Priceline (PCLN) 70 -2 1/4 : Jay Walker now looks like Ann Elk, from the Monty Python show, who says "My theory, which is mine, that I thought of, is mine." Priceline.com sues Microsoft for copying the user-initiated bid system. This should be a very interesting lawsuit as it is the first real test of the business process patents. With patents it is very important to remember that only a process is patentable. The end-result is not. Eli Whitney's cotton gin patent did not prevent other people from making cotton, just from using his process. Even though you can now patent a method (process) of business, you still cannot own the end result. What is Priceline.com's end result? Priceline.com's patent is for a "method and appartus" for user-initiated bids. The method describes how a user initiates a price (bid) which is then routed to suppliers and compared against an inventory. The method claims are very broad and general. The apparatus claims of Priceline.com's patent describe how the computerized system works, including descriptions of the central processing unit and storage devices (databases). As long as Microsoft wrote its own algorithms to process their user initiated bid system, it isn't likely that Microsoft violates the apparatus patent claims. Since patents must have a "non-obvious" aspect to them, if anything in Priceline.com's apparatus claims is so obvious, or necessary, that Microsoft had to duplicate them to create any type of system, (for example, Priceline.com's patent describes how it uses databases; that doesn't preclude Microsoft from using databases) then Microsoft could argue that Priceline.com's apparatus claim is "obvious," and therefore does not deserve a patent. So the real question is whether the "method" claims are valid. Priceline.com is putting everything on the line with this lawsuit, because, if they lose, at best they render their patent barrier-to-entry valuation invalid. At worst, they have their patents invalidated. It happens. If they win, they will have an unprecedented level of patent protection. So what are the chances? First, forget about the whining in the press release regarding Bill Gates telling Jay Walker to "get in line" if he wants to sue Microsoft. It's amusing, but irrelevant (but read it anyway). The specific complaint charges that Microsoft infringed on patent 5,794,207. Just to give you an idea of how broadly written this patent is, Method claim #4 includes checking to see if a credit card account is valid. No one would argue that Priceline.com invented that. If Microsoft can argue that the methods are only relevant to Priceline.com's apparatus, and that Microsoft's apparatus is different (not difficult), then it is not likely that Priceline.com's challenge will stand up. There are many other business method patents out there; this is likely to set precedent for many companies. Expect it to go to trial. - RVG
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