April 23, 2012, 12:24 PM
Blogger

Leave the cannoli: An e-commerce trade group wants to offer patent protection

Thad Rueter

Senior Editor

The way Eli Katz figures, the “patent trolls” already have a good racket going, so why shouldn’t e-retailers band together and fight back? That’s one of the goals driving his new e-commerce trade group, TheEmob.org, which launched earlier this year. Yes, that’s mob as in Mafia, Outfit, Five Families, Cosa Nostra. And just so no one misses the connection, the home page of the site includes an image of a cigar-holding gangster, his suit about as shiny as a road slickened by rain. He sits menacingly in a leather chair and is flanked by two bald goons who look as though they’ve already dug the hole. 

Katz, whose gritty Brooklyn accent makes this Midwestern hick imagine shoot-outs in Little Italy and bootleg cigarettes sold from car trunks, has been an e-retail capo since the 1990s. Most recently he was president of watch retail site Ashford.com. He describes himself as a “thought leader” and “pioneer.” I can’t vouch for that—I’ve watched enough cable reruns of mob movies to know one shouldn’t vouch for a stranger unless absolutely sure, thank you very much “Donnie Brasco”—but I can tell you he seems to be spoiling for a fight.

In case you’ve been hiding under the mattresses and didn’t know, retailers large, medium and small face enormous financial pressures from companies that hold patents for such vital e-commerce technology as site search, production recommendations and navigation. (Let me take this chance to shamelessly plug Internet Retailer’s rocking new cover story about patent infringement suits that target e-retailers, which you can read by clicking here.) The patent holders—also called non-practicing entities by those with less of an emotional and monetary stake in the matter—tend to target e-commerce operators individually in hopes of getting them to settle for lump sums or costly licensing fees. A recent change to patent law could make that harder for patent holders, but it appears unlikely that e-retailers will escape the patent-infringement threat.

As part of his new group’s mission, Katz wants to offer some much-needed protection for small- and medium-sized retailers. For now, that means the two dozen or so retailers who have ponied up the $3,600 annual membership fee can share tips about patent defense among themselves and receive advice about , say, which law firms are good to approach and which vendors will help e-retailers in suits involving e-commerce technology—and which won’t. In the future might come some sort of joint defense fund for retailers facing patent actions, though Katz is quick to say what TheEmob.org will not become. “We’re not setting out to be a pseudo-law firm,” he says, that freaking accent of his both threatening and friendly, like most of the interesting New Yorkers I’ve known. “Mafia-style, we will settle these things a little differently.”

All kidding aside—almost—the work TheEmob.org hopes to do in this area represents a big need for the e-commerce industry, especially those retailers who can’t afford to settle patent cases with what amounts to petty cash, as is the case with Amazon.com and some other huge players. That’s according to the experts such as Lee Cheng, general counsel for Newegg Inc., who has become almost a folk hero in the industry for his vigorous work against the so-called trolls, and who will speak at the Internet Retailer Conference & Exhibition 2012 in a session entitled “Fighting back against patent suits: What to do and how to do it.” And that’s also according to many other retailers who keep quiet because they can’t afford to be as brave.

I don’t know whether TheEmob.org will succeed—I’m the skeptical type (sue me, it’s how I pay for my rent, groceries and beer.) But I don’t doubt the enthusiasm shown by Katz. To be sure, the trade group also has other purposes, including what appears to be a much greater one than lawsuit protection: Simply helping those small- and mid-sized retailers figure out how to survive in the Darwinian world of online retail. But it will be telling to see if retailers who feel they are under attack over patents will band together under this would-be Godfather.

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