Such patent infringement suits are becoming increasingly common in the Internet industry, raising the risk of doing business. The suit was filed this week in U.S. District Court for the Northern District of California.
The suit alleges "willful and deliberate violation of a patent" and it seeks "unspecified monetary damages as well as an injunction against our operations," according to eBay. It also seeks triple damages and attorneys' fees and costs.
A spokesman for Network Engineering confirmed the lawsuit was filed, but declined further comment. The patent, issued in July 1998, deals with automated online information service and directory, particularly for the Web, according to an online patent registration site.
eBay said it believes it has "meritorious defenses against the suit and intends to vigorously defend" itself.
The company added, however: "We could be forced to incur material expenses during this defense and in the event we were to lose the suit, our business would be harmed."
In the regulatory filing, eBay reiterated that it is the subject of a federal government inquiry regarding the investigation of "possible illegal transactions" on its Web site. "The inquiry includes an examination of our practices with respect to these transactions," it said. "We are cooperating with the inquiry."