eBay's Next Big Challenge May Be a Legal One

Competitors, the shaky economy and technical troubles haven't derailed eBay's (EBAY) rapid growth.

The online auctioneer reported record earnings and profits last week and looks to be fulfilling its promises of rapid growth. But there are a few unknowns that could be speed bumps on eBay's highway -- a trio of lawsuits that the online auctioneer has been unable to dodge.

The suits cover significant pieces of eBay's businesses; two of the three suits have survived early legal challenges. Also bothersome is that it's difficult to assess their potential for cutting into earnings, though the lawsuits so far have escaped much notice from those who follow the company.

One of the suits, a patent dispute, is scheduled for trial in April. Two more suits that take aim at the company's fast-growing PayPal unit are proceeding, with important court dates later this year.

eBay plans to defend itself vigorously against the suits, but even if it manages to win them or settle them out of court, it could end up paying significant legal fees or royalty payments. If eBay were to lose, each of the suits could force it to either change the way it operates or pay significant damages.

"Any such result could materially harm our business," the company warned in its quarterly report filed in November. eBay representatives did not return calls seeking comment on the company's various legal disputes.

Outside the legal arena, eBay has had little to worry about lately. Last week, for instance, the San Jose, Calif.-based company reported record earnings and revenue for its fourth quarter. eBay also raised its earnings and revenue guidance for the first quarter and the year.

Boosted by the report, eBay shares hit a 52-week high on Friday. Despite the down market on Tuesday, shares again rose, setting another 52-week high and closing up 91 cents to $75.76.

In the legal arena, eBay has been somewhat less of a success.