A small company with an obscure patent is suing e-commerce site owners.
October 24, 2002 11:02 AM   Subscribe

A small company with an obscure patent is suing e-commerce site owners. If you sell something on the web, you may be next. It's hard to tell if they have any legitimate claims or if they're simply extorting money from the people they threaten.
posted by mathowie (26 comments total)
 
The demands for "one-time" licenses for a low, low price makes me question the deep intent of the alleged patent-holders. It's very reminiscent of when someone overseas copyrights someone else's material and then demands a "license fee" roughly equal to what the court costs of getting your own rights back would be.

I agree with patenting lenghtly code, but this seems way too broad. Coupling that with their claim that they "don't seek to press any lawsuits" adds to the common story of trying to scare people out of some quick cash.
posted by XQUZYPHYR at 11:14 AM on October 24, 2002


this has been discussed on slashdot before as well, here (from yesterday) and here (from may 13th)
posted by dolface at 11:20 AM on October 24, 2002


It's hard to tell if they have any legitimate claims or if they're simply extorting money from the people they threaten.

I'd say extortion. The slashdot discussion made it fairly clear that the patent was issued late in the game -- 1996. I can name several online retailers that'd been in business for well over a year by that time, and some e-commerce companies that provided turnkey solutions that'd been in business for approximately as long. Including one I worked for.

Not to mention its general nature. I can't figure for the life of me what is going on at the patent office.
posted by namespan at 11:26 AM on October 24, 2002


They're not the only ones: divine inc. is suing a number of companies for intellectual property infringement for a "network-based sales system" -- the shpping cart concept -- patented in 1998 by a company divine bought last year.
posted by me3dia at 11:27 AM on October 24, 2002


patented in 1998
...filed in 1994.
posted by me3dia at 11:28 AM on October 24, 2002


As the article mentions, the US Patent Office has got a lot of criticism for granting ridiculously simple patents, i.e. the whole amazon one-click thing.

Attorney Walker says that about 15 defendants in the PanIP lawsuits have settled.

We're not sure how much but the fact that all these companies are smaller mom and pop shops tells me that PanIp (the company holding the patents) deserves all the contempt in the world.
posted by jeremias at 11:31 AM on October 24, 2002


I am filing a patent for a method of pulling patents out of my ass that claim ownership to commonly used technologies that have thus far been free.
Then I am going to sue these guys, and the GIF people, and the hyperlinking people, and the MP3 people, and so on, and so on, and so on.

I vote extortion.
posted by Fabulon7 at 11:32 AM on October 24, 2002


CDNow was definitely in business by '96, I think Amazon as well. And I haven't read the entire patent listings, but "automatic business and financial transaction-processing system" sounds a lot like what banks have been using for years to transfer funds.
posted by mkultra at 11:34 AM on October 24, 2002


Patents are supposed to protect creativity and research. Spend 5 years developing an idea and rest assured some guy across the street will not copy your idea for free.

But what these guys did was, basically "Dude, what if we could sell stuff using computers? Woooo... let's file a patent."

I know it's too black-and-white, but I am still for the idea of pateting only products (i.e.: "objects"), never services, processes (like Amazon's 1-click) or medical research. "I patent the Y chromosome! All men will be sued! HA!"
posted by crisdias at 12:07 PM on October 24, 2002


No, you patent the X chromosome, then you can sue men and women both, much more opportunity for revenue.

This is simple extortion from a company who thinks they can get away with it.
posted by benjh at 12:54 PM on October 24, 2002


Is prior use applicable against the grant date of the patent or the filing date? At any rate, This post to Usenet from January, 1994 refers to CDNow (as a site, don't know if it was a store yet). Does anyone remember when you had to telnet into CDNow? Ahhh, makes me nostalgic for Gopher...
posted by mkultra at 1:13 PM on October 24, 2002


You should go work for a prior art search firm, mkultra.

"A person shall be entitled to a patent unless... the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent." 35 U.S.C. 102(a)

Asking a large number of people for a very low settlement fee -- in this case $5,000 is well below the cost of even hiring a law firm to do the initial work in defending a case -- is a frequent tactic of so-called patent terrorists (a pre-9/11 term that sounds unfortunately inappropriate now). These people know that serious examination of their patent by a court is likely to result in its being declared invalid, so they do whatever they can to prevent lawsuits.

Unfortunately for them, the patent office has recently established a pattern of "re-examination" when enough people complain about a recently-issued patent that seems to be just plain wrong -- especially when the patentee starts asking a huge number of people for a very small licensing fee.
posted by profwhat at 2:11 PM on October 24, 2002


a number of companies for intellectual property infringement for a "network-based sales system" -- the shpping cart concept -- patented in 1998 by a company divine bought last year.

The company (OpenMarket) that bought the e-commerce company I worked for in 1996 (ICentral) had a 1997 patent on the shopping cart, I believe. They never used it for anything as far as I know. I believe OpenMarket was later bought by someone else... I don't know if it was Divine, but I think it wasn't... the buying company is still in Utah, from what I can tell, and Divine looks centered in Chicago....
posted by namespan at 2:23 PM on October 24, 2002


Remember the kid that patented the "new" swing technique? Apparently the patent office is under-staffed and under-budgeted, so a lot of this crap is slipping past the patent examiners. One proposal is that the patent office be allowed to keep the fees it generates instead of having them go into the general government budget.

