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Monday, October 25, 1999 Published at 17:56 GMT 18:56 UK


Business: The Economy

Amazon.com case may open floodgates

Microsoft is being sued by Priceline.com

When Amazon.com filed a suit against its rival for patent infringement, it sent shivers down the spines of e-businesses everywhere.

The online giant announced on Friday it had filed a suit against Barnesandnoble.com for using its 1-Click technology.


[ image: Amazon.com's case could trigger many more]
Amazon.com's case could trigger many more
1-Click allows Amazon.com customers to buy goods over the web with just one click of the mouse.

The advantage of the system is that the customer does not have to enter and re-enter information.

The problem is, that by some reckonings, about half of all e-retailers use an "express" shopping mechanism. Does Amazon.com have a case against them as well?

You can't be serious

Most people's immediate reaction to the Amazon.com case is one of incredulity.

Analyst Paul Hagen of Forrester Research said: "It's like patenting taking orders over the telephone. My gut tells me this will go nowhere."

Barnes and Noble, predictably, see the suit as the latest stage in their competitive, and previously litigious, relationship with Amazon.com.

They call the suit a "desperate attempt to retaliate for our growing market share."

But what Amazon.com has done has to be seen against the backdrop of a seachange in US patent law, Robert Greene Sterne, a leading US attorney on intellectual property law, says.

He believes the Amazon.com case is one of the first of many.

A court decision last year held that a business process could be patented and this helped push back the already wide barriers of what can be patented.

The US's wide interpretation of what can be patented has led to a flood of applications, many from Internet companies.

Given that it takes two or three years for a claim to be processed, many internet companies have only just received their piece of paper.

"The net result of that is that there is going to be a very dramatic increase in disputes, between owners of patents and companies who do not have patent protection," Robert Greene Sterne said.

Sceptics still question the validity of many of the patents granted.

World Wide Web inventor Tim Berners Lee said some patents combine "well-known techniques in an apparently arbitrary way, like patenting going shopping in a yellow car on a Thursday."

The US patent office has even been known to withdraw a patent it granted for software which was widely in use.

Microsoft faces action

While Amazon.com's case has grabbed the most headlines so far, another similar case is underway.

Priceline.com has filed a suit against Microsoft for allegedly copying its patented method of reverse auctions.

Priceline.com allows customers to name their price first for plane tickets and hotel rooms, in what is known as a reverse auction. In September, Microsoft launched a service that allowed customers to name their price for hotel rooms.

E-commerce stifled

If Amazon.com does win this case, it could change the face of e-business.

Fear exists that this case could change forever the entrepreneurial spirit that characterises the web. Many fear that the onset of the lawyers will spell the end for e-commerce as we know it.

But - lawyers fees apart - patents often prove to be nice little earners.

A company that has a patent has a few options when it comes to making cash. The company can sue for retrospective damages or it can demand a license fee. IBM is estimated to make about $1bn annually from its patent portfolio.

A patent can even be used as a mechanism to leverage business as well as adding shareholder value.

"They ( the company) may not be making much money, but because of their patent position, they may be perceived as having more value," Robert Greene Sterne said.

Only in America?

Could the Amazon.com scenario be repeated here?

"It is a very tricky area," a spokesman for the UK patent office said, declining to comment further.

Patent and copyright law operates very differently in the UK than in the US. Typically, software would be patented in the US while it would be copyrighted in the UK.

But UK patent authorities might find they have no option but to follow the path of the Americans, some say.

E-businesses could find themselves at a disadvantage if they face US aggressors on their freer home territory, but when they target the US market find it is protected by patent law.



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