The invention of e-commerce (also known as US Patent 6,289,319)

by Matthew Gast

I believe in patents, and I think it's a great idea that they have such a strong constitutional basis in the U.S. Inventors should be able to protect a unique idea so that they have time to reap the rewards of their efforts, especially when good ideas can be easily copied by a larger competitor. Patents are supposed to protect inventors. I'm much less comfortable with patents being used as a means of attack and a business in and of themselves. The system should protect inventors who are actually inventing, as opposed to inventing on paper. (Think of the difference between a competent network engineer, and a certified "paper tiger.") If an inventor is building the product or using the process described in the patent, it was clearly worth something to them. If they don't appear to do anything other than sue people and ask for money, that is much more difficult territory.

Government-sanctioned monopolies are always treacherous territory, and the patent system has a particularly noxious breed of parasite: People who "invent" new technology by studying the state of the art and guessing where it might go, for the purpose of obtaining patents and extorting license fees from productive businesess following along the obvious path of innovation. These patent-system tapeworms file applications for inventions they have no intention of ever putting to use, simply to use the patent document as a method for extorting license fees from others. (Say what you will about Amazon's "one click" patent, but at they were practicing the patented invention.)

Well, in September of last year, the patent office issued a broad patent, number
, for an "[a]utomatic business and financial transaction processing system." The inventor, Lawrence Lockwood, has enlisted the help of Pangea Intellectual Properties (PanIP) to license the patent. Some news stories state that he licensed his patent to PanIP, while others describe him as a founder of the company.

With the backstory out of the way, I can get to the point of this entry. I ran across a reference to this patent a few days ago when I was reading Bob Lewis's December 2 InfoWorld column. Lewis says that PanIP "might politely be described as a lawsuit factory." PanIP's strategy appears to be to nibble a bevy of small companies to death by suing, and then offering to go away for a license fee. It is not clear whether attacking small business is the end goal, or if it is meant to build licensing momentum before they attack larger e-commerce sites. Many of the companies that have been singled out are small companies that do not have the legal resources to fight a sustained legal battle, and thus have either settled or reverted to less efficient, but non-electronic methods of doing business.

Lockwood has a history of being a paper inventor. He previously sued the SABRE division of American Airlines attempting to extort money for his patents, and had two patents invalidated as a result. According to this
InfoWorld article
, during a deposition in that suit, American's lawyer asked about his employment, and Lockwood responded, "I enforce my patents."

There's the reason I don't like him. He doesn't act like a man who is an inventor using his patent as a well-deserved shield against competition. He anticipates where the action in a field will be and attempts to obtain a patent, then uses the threat of legal action to extort money from smaller companies that can't afford to fight him. He probably filed for the patent with the plan of using it to live off licensing revenues. It's quite possible, dare I say likely, that he would have no idea how to set up a Web site, much less practice electronic commerce. (The PanIP Web site doesn't let you buy a license to any of the patents they represent, after all.) But somehow, we're supposed to believe that he deserves money from anybody out there with a transaction-processing Web site. As the first group of defendants said, "You may be next."

What would happen if you actually had to be using the patented invention (or a derivative thereof) to win an infringement lawsuit?


2002-12-29 20:40:20
He is not doing anything illegal
Subjective opinions don't count for much. Whether you despise Mr. Lockwood's existence or not, he is operating within the bounds of the legal system, which is a very good thing. If you don't like the legal rules as they are, then the best action to take is to propose better rules. Complaining about the system is just a waste of time.
2002-12-29 23:46:57
not a waste of time
The system is broken since it allows so many leaches such as this man to survive. He IS acting within the bounds of the law... laws which are so hideously broken that they need to be completely revamped. Complaining about them and raising public interest is the first step to fixing the system. It is not a waste of time.

Whoever posted that it is a waste of time to complain about such things is probably one of these idiots.

I'm sorry, I just have absolutely zero respect for the people who abuse this system to the point of making it worthless.

2002-12-30 07:07:02
patent technology, copyright techniques
I agree that the patent system has been used well in the past to protect inventors from unfair exploitation. However, recent trends in the patent process are showing us remarkable failures, as illustrated by this article and the countless other nightmare legal attacks that have cropped up. Here is my take....

I'm tired of people referring to software, standards, and processes as "technology". They say this to make their work sound intimidating or important, but when it comes to the abstract definition required for a patent, it's all really just logic. The same goes for business processes; they are techniques, not technology. After seeing the information industry behaving as badly as it has since the advent of the internet, I am inclined to favor less legal machinery rather than more. My final conclusions: software patents are unethical, business process patents are nonsensical, and copyright is underprotected in exchange for an obscene amount of legal wrangling over other forms of "intellectual property".

In the larger picture, I'm totally disgusted by all the players out there grappling with ideas and screaming "mine" like ill-tempered toddlers on an unsupervised playground. Ideas are meant to be shared, and the opportunity cost of all of this selfishness squabbling is astronomical to mankind at large. So go ahead and "steal" all my ideas; it's not as if people and companies aren't doing it already. I personally would rather die knowing I made a contribution to the world rather than that the world made contributions to the wallet under my fat, lazy, litigious American ass for things I did yesterday.

2002-12-30 15:56:12
After reading the claims, it almost sounds like a cash register in a store connected to a central computer would fall under this patent (if the cash register had a video display) or the computer terminal at the credit department of a department store . Seems I remember such systems existing long before this patent was filed. Some prior art?
2003-01-01 14:32:05
He is not doing anything illegal
> the best action to take is to propose better
> rules

That's why the lead-in question to the comment section was "What would happen if you actually had to be using the patented invention (or a derivative thereof) to win an infringement lawsuit?" If this were the law, patent tapeworms such as Mr. Lockwood could not win infringement suits because they do not actually use patented technology or processes in any product or service.

I was interested in hearing what people thought of the idea. It is an alternative, but I'm always wary of "solutions" worse than the disease. One problem with the requirement to practice the invention, for example, is that it might exclude a large class of more honest infringement plaintiffs. As an example, consider a person or company that licenses code but does not actually build finished products. Is a toolkit and API a product? Litigators would love to dispute the question. There may be other problems that I cannot see without discussing the matter with other more experienced people.

> Complaining about the system is just a waste of
> time.

Another proposal, made by many others, is to improve the quality of examination by the USPTO. Other comments have noted that prior art is likely to be available, but obviously the USPTO did not find any of it. Sometimes, a little "complaining" is necessary to draw attention to existing proposals, refine them through a public discussion, and build consensus for enacting them.

(If laws are the equivalent of computer code for business/society, an open discussion of how to change them is a close relative of open source software development, too.)

2003-01-01 14:43:01
Prior art
Now that the patent has issued, prior art that can cited against a patent must be either other patents or printed publications. (35 USC 301, 37 CFR 1.501) If you can find a written description of the system you remember, by all means, send it in to the patent office.

Unfortunately, prior art citations are not generally used. They are placed in the file for any requester of the file to see it, but do not cause action to be taken. If you want the USPTO to act on your submission and take another look, it costs money. The USPTO fee for a reexamination request is $2500 or $8800; those fees do not buy you any attorney time to draft the request.