What's next? Having someone take out a patent on how best to stir your coffee? How the shipping department uses bubble wrap? How to sell Siamese fighting fish?....wait a minute! That's my idea! I came up with the idea of selling fighting fish in separate little bowls!
posted by Secret Life of Gravy at 2:30 PM on October 24, 2002


A few questions: When is the US patent office going to get its' act together and get the staff and funding it needs to do the job right? Surely all these patent lawsuits are more of a hassle than granting patents that aren't overly broad in the first place. Or is it that patent lawyers are making so much money this way that they don't want to change the system?

And, what is the best way to answer a lawsuit like the ones these extortionists are pressing? What's the legal equivalent of 'piss off'?
posted by the big lizard at 3:44 PM on October 24, 2002


Perhaps it is just differences between countries, but I am pretty sure it is not possible to actually patent an idea here, it must be something tangible that has been created. In this case, it could be the particular code that carries out the transactions, but it would be easy to write different code to carry out the same task, surely. It is ridiculous that someone is able to patent the idea of selling or carrying out financial transactions on-line.

I imagine that the groups of 10 companies they are suing at a time would be chosen to be widely distributed geographically and otherwise so that they are unlikely to band together to fight the case, have enough cash to be able to pay the settlement but not enough resources to fight it individually. Their intention to create precedents seems logical and, if they continue to be successful with this strategy, companies like Amazon better take note.

As I understand it, you can patent a specific method of carrying out electronic trading, but not the idea of it.

From the Web site of IP Australia:

Patent applications directed to electronic commerce are similarly acceptable if there is an end result or way of achieving an end result that is an artificially created state of affairs of economic utility. Examples of applications for electronic commerce that may be patentable include methods of enabling electronic transactions, or methods of electronically creating or monitoring interactions of Internet sites, or creating electronic links between customers and suppliers and banks.
The following is a suitable example of a claim related to electronic commerce:
A value transfer system comprising:
(a) a plurality of electronic purses and interface devices whereby purses may communicate with each other to transfer value by means of transactions;
(b) each of which involves an exchange of electric signals between a pair of purses;
(c) each purse including memory means storing a record of the accumulated value currently contained within the purse;
(d) the system being characterised in that each purse is assigned a class in a hierarchical structure and in that said memory means further stores a record of the class of that purse together with a list of those classes to which that purse can transfer value.
posted by dg at 3:54 PM on October 24, 2002


Secret Life of Gravy: The kid can't sue me. I was swinging like that loooong before that little twerp was even an impulse in daddy's pants.
posted by Witty at 4:41 PM on October 24, 2002


CD Connection was available back in the dial-up days, as well as being the first store I ever telnet-d to, back in 1993...they say they've been around since 1990.
posted by nomisxid at 4:43 PM on October 24, 2002


Apparently the patent office is under-staffed and under-budgeted, so a lot of this crap is slipping past the patent examiners.

It's true. I recently went through the patenting process with the USPTO on a biotech patent. I got the sneaking feeling that the examiners on our case had virtually no idea what the patent was about and that we could have fudged our way through the entire thing. It seems all we really needed to do was to meet all the deadlines and paperwork requirements. The 'intellectual' part was about the 3rd or 4th most important thing. They are way, way understaffed and underfunded.
posted by shoos at 4:59 PM on October 24, 2002


It's hard to tell if they have any legitimate claims or if they're simply extorting money

Nope, really easy, actually. Extorting.
posted by azazello at 5:18 PM on October 24, 2002


Did anyone else notice that the USPTO website page that lists the patent in question has a shopping cart system similar to the one that this company is suing over?

Look at the very top of the page.

That's some big balls.
posted by tpoh.org at 5:43 PM on October 24, 2002


Remember when Amazon's Bezos said he only patented the silly stuff to stop other people doing the same and suing him ? - Time to put up, Amazon, or lose any remaining shreds of credibility.

It's sad how this all makes lawyers and other assholes richer, and the world as a whole poorer.
posted by godidog at 6:22 PM on October 24, 2002


Its interesting people are bringing up the the lack of funding and general displeasure with the patent office. It is definitely worth pointing out that among all federal agencies, the US Patent & Trademark Office is the only one (by congressional mandate) that has to be self-sufficient....yes, boys and girls, they get no funding from the government. They generate all their revenue from fees, etc on patents (and if you've ever dealt with the patent office, *everything* requires a hefty fee).
I personally think there's a huge problem here...the PTO is one of few agencies that exercise power over such an integral part of the US economy.
posted by dicaxpuella at 7:47 PM on October 24, 2002


Does anyone remember videotex circa 1980? Yes, this is absurd but then again so is most of the rest of it these days.
posted by matt_wartell at 8:36 PM on October 24, 2002


Great links matt_wartell. The main article really puts the whole thing in perspective and makes it clear (to me, at least) that the patent process in the US has been subverted by the need for the USPTO to be self-funding.

The main (only?) advantage of having official functions under a government umbrella is the removal of the need to turn a profit, allowing decisions to be made without regard to monetary consequences.

It's sad how this all makes lawyers and other assholes richer, and the world as a whole poorer.

Exactly. Far too many things are doing this nowadays.
posted by dg at 9:27 PM on October 24, 2002


A continuing controversy arises from the fact that the PTO fees generate revenue in excess of the PTO budget. The extra money goes into the general US budget. Many patent practitioners and of course the PTO would like to use that extra money to hire more examiners. The Intellectual Property Owners Association has info at their site.
posted by caddis at 10:56 AM on October 25, 2002


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