eBay 2008 Annual Report Download - page 109

have filed an answer and counterclaims asserting that the patents are invalid, unenforceable, and were not infringed.
The parties have completed claim construction briefing and attended a pre-trial conference hearing. The claim
construction hearing is set for March 2009 and the trial date is not yet set. We believe that we have meritorious
defenses and intend to defend ourselves vigorously.
In March 2007, a plaintiff filed a purported antitrust class action lawsuit against eBay in the Western District of
Texas alleging that eBay and its wholly owned subsidiary PayPal “monopolized” markets through various anticompe-
titive acts and tying arrangements. The plaintiff alleges claims under sections 1 and 2 of the Sherman Act, as well as
related state law claims. The complaint seeks treble damages and an injunction. In April 2007, the plaintiff re-filed the
complaint in the U.S. District Court for the Northern District of California (No. 07-CV-01882-RS), and dismissed the
Texas action. In 2007, the case was consolidated with other similar lawsuits (No. 07-CV-01882JF). In June 2007, we filed
a motion to dismiss the class action complaint. In March 2008, the court granted the motion to dismiss the tying claims
with leave to amend and denied the motion with respect to the monopolization claims. Plaintiffs subsequently decided
not to refile the tying claims. The class certification motion is scheduled for June 2009. We believe that we have
meritorious defenses and intend to defend ourselves vigorously.
In May 2007, Netcraft Corporation filed a lawsuit in the Western District of Wisconsin (No. 07-C-0254C)
alleging that eBay and PayPal infringed two of its patents entitled “Internet billing methods.” The suit seeks an
injunction against continuing infringement, unspecified damages, and interest, costs, and fees. In September 2007,
we filed a motion for summary judgment of noninfringement on both patents. In December 2007, the U.S. District
Court for the Western District of Wisconsin entered a judgment granting our motion for summary judgment of non-
infringement on both of the patents that Netcraft asserted against eBay and PayPal. This judgment was affirmed by
the Court of Appeals for the Federal Circuit in December 2008.
In October 2007, PartsRiver filed a lawsuit in the Eastern District of Texas (No. 2-07CV-440-DF) alleging that
eBay, Microsoft, Yahoo!, Shopzilla, PriceGrabber and PriceRunner infringed its patent relating to search methods.
The suit seeks an injunction against continuing infringement, unspecified damages, and interest, costs, and fees.
The defendants have moved to transfer venue and the parties are conducting discovery. Fact discovery cutoff is
scheduled for July 2009, the claim construction hearing is scheduled for April 2009 and trial is scheduled for
October 2009. We believe that we have meritorious defenses and intend to defend ourselves vigorously.
eBay’s Korean subsidiary, IAC, has notified a majority of its approximately 20 million users of a data breach
involving personally identifiable information including name, address, resident registration number and some
transaction and refund data (but not including credit card information or real time banking information).
Approximately 141,000 users have sued IAC over this breach in several lawsuits in Korean courts and we expect
more to do so in the future. There is some precedent in Korea for a court to grant “consolation money” for data
breaches without a specific finding of harm from the breach. Such precedents have involved payments of up to
approximately $200 per user. A consumer agency recently made a non-binding recommendation that IAC make
payments of 50,000-100,000 Korean won (approximately $35-70) to consumers who had complained to it as a
result of such breach. IAC intends to vigorously defend itself in this lawsuit.
Other third parties have from time to time claimed, and others may claim in the future, that we have infringed
their intellectual property rights. We are subject to additional patent disputes, and expect that we will increasingly
be subject to patent infringement claims as our services expand in scope and complexity. In particular, we expect
that we may face additional patent infringement claims involving various aspects of our Marketplaces, Payments
and Communications businesses. We have in the past been forced to litigate such claims. We may also become more
vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act, the Lanham Act and the
Communications Decency Act are interpreted by the courts, and as we become subject to laws in jurisdictions where
the underlying laws with respect to the potential liability of online intermediaries like ourselves are either unclear or
less favorable. We believe that additional lawsuits alleging that we have violated copyright or trademark laws will
be filed against us. Intellectual property claims, whether meritorious or not, are time consuming and costly to
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)