[Random-bits] Richard Poynder: Method Madness -- ecommerce patents

[James Love]

http://www.ipmag.com/monthly/99-nov/poynder.html

Method Madness: The battle over e-commerce patents heats up
Richard Poynder 

Nov 1999
ipmag.com


-- It should, therefore, come as no surprise that a development as
radical as the Internet should spark its own patenting wrangle. In
particular, a cluster of patents issued by the U.S. Patent and Trademark
Office covering e-commerce methods and techniques has set off a storm of
criticism.

        The main complaint is that many of these new patents are far too
broad in scope. Massachusetts-based Open Market, for instance, has been
granted several patents that, some claim, could potentially allow it to
demand royalties from almost any company engaged in e-commerce. These
include a patent on a secure, real-time payment method using debit and
credit cards, one covering electronic shopping carts, and another on a
technique for analysing how users browse Web content. To date, Open
Market has not taken legal action against supposed infringers.

        In contrast, Sightsound.com -- which claims to have been granted
a patent that covers the sale of any digital audio or video recording
over the Internet -- is currently suing N2K, a company that retails
music on the Web. The Mt. Lebanon, Pa., company has also written to a
number of other prominent music sites demanding royalties on every sale
that involves downloading music to a customer.

. . . 

        A 1998 Federal Circuit U.S. Court of Appeals ruling, endorsing
the principle that business methods can be patented, has prompted an
onslaught of filings for -- and PTO approvals of -- business method
patents. Critics fear that the door has now been opened to allow anyone
to take a familiar business method from the physical world, add the word
"network," and then patent its use on the Web.

        Frequently cited in this regard is Priceline.com, which, among
other things, claims to have patent rights on Internet-based "reverse
auctions" -- where buyers propose a price for a product or service, and
sellers bid to supply it. Likewise, Netcentives has been granted a
patent covering the use of a promotional programme in which consumers
earn points for making online purchases.

        "A lot of commentators are worried that patents will be issued
on business methods that have been used for years," says Dickinson. "But
that is not going to happen because if they have been used for years,
and publicly, then a patent cannot be issued, as the method is not
novel."

        The question of what is novel, however, makes for contentious
discussions. When Oakland, Calif.-based Cybergold was issued a patent on
pay-per-view advertising (where users are rewarded for looking at
Internet-based advertisements), many questioned its novelty. But
Cybergold's CEO, Nat Goldhaber, dismisses the criticism. "When I
explained what we were doing to one of the leading men in American
advertising, he told me our business model was so innovative that he
would have to go back and re-learn the business."

 Until recently it was assumed that the controversy was not relevant to
Europe. Historically, software (which e-commerce patents by definition
are) has not been patentable in Europe; nor is it generally accepted
that business methods can be patented.

        But apart from the inherent problems of trying to enforce a
geographically defined legal system on a global network, current
harmonisation initiatives are eroding national differences. Thus, in
response to the European Commission Green Paper on patenting, the
European Patent Office has recently proposed that 52 of the European
Patent Convention should be replaced with wording agreed upon during the
Uruguay Round of the GATT Accord.

        "If this were to happen, not only would it open the door to the
patenting of software in Europe, but to business methods as well,"
argues Bob Hart, chairman of the Computer Technology Committee of the
U.K. Chartered Institute of Patent Agents. "Which would make it highly
likely that many of these e-commerce patents would be granted in Europe,
too."

        Certainly a patents search reveals that applications for most of
the controversial e-commerce patents have been filed at the World
Intellectual Property Organization. Many of the inventors of those
applications indicate an intent to file in most European countries as
well.

 . . . 


James Love, Consumer Project on Technology
v. 1.202.387.8030, fax 1.202.234.5176
love@cptech.org, http://www.cptech.org