Net patents stir debate
August 24, 1999
by Julia King
(IDG) -- In the mad race to make big bucks online, thousands of companies are making a pit stop at the U.S. Patent and Trademark Office. What they want is monopoly protection for their proposed Internet innovations.
And they're frequently getting it -- even for familiar ways of doing business that critics claim aren't really new or novel. The only thing different is that they occur in cyberspace.
"They're issuing crap at the speed of light," said San Francisco-based patent researcher and consultant Greg Aharonian, referring to the Patent and Trademark Office's 1998 issuance of 125 patents for supposedly new ways of doing business on the Internet. This year, the Patent Office expects to issue as many as 200 more such patents.
"It's not that hard to move anything you do on paper to a computer. The fundamental question is whether that's a really innovative thing," Aharonian said.
A prime example is Priceline.com Inc. in Stamford, Conn., which secured a patent for so-called reverse auctions. That's where online buyers set the price they're willing to pay and sellers bid for their business. What differentiates the process from a traditional request for proposal is that it occurs online.
Another is Home Account, which provides outsourced Internet banking services to Bank America, Ameritrade and other corporate customers. It holds a total of about 400 Web-related patents, including one for the process of combining certain types of brokerage and mortgage accounts, then selling them online.
"Our patents are around the delivery of services," said Home Account CEO Chuck White. They're also a key source of increased revenue for the Emeryville, Calif., firm because banks that want to offer the same online services would need to go through Home Account to do so.
But that's assuming the company's patents are enforceable, which is a big if, according to several experts.
"In my opinion, the patents are worthless," said Vernon Keenan, an Internet analyst at Keenan & Associates Inc. in San Francisco. He also noted that because patent holders such as Open Market Inc. have so far done little, if anything, to enforce their monopolies, "IT managers and entrepreneurs shouldn't be afraid of patents. They can safely ignore them."
Patent attorneys also have their doubts about the flurry of new Web patents. "People have to be aware that a lot of the patents at issue are probably not going to stand up in court," said Bary Rein, a patent attorney and partner at New York law firm Pennie & Edmonds. One of the primary reasons, he said, is that the standard the patent office uses for Web-related patents is "pretty low."
Still, other analysts said they believe that many of the Internet patents should never have been issued because they grant very broad protections for business processes, such as online ordering with a credit card, that can be executed in only a limited number of ways.
"Instead of patenting, what they should be doing is trademarking brands," said Steve Telleen, an e-commerce analyst at Cambridge, Mass.-based Giga Information Group Inc.
Antoine Toffa, CEO at Denver-based Trip.com Inc., which holds a provisional patent for software technology and processes related to online comparative shopping, said he agrees -- up to a point.
Companies like Priceline.com shouldn't be granted patents for moving traditional business methods to the Internet, Toffa said.
"We feel, like many other companies, that the patent isn't enforceable because it doesn't include technology. It's for a business process that existed all along," Toffa said.
By contrast, Trip.com's patent covers an online shopping process plus all of the software code that went into its Intellitrip technology, which sifts through huge volumes of airfare data to present users with the lowest fares.
As for enforcing its patent, Toffa said the onus lies with Trip.com and would be fairly straightforward. "First, we'd look at the online travel industry to see if anyone is doing the same thing. We already have a unit that scans for what competitors are doing," he said.
Another somewhat ironic option, he said, would be to hire one of an emerging breed of investigative services that conduct searches of sites for possible patent infringements.
Some firms will do that for a fee, he said, proving that "there's always an opportunity somewhere for someone to make money on the Internet."
A patent sampler
Here's a sampling of patents -- some approved, some still pending -- for online versions of real-world business practices and methods:
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