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Business methods that are patently ridiculous

By Jon Bernstein

Published: Monday 10 April 2000

The gloves are off in the US where competing ecommerce ventures have turned to the law in an effort to hamstring rivals.

E-tailers and business-to businesses (B2Bs) are rushing to patent business practices that appear to lend more to common sense than any spark of creativity or genius. The result will be stifled competition and the end to an ethos of openness and information sharing that has characterised the Web. And all this is heading to Europe.

It started last October when Amazon.com applied for and received a patent for its 'one click' ordering system. As the name suggests 'one click' allows customers who have previously bought books on the site to make further purchases via a single click of the mouse.

With patent in hand, Amazon.com set its sights on its bête noir, took out an injunction and prevented barnesandnoble.com offering its own ExpressLane service.

Meanwhile across cyberspace, priceline.com was enforcing its own patent. 'Reverse bidding' lets customers name their price for a service which suppliers are subsequently invited to match. Expedia, the Microsoft-owned online travel agent, offers a similar service - unlawfully, said Priceline.com, which filed a suit for infringement.

Most recently, Accompany Inc claimed it was a matter of months away from securing a patent on its technology for 'group buying'. It's one of the most popular methods of buying online, giving individuals the benefits of discounted purchasing in bulk. If Accompany gets its way, scores of retailers will be left to question the very nature of their businesses.

One click, reverse bidding and group buying are all neat, clever Web purchasing techniques. But are they worthy of the exclusivity a patent affords them? Are they any more creative than those mainstays of the high-street, 'buy one, get one free' and the loyalty card?

Jeff Bezos, Amazon.com's founder and CEO, said his company had spent "thousands of hours" developing 'one click' before it was introduced. But so too had Lotus when it developed 1-2-3 for the PC. No one complained when Microsoft and co introduced their own spreadsheets.

The good news for the UK and Europe is that patent laws have national boundaries and the inability to patent methods of doing business is enshrined in Article 52 of the European Patent Convention (1973).

The problem, of course, lies in the global nature of the Web. Unless you explicitly state that your service is not aimed at US businesses or consumers, American business method patents could still hurt. Add to this the fact that the EU is about to review the terms of the Convention, and what is happening in America could soon happen here.

As Simon Stokes, partner at Tarlo Lyons, pointed out, "A patent is only valid until it is successfully challenged."

However, the notoriously high cost of fighting patent cases (because of the technical examination often involved), makes this prohibitive for most dot-com start-ups.

A holder of a patent may of course chose to licence his or her ideas. This may indeed be what Accompany Inc decides to do with other group traders who are clearly are not rivals. Nevertheless, while the opportunity for abuse and anti-competitive behaviour remains, current patent laws remain absurd.