The invention of e-commerce

The invention of e-commerce (also known as US Patent 6,289,319)
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Sunday December 29, 2002 8:03PMby 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 6,289,319, 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.”