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Nothing new: patenting the online world
The patenting of traditional business practices online has become a contentious issue in the US - and the lawsuits are flying. Although the EU does not currently consider business processes as patents, the legislation is under review. Joey Gardiner investigates

By Joey Gardiner

Published: Thursday 13 April 2000

As if cybersquatting, content liability and business across national boundaries haven't already made ecommerce enough of a legal minefield, a new issue is threatening to put the shackles on online entrepreneurs - the patenting of business processes.

This phenomenon is sweeping across the Web and looks set to prevent Barnes and Noble customers from shopping quickly without re-entering their credit details - because Amazon.com has the patent.

Potentially more worrying than the Amazon case is the patent granted to a US ecommerce company called Priceline.com, which now owns the rights for 'reverse bidding' on the Internet. Meanwhile a firm called MobShop (formerly Accompany Inc) is trying to patent a form of 'group buying' online. These processes are all business ideas that have been around for many years - but now companies with patents could put the brakes on others practising them online.

Furthermore, US companies are doing it in ever greater numbers. The number of business process patents issued by the US Patent Office rocketed from 199 in 1995 to 980 last year.

So what do companies in the UK need to be doing about it?

First, you need to know why you should be worried. The problem has arisen in the US as firms have started taking advantage of more generous patent legislation. Many of the ideas are not new per se, but they are new when applied to the Internet.

Simon Stokes, partner at law firm Tarlo Lyons, said: "All dot-coms should be looking into this at the moment. There is a great need for clarity on this issue, but while doubt remains, firms ought to do everything to protect their turf."

Francesco Benincasa, director and founder of start-up ihavemoved.com, admitted to Silicon.com that he is trying to patent his own company's business methods. "It is regrettable but it really is a matter of keeping up with the Joneses - it's just about trying to establish some clear water between yourself and the competition, and investors are starting to require it."

Some are even more strident on the issue. While Jeff Bezos, CEO of Amazon has followed the barnesandnoble.com injunction with more conciliatory noises about the length of these patents, others stress that it is their obligation to do what they can to protect their ideas.

Charles Cohen, founder and chief technology officer at Beenz, said: "It is our duty to our shareholders to not only get our intellectual capital protected, but to do it well with sound applications worldwide."

At present EU legislation doesn't officially allow the patenting of business processes. However, this is under review, and companies should carefully consider their position.

Not only could injudicious patents make it easier for companies to monopolise markets, this trend could also be damaging for ecommerce as a whole, according to Eva Pascoe, joint-MD at online shopping mall Zoom.co.uk. "If this attitude was taken at the birth of the Internet then the open standards which we all rely on would never have developed. If the US wants to stifle ecommerce then fine - but we should campaign vigorously to ensure the same thing doesn't happen over here," she said.

US patent lawyer John Pierce, associate at law firm Wilmer Cutler & Pickering, urged companies thinking of registering patents to remember why the law was instituted in the first place. "Patents are supposed to encourage innovation by upholding the rights of inventors - if broad business process patents go through we will see the opposite effect - patents actually discouraging creativity and competition."

However, he admitted that for many dot-coms the ownership of a patent was a vital part of getting funding.

So it seems that while much of industry resents the move, no-one wants to be left behind without a legal way of protecting their ideas. In the real world, no-one knows how enforceable these patents are until the outcome of two landmark cases - between Amazon and Barnes and Noble, and Priceline and Expedia (Microsoft on the receiving end) - which will determine how this affects ecommerce.

But in the mean time it is down to dot-coms to pick their way through the increasingly dangerous legal minefield. Protecting your business may be to the detriment of ebusiness as a whole.

Zoom's Pascoe added: "Ecommerce loses out from this, and the consumer loses out. The only people to make any money will be the lawyers."

And that's not a new idea either.