Patents in E-Commerce

Definition A patent grants a property right to an inventor for 20 years, prohibiting others from using the invention in the U.S. As companies venture into the unchartered territory of e-commerce, several seek to patent their work. But the spread of e-commerce patents has raised questions about whether they are too broad and what, if any, limits should be imposed.

The rise of e-commerce has produced a flood of Internet-related patents that make infringement as easy as a single click of the mouse.

Barnesandnoble.com Inc. learned that the hard way when Amazon.com Inc. slapped the company with a lawsuit claiming infringement on Amazon's patent for single-click technology, which lets repeat customers shop the site without having to re-enter personal and credit-card information.

The flood of Internet patents, say attorneys, is a natural evolution of the 1990s trend toward patenting not only hardware but also software and business methods.

As a result, many experts say information technology workers may be in for a rough ride as they are forced to learn about patents and patent infringement for the same reason that corporate management was forced to learn about IT: Because ignorance can touch off a business disaster.

Others say IT professionals can breath easy because the flood of patents will soon subside as the U.S. Patent and Trademark Office gains familiarity with Internet issues and applies stricter standards to future patents.

Such assurances have done little to ease concerns about the number of patents being issued today and the broad protections they provide.

Jonathan Band, an intellectual property attorney at Morrison & Foerster LLP in Washington, says there is widespread concern over whether patents like Amazon's are too broad.

"A lot of people think (Amazon) shouldn't have been able to patent that," Band says.

Kenneth K. Dort, an attorney and a senior litigation partner at Gordon & Glickson LLC in Chicago, agrees. Internet patents, he says, "have kind of gotten out of hand."

Part of the problem, explains Dort, is that attorneys, fearing the repercussions of failing to patent something important, advise clients to patent some things just to cover themselves.

"So you literally get simple processes or methods of business organization being patented," he said.

For instance, many people questioned the validity of Priceline.com Inc.'s patent on its method of letting customers propose their own prices for products or services on the Internet.

"I think the Amazon patent may be patentable because it is a rather discrete way of how to maintain the confidentiality of information," says Dort. "But the Priceline.com patent gets a little closer to the line. What it describes is way of conducting business. I think Priceline-type patents really do go too far afield by trying to keep people out of the industry in question."

But Jeffrey R. Kuester, an intellectual property attorney and partner at Thomas, Kayden, Horstemeyer & Risley LLP in Atlanta and chairman of the American Bar Association's special committee on patents and the Internet, says he disagrees.

Kuester says the Internet patent problem is exaggerated by people who don't understand what the patents protect.

"It's easy to overestimate the breadth of a patent application if you read only the title or the abstract. Nine out of 10 patents are not as broad as they sound," he says.

Norman Imamshah, director for computing and telecommunication services at Central Washington University in Ellenburg, Wash., doesn't see much of a threat in the number of Internet patents being approved.

His hope is that the government, by granting a large number of Internet patents, will promote e-commerce by rewarding innovation. That would benefit most IT workers, he says.

Still, the patent debate isn't over yet, says Imamshah.

"It's a very sticky issue, and it will be with us for a long time," he predicts. "But right now, it's really a lawyer issue."

Proceed With Caution

Kevin Rivette, chairman of intellectual property management firm Aurigin Systems Inc. in Cupertino, Calif., and co-author of Rembrandts in the Attic, a book about the value of patents, says some Internet patents are probably too broad. But he cautions IT industry leaders not to compound the problem by patenting everything connected with electronic business or the Internet.

Instead, he suggests that they adopt new ways of deciding what to patent.

"IT needs to ask marketing, 'What are the top five features that customers need in this new product?' " Rivette says. "Then they need to ask the same question of customer service, sales, production and research and development. Typically, they'll find there will be two to four top features that everybody agrees are critical to the success of the product. Those are the things you should patent."

Rivette predicts that the Internet patent flood will take five or six years to subside. In the meantime, he favors the creation of Web sites where patent claims could be easily read by the people who might help invalidate them by citing the existence of "prior art." Demonstrating previous use of something is a key way of invalidating a patent, he says.

Band also predicts that "the rush of Internet patents will slow down. People will continue to apply for them, but the patent office will not be issuing as many patents, or (it) will do it more carefully and properly."

As a result, Band says that "in the long run, most of the IT people in e-commerce are not going to be affected, although those being sued probably will be hurt."

Dort isn't as optimistic about a slowdown in the patent boom.

"I don't see there being any break until the courts or Congress steps in," he says. Alexander is a freelance writer in Minneapolis. Contact him at sorion99@yahoo.com.

Copyright © 2000 IDG Communications, Inc.

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