Monday August 24 2:12 PM ET
Patent flood could pose problems
By Mel Duvall, ZDNet
As entrepreneurial companies race onto data highways to make money, they face an increasing barrage of "stop" and "detour" signs in the form of patents suddenly being enforced.
At stake could be billions of dollars over the next decade in licensing revenue - or licensing expense. There also is the potential for business dynasties to be prevented from moving their traditional methods of doing business onto the Web, without good cause. "If you're granting patents that are going to be blown away as soon as they're really tested, we run the risk of doing more harm than good," said Roland Cole, executive director of the Software Patent Institute. "A tremendous amount of resources could be wasted."
Proponents of the new Internet-oriented patents said they're necessary to prevent the little guy from being stepped on by big corporations and to ensure that millions of dollars of investment in research and development are protected.
Race to create e-postage
"Pitney Bowes [Inc.] has invested in major research over a long period of time and as a result has acquired dozens of patents in this area," said David Pitchenik, the company's patent attorney. "They go back to the 1980s and as recently as a few months ago."
Last week, Pitney, a giant in the postage meter business, stepped forward to claim it holds 15 patents covering a wide variety of PC metering technologies. The company would not release full details about the nature of the patents but said they cover everything from coding and decoding addresses to using a standard computer printer to print postage.
Pitney is attempting to seek licensing agreements from a group of firms in the emerging market for Net-based postage delivery systems. But at least one, E-Stamp Inc., said it won't pay.
"We do not need to license anyone's patent to bring E-Stamp to market," said Nicole Eagan, a spokes- woman for the company. "We're out in front of this race, and Pitney is reacting to the competitive threat."
In March, E-Stamp became the first company to be authorized by the U.S. Postal Service to conduct a trial of its PC-based postage system. It plans to bring a product to market later this year costing less than $200.
Pitney also has sought USPS approval to bring an Internet-based delivery system to market but has not yet succeeded. Officials denied the patents are being used as a method to stall their competitors' progress.
"That's not the case at all," Pitchenik said. "It's a matter of protecting our investment."
Officials reacted harshly to criticism that the company has been a laggard in the e-commerce race and is now trying to catch up.
Spokeswoman Sheryl Battles said a number of Internet projects are at various stages of development and that the company is due to announce this week that it is launching a secure document Net delivery service with Tumbleweed Software Corp.
Despite the rhetoric, E-Stamp and Pitney admit to being in negotiations regarding licensing agreements.
Invited pull
On other fronts, a small Colorado company announced last week that it has been granted a patent covering the delivery of a broad range of personalized content over the Net, including bill statements, invoices, catalogs and advertising, through a system called "invited pull."
NetDelivery Corp. said its Electronic Delivery Management technology can deliver URLs to user's desktops, so they can pull information such as bills to their screens.
A sister company of Net travel pioneer Priceline.com Inc. said it was issued four new patents. The patents issued to Walker Digital Corp. cover the purchase of options in plane tickets, a system that adds the amounts due for low-cost items purchased online to a phone bill and two patents in the area of online gaming.
And Open Market Inc., which was issued three patents in March covering key aspects of Net credit-card payments and online shopping carts, said it's pursuing talks with a variety of companies on licensing agreements but is mum on the status of those talks.
However, those that are attempting to enforce their patents admit there's always the danger a company may attempt to use its patent to stall competitors or extort fees but argue there's more to be gained by playing ball.
"It makes more sense to license and reap the commercial benefits of your invention," said Jay Walker, chairman of Priceline. "If you don't license - under fair conditions - you're motivating people to take you to court or find some way to get around your patent," he said.
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