6/29/10

Supreme Court ruling leaves e-retailers guessing

A ruling leaves the question of what online shopping methods can be patented unresolved.

Paul Demery , Managing Editor, B2B E-commerce

Many of the shopping methods online retailers make available to customers, such as the number of clicks shoppers use to complete a checkout session or to view product details, can be the target of lawsuits claiming infringement of business method patents. And that hasn’t changed following yesterday’s long-awaited U.S. Supreme Court decision in Bilski v. Kappos, experts say.

“Folks in the e-commerce sphere are the ones most likely to bear the brunt of business method patent lawsuits,” says Peter Brann, a partner with Lewiston, ME-based law firm Brann & Isaacson who specializes intellectual property litigation on behalf of Internet retailers and other direct marketers. He adds that there are tens of thousands of patents that could apply to web site operations, and hundreds of court cases underway claiming infringement of such patents.

Many of these patents pertain to business methods, such as one for commodities trading that the Supreme Court ruled against this week in Bilski v. Kappos. In that case, the high court sided with Undersecretary of Commerce David Kappos and ruled unanimously that a patent sought by Bernard L. Bilski for a method of hedging against risk while investing in energy commodities was not eligible for a patent.

But in a second related ruling, the court split five to four on whether other business methods could be patented. The majority said that business methods could be open to patents, while the dissenting opinion said business methods should not be patentable.

That effectively leaves the door wide open for lawsuits claiming infringement of method patents that can be difficult to guard against—particularly for web site operators that use a wide variety of technology and offer a broad range of online shopping methods, experts say. “An online retailer may be doing something with its web site without knowing of a related method patent,” says Paul Holstein, co-founder and chief operating officer of web-only retailer CableOrganizer.com Inc., No. 450 in the Internet Retailer Top 500 Guide.

Brann adds that many patent infringement cases are filed against Internet properties even though the word “Internet” doesn’t even appear in the cited patent. “For $200, someone can filed a complaint to start the wheels rolling on what can be an expensive litigation on very ill-defined patent claims,” he says.

Brann advises retailers to take several steps to guard against over-exposure to patent suits. These include getting technology vendors to include an indemnification clause in contracts, specifying that the vendor would cover the cost of a retailer’s legal defense should it ever be named in a patent lawsuit related to the vendor’s work; and considering legal insurance to cover the cost of patent suits.

Topics:

e-retailers, patent, patent law, U.S. Supreme Court

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