Company placing e-commerce sites in jeopardy

Posted on November 25, 2002

This just in from the Department of You Can't Be Serious: Pangea Intellectual Properties (PanIP), a technology development company based in San Diego, is suing boatloads of companies for infringing on its patents. The company claims to have patents on e-commerce and Web-based financial banking systems, which means any Web site that conducts shopping on the Internet is violating a patent and could be sued as well.

To quote one of my favorite Different Strokes characters: "Whatcha talkin' bout, Willis?"

It cannot be argued that these patents exist. Through the years, PanIP has picked up a couple of novel patents, including the Self-Service Terminal (U.S. Patent No. 4,359,631, 1980), Automatic Information, Goods and Services Dispensing System (4,567,359, 1984) and Automated Sales and Services System (5,576,951, 1996). According the PanIP's Web site, these patents have been cited on numerous occasions for other patents, even more so than a random sample of other historically significant patents.

The problem with these patents, and what they have now led to, is that it's difficult to differentiate what is actually an invention and what is just an idea. Ideas cannot be patented. Even Arnold knows that. That's why the two newest patents -- Automated Multimedia Data Processing Network (from 5,576,951) and Automatic Business and Financial Transaction Processing System (6,289,319, 2001) -- have the Internet e-commerce world somewhat bewildered. Developers have one thing on their minds: They could be the next company to be sued.

Enter You May Be Next!, a Web site begun by one store owner who is being sued by PanIP. Tim Beere of DeBrand Fine Chocolates is trying to organize a defense against PanIP to thawart its suing bonanza. Through October, there were approximately 50 lawsuits filed.

Perhaps the most intriguing thing with the lawsuits filed is the choice of businesses being sued. There are many large companies who provide shopping solutions on their sites, yet PanIP is suing relatively small stores located outside of its home state of California. Could you imagine if every transaction made online would incur PanIP of royalities? I'm guessing,, E-bay and thousands of other shopping sites would not be extremely delighted. The government site that lists the patents is also in violation because they allow visitors to buy patent copies directly online. So if PanIP attempts to shut the patent office down, that would render their patent useless and could create a paradox similar to the episode where Mr. Drummond and Kimberly switch places with Willis and Arnold.

Because only small businesses have been affected thus far, the media coverage has been minimal. But the cases are making their rounds now, which means PanIP is most likely running out of time.

The question is, though, can a patent be revoked or rewritten so that it will not hinder the ongoing develpoment in e-commerce? Computer programming code can be patented, but ideas on how to use that code effectively and efficiently cannot be patented.

At this point, e-commerce administrators can only hope this predicament will be resolved in favor of the sites being sued. If PanIP is allowed to enforce its patents, virtually all companies on the Web, whether small or large, will take a direct hit in revenue. The best way to help is by spreading the awareness, through local and national media or even just through friends and family. PanIP is sure to panic when its hope of fortunes turns to pancakes over this debacle.