May 5, 2004, 12:00 AM

Retail e-commerce lawsuits are settled, but more may be in the works

The first batch of lawsuits against a group of small retailers by San Diego-based Pangea Intellectual Property LLC claiming patent infringements has been settled, but PanIP is threatening new suits against other retailers.

The first batch of lawsuits against a group of small retailers by San Diego-based Pangea Intellectual Property LLC claiming patent infringements has been settled, but PanIP is threatening new suits against other retailers.

In March, PanIP, which owns patents relating to the processing of payments at e-commerce sites, settled with a group of 16 retailers who had banded together to fight the suits. The settlement grew out of what was actually a secondary issue in regards to the patent suits. The 16 defendants had organized into what they called the PanIP Group Defense Fund and had established a web site. PanIP sued the group under state and federal laws, claiming defamation and trademark infringement for use of the PanIP name on the web site.

The court struck all the state claims and awarded the defendants $19,000 of the $45,000 they had sought in legal fees. Rather than appeal, PanIP agreed to mediation. That resulted in PanIP dropping its claims against the 16 defendants and agreeing not to re-instate suits against them and the defendants agreeing not to collect their $19,000.

The suits date to 2002 whenPanIP targeted small retailers around the country threatening to sue them if they didn’t pay a licensing fee for the technology that covers web sites that provide text and graphics and have a method for gathering financial information, whether automated or not. Defendants say PanIP started out seeking $30,000 in licensing fees from each, settled with some retailers for $5,000 and sued the balance.

At the same time, though, PanIP has threatened a new group of retailers with legal action if they don’t pay a licensing fee of $2,500. Kathleen Walker, PanIP’s attorney, says PanIP will proceed with defending its patents. “This agreement has no bearing on the validity or applicability of the patents or on whether PanIP will proceed,” she says.

Meanwhile, the U.S. Patent and Trademark Office has agreed to review PanIP’s patents. Defendants’ attorney Jonathan Hangartner of San Diego-based Sheppard, Mullin, Richter & Hampton LLP, says the PanIP Group Defense Fund claims that there were systems that pre-date PanIP’s patents. PanIP says in defending its patents that the Patent Office has cited them as “prior art” 147 times in rejecting other patents, nearly 30 times the rate of citations for an average patent. “We believe the patents will come out unchanged,” Walker says.

Bruce Sunstein, Boston-based patent attorney with Bromberg and Sunstein who is not involved with the case, notes that most patent re-examinations result in some change to the patent. “Usually something happens that will narrow the claim,” he says. “You don’t usually get through the re-examination unscathed.” m

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