By Vijaykumar S L & Shweta Kumawat
A patent is an intellectual property right granted to an inventor – “to exclude others from making, using, offering for sale, selling or importing the invention” – for a limited time in exchange for public disclosure of the invention when the patent is granted. There are three types of patents to be considered – utility, design and plant patents.
Patents are an important entity across different industries due to the innovation and high degree of competition. eCommerce patents protect the method of buying or selling something, in an offline store or through an electronic medium. They can be used to protect various types of business practices on internet. Some patents cover specific techniques or inventions, which make it faster, easier and more enjoyable for consumers to make electronic purchases. A few of the categories that are covered under the eCommerce patents are Sales and Purchasing Techniques, Online Auctions, Consumer Reward Systems, Financial Transactions, Advertising, Infrastructure and Directories and Search Engines.
Patents are important because of the amount of licensing, contracting out, outsourcing and strategic relationships involved in eCommerce. Patents benefit eCommerce business in various ways, because they record new ideas that are developed, block rival patents on related innovations, increase valuation and enhance the reputation of a company and become a source of royalties in licensing transactions. For example, Amazon had one of the best known development and business software patents in the world – “One Click” – which allows customers to buy products with one click. In October of 1999, Amazon sued Barnes & Nobles Inc. for an infringement of Amazon’s “One Click” patent and was awarded a preliminary injunction. However, later in February 2001 the Court of Appeals for the Federal Circuit vacated the District Court’s order and held that Amazon.com was not entitled to preliminary injunction, thus proving the importance of patenting a technology or innovation coming together in the eCommerce Industry.
To increase profit, an eCommerce company that has business method payments can easily outsource some of the products. To illustrate this point, in 1993, Sightsound.com acquired a Patent for downloading digital music from the internet. Later, Sightsound sued CDNow for patent infringement and demanded other internet companies involved in downloading digital video or music, like MP3.com to pay royalty.
The main reason behind the rise in eCommerce patents is that its business method patents can secure monopoly rights over important business methods and also add a significant value through sustainable competitive advantage.
One such example can be taken from Priceline.com’s “Reverse Auction” patent also popularly known as the “name your own price” bidding system. It allows online consumers to set a price that they are willing to pay for certain products or services. In October 1999 Priceline.com sued Expedia.com, a travel website, for infringement of “Reverse Auction” patent of Priceline.com.
In the future, eCommerce patents like the online and offline integration; curation, customisation and personalisation; virtual currencies; commerce through TV and other devices will increase the importance of patents in eCommerce industry more than ever.
Studying eCommerce patents leads us to understand the intricate industry needs that produce various inventions. They also inform us the importance of the notion and financial benefits of innovations, owing to the fact that patent systems are designed as an incentive to innovate. They also refine the design processes, which form the very base of the technologies within the industry, and additionally push us to find alternative solutions.
At Blueocean Market Intelligence, where our scope of work involves inquisitively producing market intelligence for diversified industries such as eCommerce, by integrating various resources and collating information from different sources, we have been studying eCommerce patents to understand their intricacies, with respect to the above mentioned points and also how they are changing the dynamics of the industry taking into consideration, evolving through innovations and technologies developed.
Blueocean study on patents provides illustrative insights on the scope and approach taken up many of the top eCommerce companies across the world, to patent their processes and innovations. With our evolved understanding of the industry and patents, we have been to cluster the study around different services involved within, hinting rightly the importance of patents at an intricate level.
In our next blog, we will take a closer look at the patents and the eCommerce industry through a comprehensive market study.