Creating Marketable eCommerce Patents

by Jeffrey R. Kuester

Mr. Kuester ( is a partner with the patent, copyright and trademark law firm of Thomas, Kayden, Horstemeyer & Risley, LLP ( in Atlanta, Georgia. This article was originally published in the March 2001 issue of Patent Strategy & Management.

As dot-coms become dot-compost, IP may be their last remaining asset. While trademarks of a failed business generally have little value, and copyright law still offers little protection for software, patent rights are more likely to hold their value.

Furthermore, as "bricks & clicks" businesses figure out new ways to use the Internet to sell their conventional products and services, they will work to protect their IP in ways that it can be licensed to others in different markets. For eCommerce, this requires going beyond the traditional rules for creating strong patents.

Priceline v. Microsoft
One famous example of a recent eCommerce patent license resulted from the settlement between Priceline and Microsoft regarding Priceline's name-your-own-price business model. In October 1999, Priceline sued Expedia and its parent company, Microsoft, for infringement of U.S. Patent No. 5,794,207, "Method and Apparatus for a Cryptographically Assisted Network System Designed to Facilitate Buyer-Driven Conditional Purchase Offers."

On January 9, Microsoft agreed to pay royalties to Priceline to settle the dispute. While the terms of the settlement were not disclosed, both parties stated that it would not have a material impact on their businesses. There are several lessons to be gleaned from this case.

First, the patent system is still working, even in cyberspace. While the e-patent pundits suggested that the sky would soon fall under the weight of bogus business method patents, the Priceline settlement is an example of the patent system working as it always has. If the Priceline patent was clearly invalid, it is less likely that a corporation the size of Microsoft would have agreed to pay anything. Instead, the parties behaved normally, implying that the system worked.

Second, this settlement also serves as an example of a conventional licensing strategy: attract early participants with a lower rate to boost the ultimate success of the licensing program. If Priceline had asked for too much, it could have faced an invalidity fight that might have destroyed the asset, like the one being waged against another famous eCommerce patent, the one-click patent owned by, U.S. Patent No. 5,960,411. (After a trial court granted a preliminary injunction against Barnes & Noble in a suit brought in October 1999, the Federal Circuit on February 14 held that Barnes & Noble had "mounted a substantial challenge to the validity of the patent" and that Amazon was not entitled to the injunction. Thus, Amazon is now facing the invalidity fight that Priceline avoided.)

Third, the Priceline patent was written with an eye towards marketing it. For example, the claim was written so that infringement would not be obscured by technical intricacies:

1. A method for using a computer to facilitate a transaction between a buyer and at least one of sellers, comprising:

inputting into the computer a conditional purchase offer which includes an offer price;
inputting into the computer a payment identifier specifying a credit card account, the payment identifier being associated with the conditional purchase offer;
outputting the conditional purchase offer to the plurality of sellers after receiving the payment identifier;
inputting into the computer an acceptance from a seller, the acceptance being responsive to the conditional purchase offer; and
providing a payment to the seller by using the payment identifier.

The steps of this claim are lucid and can be readily detected in a potential licensee's system. By looking at the Expedia web pages themselves, Priceline was able detect and then argue that each of the claimed steps was performed by the Expedia system.

For patents that lack such easily detectable elements, technical experts are often used to determine whether a claim element is present. For example, variable names and script titles in web page code, as well as URLs that are generated by hyperlinks or that perform actions on web pages, can provide evidence of infringement. By keeping these types of indicators in mind, a skilled e-patent attorney is better able to draft strong claims for eCommerce patents.

Claiming Tips
The American Inventors Protection Act created a defense to infringement for any claim directed to a method of doing business. While the Act did not define such methods, one way to help avoid the defense is to not include business terminology in the claims, title, abstract and specification. The object is to prevent the PTO from classifying the application as being in class 705, the business methods class.

eCommerce claims can also be written in alternative formats, including actually claiming the web page itself -- as data stored on a recordable medium. While these types of claims push the envelope of statutory subject matter, they have been accepted by the PTO and can substantially increase the number of potential infringers, possibly even off-shore websites. Take care, however, to write the claims to show the functionality of the claimed data.

In conclusion, if a patent portfolio is the only thing left standing when a dot-com is dot-gone, strong patents can generate revenue into the future. However, while strong patents in all areas of technology share certain characteristics (like breadth and validity), strongly marketable eCommerce patents require specialized attention.

This article was originally published in the March 2001 issue of Patent Strategy & Management, Vol. 1, No. 11, p. 7.