| Stuart T. Auvinen
Patent Agent Reg. No. 36,435 |
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gPatent LLC 429 26th Ave. Santa Cruz, CA 95062 (831) 476-5506 |
e-Commerce Patents - A New Way of Doing Business...
| So far, patents have been a minor force in the Internet arena. The situation
is similar to the software-program industry a few years back. At first, nobody
patented their software. Then Microsoft was defeated in court by the tiny
software firm Stac, who had patented their compression software. Since then,
software firms have been rushing to patent their ideas.
Since patents take 2-3 years to issue, we are just now beginning to see the first wave of Internet patents. Browser technology has been the subject of many of these early iPatents. An example is an early Internet patent for a World-wide-web server for resource-based load balancing I wrote for Resonate. The next wave of patents taking shape appears to be from some of the e-commerce companies. Recent court decisions have opened the door to a new kind of patent that is ideally suited to e-commerce - the business method patent. A few years ago one of my clients received a GUI or Icon patent. Puma Technology, a maker of synchronization software, received a patent for displaying link-status information using a traffic light iconic representation. This patent describes how a traffic-light icon changes from red to yellow to green as a link is made between two PCs. Some have suggested that web sites themselves may be patented in a similar fashion. The various graphical elements on a web page and the actions that occur when a user clicks on different parts of the web page could be a subject for a patent. The patent office is already allowing design patents for computer icons, and a web page can be thought of as a collection of individual icons. These design patents cover the "ornamental design" or appearance, not the function. Thus design patents are less desirable than normal "utility" patents. All through the '60s, 70's, and most of the '80s almost no patents were issued on software. Then a series of court decisions forced the patent office to start issuing software patents. Now 10K+ SW patents are being issued each year. These patents often patent a "computer program product" which includes code embodied on a computer-usable medium, such as a disk. Sometimes a PC running the software is patented as a method. An example of this kind or computer-program patent can be seen in a patent I wrote for Recipio, a middleware-database company. This patent for transparent client/server updating of distributed objects describes an updateable client-server middleware program. Software that runs at a web site can be patented using this type of patent. Another client of mine, Netmind, makes change-detection software. This software is being used as eBay's personal shopper, notifying the user by e-mail when a desired item is auctioned off. Netmind's patent covers a change-detection tool that web sites can use. Auction-Site Patents Internet auctions is a wildly popular and rapidly-growing e-commerce application. Although auctions have been around for many years, internet auctions are new in several ways. Onsale has a patent on an electronic auction computer program. This patent claims several key elements, such as a bid and a merchandise database. The merchandise database sends a catalog page to the user to look at, and then the user's bid is validated and entered into the bid database. Finally, the winners are notified by e-mail. While it might appear that nothing in Onsale's is new, a closer look shows why the patent was granted. It is likely that any previous electronic auctions did not show a catalog page describing the merchandise to the user, since this requires a browser. Also, sending the winner notification by email is likely new. Combining all the elements together - the bid, merchandise databases, the bid validator, and emailing the winner - into an automated computer program was enough to convince the patent office to grant the patent. You might get around Onsale's patent by not sending the email notice, or having a human compose the email and send it. But then costs are higher as humans must deal with the email. Another "off limits" area for patenting was "methods of doing business". Patent textbooks still mention that business methods cannot be patented. But that has suddenly changed with the State Street Bank court decision. The appellate court has now OK'ed such business-method patents. Business-method patents can be much stronger than software patents, because they don't have to rely on using a computer or a program. They are also much easier for someone to understand. Thus judges and juries can grasp the patent without being overwhelmed by technical details. One of the most aggressive leaders in business-method patents is Priceline.com. Priceline has a "name-your-price" web site that allows persons to purchase items such as airline tickets or new cars. The user's bid is sent to many sellers, and the first seller to accept the user's price closes the deal. Priceline's patents are some of the first business-method patents. Jay Walker, Priceline's founder, has been quite aggressive in patenting not just the software, but business method itself. His design group, Walker Research, is said to have some 250 patent applications pending. No wonder he refers to it as an "Intellectual Property Lab." Jay Walker and Walker Research assign their key patents to Priceline. A detailed analysis of Priceline's patent can be found here. Patent Covers Bid to Many Sellers Priceline's '207 patent claims several key points: 1. Having a buyer's offer sent to *many* sellers. 2. Getting the buyer's credit card info first 3. Getting the buyer's offer price first The '207 patent is not specific to any particular product. It can apply to any kind of product such as tickets, cars, or hotel rooms. Normal auctions have one seller, not many. Thus typical auctions cannot knock out Priceline's patent. A service or net agent ('bot) that shops around for the lowest price also does not fall under Priceline's patent, since the buyer, not the seller, sets the price. More Patents in the Priceline Pipeline A dozen other applications are listed in Priceline's prospectus. The more interesting ones cover a "Conditional Purchase Offer Management System" with separate applications for:
You can expect that a wide variety of business models and different aspects of these models will be claimed in these applications. The fact that so many applications are pending makes it very risky for a competitor. If the competitor defends itself based on one patent, then Boom, another Priceline patent issues and the competitor violates the new one. Portals Miss the Patent Game While newer e-commerce companies such as Priceline and Onsale are busy protecting their businesses with patents, many Internet companies are asleep at the switch. Portals such as Yahoo, excite, Lycos and older e-commerce companies such as Amazon and eBay have few or zero patents. They may be in for a rude surprise if they try to move into the patented businesses. Without patents, there is little to block a competitor from taking over a market. Amazon was able to enter the music CD business by merely adding a tab to their bookstore interface. Overnight they stole the music CD market from CD-Now and others. Later Amazon set up an auction service to compete directly with eBay. Without patents, eBay must rely on community loyalty and will likely see fewer new members and slower growth. eBay might have been able to patent thier user-feedback system, where a feedback rating is displayed next to the seller's name on an auction catalog page. Only registered users could provide feedback. Patents may prove to be the only way younger, innovative Internet companies can fend off their older, larger competitors. Business-method patents in particular can help e-commerce start-ups defend their ideas from copy-cat competitors. Otherwise, the Internet Giants will simply wait and see what works, and copy it.
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| Stuart T. Auvinen
Patent Agent Reg. No. 36,435 |
|
gPatent LLC 429 26th Ave. Santa Cruz, CA 95062 (831) 476-5506 |
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