Patents limit e-trade options

A growing number of enterprises may face lawsuits for patent infringement because of the increasing trend for patenting business processes as well as technologies and products, according to Rob Adams, vice president of sales and marketing at Derwent Information, which specialises in tracking patents.

"In 1988 there were fewer than 500 patent applications for definable business processes across the 40 different patent offices we monitor around the world," he said. "There are now some 200,000 business method patents on our World Patent Index. Infringing one of them could be costly for a company. If the patent is held by a US company, and the infringer knew a patent already existed, it will cost them three times the damages."

This increase in the patenting of business processes has come about with the development and growth of the Internet and e-business technologies. Business processes that were once simply the tacit knowledge of a company, or were paper-based and used internally can now be coded and used in online dealings with customers, suppliers and business partners.

Serious challenge

There have recently been some notable lawsuits for patent infringement. One, brought by MercExchange against eBay, was based on four of MercExchange's patents on business methodologies for computerised marketplaces. Perhaps the most famous case so far has concerned Amazon suing its rival, Barnes & Noble for using a technology similar to its own patented 1-Click system. This system keeps customers' billing and shipping information so that they do not have to re-enter data. This case was settled earlier this year under undisclosed terms, though a Federal appeals court in the US found that Barnes & Noble had mounted what it described as a "serious legal challenge to the validity of Amazon's patent".

This highlights one of the grey areas of patenting. "Because one company holds a patent on a business process, it does not mean that other companies have to stop using it," Adams commented. "It is possible to establish the existence of prior art [that a process was used by others before a patent was issued] to oppose patents, although it is not always easy. We find that even patent offices have difficulty in identifying where prior art exists."

As business-to-business activity across the Internet grows, so does the danger of infringing patents by linking systems. "Enterprises in the UK need to be aware that software developments could infringe patents held by companies in the US, Europe or Japan," said Adams. "Any software research or development, even for business processes, should now include looking for possible patent infringements."

Carrying out a search for patents may benefit firms in several ways. If relevant patents exist, it may stop development before court action ensues. It may also show firms where to apply for a licence to use patented processes, and in some cases cross-licensing may be possible. If systems can be licensed rather than developed from scratch it may also save on the R&D budget. Searches may also indicate where R&D budgets can be spent to patentable advantage.

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