EBay could soon be outbid in court and may be forced to change the way it conducts its online auctions. A Virginia inventor says he has patents for some of the technology and methods employed by eBay and he wants compensation that could go into the tens of millions of dollars. Tonight's "Tech Live" looks into the suit and the issue of patenting "business methods."

Thomas Woolston is the unlikely David in a court battle with online auction Goliath eBay, which, Woolston says, has been using its giant financial advantage against him.

"They've used their vast resources to basically crush our small enterprise here in Virginia, so we're ready to win this battle in any forum they want to do it. And if they want to do it in court, we're ready to win," said Woolston, founder of MercExchange.

Woolston is no stranger to tough fights. As an Air Force intelligence officer he reportedly flew reconnaissance flights over the old Soviet Union. As a CIA counterterrorism operative, Woolston investigated the 1986 disco bombing that killed three persons and injured 200 others in Germany.

Back in the civilian world in 1995, Woolston patented both technology and methods for conducting Internet auctions and says he met with eBay to demonstrate them.

"After the meeting eBay adopted the buy-it-now method. After the meeting eBay went to verified sellers' accounts. After the meeting eBay moved into our intellectual property," Woolston said. "So our point was, stop infringing the intellectual property or deal with it. Be held accountable. One way or the other they don't want to be. They just want to run for luck. They said, 'No, sue us.' So we ended up having to bring it to court."

Patent law parameters

The lawsuit is enabled by a string of court rulings which began in 1999 and which ruled that patents on business methods are as enforceable as patents on things.

"You can patent a method for conducting auctions on eBay," said patent attorney Michael Casey of the firm Oblon, Spivak, McClelland, Maier & Neustadt.

"The reality is that a business method is like any method you could patent. You can patent a method for making a new drug. You can patent a method of driving a car if you wanted," Casey told TechTV. He added that it's part of America's heritage.

"The idea of patents and the protection of inventions goes back as far as the Constitution and even the founding fathers thought it was important to grant to people who innovated a monopoly for a limited period of time," Casey explained.

"Because what's to keep a Goliath once he's seen your great idea from mass marketing it at a price much lower than you could afford and really ripping off your idea?" he asked.

Potential damage

In financial filings, eBay says of the Woolston suit: "If plaintiff were to prevail on any of its claims we might be forced to pay significant damages and licensing fees, modify our business practices, or even be enjoined from practicing a significant part of our US business. Any such results could materially harm our business.... We are unable to determine what, if any, potential losses we may incur if this lawsuit were to have an unfavorable outcome."

At issue are techniques common to millions of eBay users.

"One is person-to-person auctions... Their buy-it-now mode infringes our... patent and they have an internal search process that infringes our... patent," Woolston said.

The lawsuit has been scheduled for trial next month, but it may be delayed.