Patents Considered Vital to Thrive on the Internet

Article excerpt

NEW YORK (NYT) -- How important will intellectual property be in the new economy? "Excruciatingly important," said Glover Ferguson, co-director of the electronic commerce program at Anderson Consulting.

A case in point is the victory that the online bookseller Amazon.com scored last month when it obtained a preliminary injunction against Barnesandnoble.com. The injunction prevents Barnes & Noble from using the one-click system patented by Amazon that enables repeat online customers to place orders without having to re-enter mailing and credit card information.

"This is going to put some real boulders in the way of the Barnes & Noble checkout line system," said Kevin Rivette, co-author of Rembrandts in the Attic, a new book from the Harvard Business Press that proselytizes on the power of patents. "The lawsuit also has put everyone else on the Net on notice."

Walter Hanchuk, a partner at the New York law firm of Morgan & Finnegan, concurred, saying the ruling "clearly highlights the importance of intellectual property in all technologies."

Intellectual property, in Rivette's view, is what is going to separate many winners and losers on the Internet.

"When it's easy to put up a Web site, when it's easy to get financial backing, this is where some of the shakeout is going to happen," he said.

Much attention so far has been paid to the new wave of so-called business-method patents on the Internet. But Mark Lemley, a professor of law at the University of Texas, points out that the scope of what can be patented is growing every day.

"There's a patent on a method for holding a golf putter," Lemley said. "There's a patent on allocating assets in a divorce settlement. This is a great expansion of patentable subject matter beyond what has traditionally been the technological arts."

Rivette, who is chief executive of Aurigin Systems, a patent- strategy consulting company, predicted that "one of the biggest things that will occur in the next three to five years is the proliferation of well-funded patent `factories.'"

Rivette said he had heard of about half a dozen such enterprises modeled along the lines of Walker Digital, the controversial -- and extremely successful -- patent-incubation venture that gave birth to Priceline.com. The Priceline.com business is based on a patented method for letting prospective customers propose a price for a product or service, with the online order being filled if the seller is willing to sell at that price. The patent is one of 30 received by Walker Digital, which has another 300 patent applications pending.

Like Walker Digital, which kept a very low profile until it started Priceline.com, these ventures are stealthily amassing patent empires that will become apparent only when they are ready to start businesses, Rivette said. …