Intellectual Security: Patent Everything You Do, Before Someone Else Does

By Rob Garretson  |  Posted 12-05-2005 Print Email
Fortified IP portfolios are the best defense against proliferating "business-method" patents.

Do you ever go online to reorder office supplies from Staples or OfficeMax? Are you a regular customer of the Internet grocery service Peapod.com? Then Kenn Fischburg wants a piece of the action.

Last May, Fischburg was awarded U.S. Patent No. 6,895,389 for his "Internet Procurement Method."

His patent describes a system that lets customers access an online order form that uses stored records of previous purchases and other data to simplify the buying process. He began developing the idea in 1998, to help his steady customers reorder goods on the Internet. Like Amazon.com's "1-click" purchase and Priceline.com's name-your-own-price reverse auction, Fischburg's is one of hundreds of "business-method" patents awarded each year that give the inventor a 20-year monopoly, not on the design of a machine or a physical product, but on a way of doing business. Fischburg's lawyers have begun contacting companies they believe have been using his innovation without the now-necessary license.

"The U.S. Patent and Trade Office is a tremendous reason to love the U.S.," says Fischburg, owner of Consumers Interstate Corp., a $20 million seller of office, packaging and janitorial supplies based in Norwich, Conn. "The fact that you can apply for a patent and get protection—it's tremendous. It's what makes a person want to invent something."

Though it may have been more innovative when he filed his patent application, in September 2000, Fischburg's method for simplifying online orders based on past purchases is fairly common among e-commerce sites today.

Still, he and his lawyers hope to assert his new intellectual-property rights broadly across a range of industries, not just with his competitors in the office-supply business. "It appears that [Staples and OfficeMax] are using the method," Fischburg says. "It's a legal exercise as to how close people like Peapod are to the claim. But they come close."

Fischburg is not alone in his quest to assert intellectual-property rights over a business method that became commonplace in the time it took the PTO to grant his patent. His was among 7,800 applications in 2000 that fell into the PTO's Class 705, which covers most business methods. Among those applications was another patent, awarded to Amazon.com just last month, for its method of encouraging users to write reviews of products they've bought.

On that same day, Amazon was also awarded a patent on its technique for ranking multiple-category search results, and another for its method for creating communities (called "purchase circles"), for which it filed patent applications in March 2003 and August 1999, respectively.

What is a troll?
The term "patent troll" is widely used in IP law circles, but its meaning varies depending on which side of the subpoena you're on.

"Those unsavory characters who buy up obscure patents to extort money from innovative and
law-abiding companies."

—Steven Pearlstein, columnist, The Washington Post

"Someone who takes a single patent or a small number of patents and makes an assertion of clearly dubious merit either because the patent is invalid on its face or does not bear on the product it's being asserted against, typically seeking nuisance value."
—Peter Detkin, managing director, Intellectual Ventures LLC, who while an assistant general counsel at Intel Corp. coined the term "patent troll"

A company that "exists solely to license its patents or sue to enforce its patents, and not to develop or commercialize them."
— Jerome B. Friedman, U.S. District Court Judge, describing MercExchange, the Great Falls, Va., company and its injunction against eBay Inc.'s "Buy It Now" feature, found to infringe on its three patents

Troll (trol) n. In Norse Mythology, repulsive dwarfs who lived in caves or other hidden places. They would steal children and property but hated noise.
—The New Dictionary of Cultural Literacy, Third Edition.
Houghton Mifflin Co., 2002

The company hasn't disclosed if it will seek to license these patents to other online retailers, search engines or Web portals, but the patent awards touched off immediate speculation that shopping portals such as Yahoo!, and search sites that attempt to build communities, will draw the ire of Amazon.com lawyers seeking to maintain a competitive advantage and augment revenues.

The PTO has issued thousands of patents like these in recent years, littering the business landscape with land mines for unsuspecting companies and their CIOs, who must build IT systems around them. Just last July, Wal-Mart Stores Inc., Citibank, Discover Financial Services, T-Mobile and others were the latest to be sued for patent infringement by inventor Ronald Katz, who has reportedly collected nearly $1 billion in license fees for his call-center patents, which cover features such as interactive voice responses and automated prompts. (More than 100 companies have purchased licenses from Katz, including household names such as AT&T Inc., Verizon Communications Inc., Sears Holdings Corp. and IBM Corp.)

Under the law, patent holders have a range of options in asserting their rights, from collecting license fees from users to shutting down operations that infringe on their patents. Corporate mail rooms are now being flooded with "demand letters" from patent holders' attorneys—many working on a contingent-fee basis—alleging patent infringement. And companies are spending billions to settle or litigate these claims.



 

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