutory right to exclude is equally available to both groups, 

and the right to an adequate remedy to enforce that right should be equally available to 

both as well. If the injunction gives the patentee additional leverage in licensing, that is 

a natural consequence of the right to exclude and not an inappropriate reward to a party 

that does not intend to compete in the marketplace with potential infringers. 

 Finally, we do not agree with the court that MercExchange’s failure to move for a 

preliminary injunction militates against its right to a permanent injunction. A preliminary 

injunction is extraordinary relief that is available only on a special showing of need for 

relief pendente lite; a preliminary injunction and a permanent injunction “are distinct 

forms of equitable relief that have different prerequisites and serve entirely different 

purposes.” Lermer Germany GmbH v. Lermer Corp., 94 F.3d 1575, 1577 (Fed. Cir. 

1996). We therefore see no reason to depart from the general rule that courts will issue 

permanent injunctions against patent infringement absent exceptional circumstances. 

Accordingly, we reverse the district court’s denial of MercExchange’s motion for a 

permanent injunction. 

D

 MercExchange argues that the district court abused its discretion by refusing to 

enhance damages and award attorney fees. MercExchange asserts that the district 

court erred in its analysis of the factors set forth in Read Corp. v. Portec, Inc., 970 F.2d 

816, 826-27 (Fed. Cir. 1992). The defendants respond that the district court properly 

considered each of the Read factors. We agree with the defendants. In determining 

that MercExchange was not entitled to enhanced damages, the district court carefully 

analyzed each of the Read factors and based its conclusions on the jury’s factual 
03-1600,-1616 30 

findings and evidence in the record. In analyzing those factors, the court did not abuse 

its discretion. 

 The court also addressed the relevant factors that bear on whether to award 

attorney fees, including “the degree of culpability of the infringer,” “the closeness of the 

question,” and “litigation behavior.” Superior Fireplace Co. v. Majestic Prods. Co., 270 

F.3d 1358, 1378 (Fed. Cir. 2001), quoting Nat’l Presto Indus., Inc. v. W. Bend Co., 76 

F.3d 1185, 1197 (Fed. Cir. 1996). Again, the court did not abuse its discretion in 

applying those factors in the factual context of this case. We therefore affirm the portion 

of the judgment denying an award of enhanced damages or attorney fees. 

 Each party shall bear its own costs for this appeal. 

AFFIRMED IN PART, REVERSED IN PART, VACATED IN PART, and REMANDED.