A panel of three judges in the U.S. Court of Federal Appeals in Washington, DC, heard eBay's appeal Tuesday in the case of MercExchange vs. eBay. Last year, a Norfolk, VA jury found that eBay had infringed MercExchange's patents.

eBay argued that in that trial, the court "provided no instruction to the jury" as to the question of date of invention. One of the judges asked if the court had "an obligation to give the jury legal background for which it could deduce the date of invention?"

MercExchange called this argument a "red herring" (an irrelevant point that is a distraction from the real issue), and said the "jury did not need to be instructed on something that was of no consequence." (MercExchange founder and CEO Thomas Woolston filed patent paperwork in April of 1995, about five months before eBay founder Pierre Omidyar created his site AuctionWeb, which became eBay).

eBay's attorneys put forth another argument in its appeal, arguing that eBay and Half.com do not infringe on MercExchange's patent for online transactions because of the issue of "transferring ownership," which Woolston's patents cover. eBay argued each user of their marketplace, not eBay or Half.com themselves, has the responsibility for transferring ownership. When questioned by one of the judges what was recognized as "transfer of ownership," the MercExchange attorney argued that it was the recording of a new owner and "modifying a data record" to reflect the new owner.

The attorney further explained that eBay tells sellers they're legally able to sell goods and obligated to complete the transaction; and tells both buyers and sellers they're entering into a legally binding agreement.

There is no telling when the Appeals Court decision will be announced, MercExchange's lawyer told the Wall Street Journal.

Just outside courtroom 402, where the appeal was heard, is a lobby with stately oil paintings of justices on the wall, and a museum-like display case featuring antique patent-related documents and artifacts. One of them, dated 29 May 1832, is titled "wireless telephony" and was personally signed by Andrew Jackson. So it seemed appropriate that this was the venue for a case involving communications technology, albeit over 170 years later.

Stay tuned for the next development in this interesting case and what it will mean, if anything, to the world of online auctions and ecommerce.