August 11, 2005 2:11 PM PDT

Amazon pays $40 million to settle patent dispute

Amazon.com paid $40 million to Soverain Software to settle a patent-related lawsuit, just days before the trial was set to begin.

Under terms of the settlement, announced Thursday, the parties will dismiss all claims and counterclaims involved in the lawsuit. Amazon will also receive a nonexclusive license to Soverain's patent portfolio.

E-commerce software company Soverain originally filed a claim against both Amazon and clothing retailer Gap on Jan. 12, 2004, in the U.S. District Court for the Eastern District of Texas. The trial involving Amazon was scheduled to begin Monday.

"We are pleased to have reached an agreement with Amazon, and to have them as one or our patent licensees," said Katharine Wolanyk, president of Soverain.

Patty Smith, an Amazon spokeswoman, said Amazon reached a settlement in order to avoid the expense that would come with protracted litigation. It was also in the best interest of the company's shareholders, she added. She noted that the company continues to deny any and all wrongdoing cited in the case.

Soverain had alleged that Amazon and Gap infringed on five of its patents covering "core" aspects of e-commerce technology.

One patent allows e-commerce merchants to recognize a customer when he or she makes multiple inquiries on a Web site during a shopping session or when the person later returns to the site, according to court documents.

Another Soverain patent involves an Internet sales system with a virtual interactive "shopping cart," which includes technology to authenticate a buyer's identity and process payments automatically. A third patent in question is an extension of this technology and is targeted at network-based sales systems that use a public packet switched network such as the Internet.

The other two patents involve payment processing during a Web session.

In its lawsuits, Soverain alleged Amazon used its technology dating back as far as 1998 for the e-commerce giant's Web sites either directly, or indirectly, via Amazon customers.

"Soverain's intellectual property is essential to the ongoing development of our software product Transact and the future of our company," Wolanyk said.

Soverain and Gap reached a settlement in February. Terms of that settlement were not disclosed.

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Shame on Amazon
This racketeering involving patents on obvious business methods will only cease when companies have the guts to fight back rather than settle.

For $40 million, Amazon has only purchased some time... until the next patent troll knocks at the door.

Can anyone believe that it would have cost more than $40 million to have these patents invalidated ? Or that it really cost the "inventor" more than $40 million to develop the "technology" ?

Remember, the only societal justification for patents is to provide payback for heavy investments in R&D. It does take 10 years of expensive research to develop a new pharmaceutical, but it doesn't cost $40 million to transpose the idea of shopping carts and loyalty cards from WalMart to the Internet.

Someday corporate officers will be help accountable for these monetary diversions. This could be the next Enron, except this time it won't be the CFO who goes to jail, it will be the General Counsel.
Posted by (19 comments )
Reply Link Flag
Shame on Amazon
This racketeering involving patents on obvious business methods will only cease when companies have the guts to fight back rather than settle.

For $40 million, Amazon has only purchased some time... until the next patent troll knocks at the door.

Can anyone believe that it would have cost more than $40 million to have these patents invalidated ? Or that it really cost the "inventor" more than $40 million to develop the "technology" ?

Remember, the only societal justification for patents is to provide payback for heavy investments in R&D. It does take 10 years of expensive research to develop a new pharmaceutical, but it doesn't cost $40 million to transpose the idea of shopping carts and loyalty cards from WalMart to the Internet.

Someday corporate officers will be help accountable for these monetary diversions. This could be the next Enron, except this time it won't be the CFO who goes to jail, it will be the General Counsel.
Posted by (19 comments )
Reply Link Flag
Web/Software Patents = Counter-Productive to Society
Software Patents are counter-productive to the technological evolution of our society, and do nothing but harm for the vast majority of businesses (small and large), as well as (education/health care/government) organizations today.
Posted by (2 comments )
Reply Link Flag
evolution of our society
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Posted by George Cole (314 comments )
Link Flag
Web/Software Patents = Counter-Productive to Society
Software Patents are counter-productive to the technological evolution of our society, and do nothing but harm for the vast majority of businesses (small and large), as well as (education/health care/government) organizations today.
Posted by (2 comments )
Reply Link Flag
evolution of our society
<a class="jive-link-external" href="http://www.analogstereo.com/suzuki_esteem_owners_manual.htm" target="_newWindow">http://www.analogstereo.com/suzuki_esteem_owners_manual.htm</a>
Posted by George Cole (314 comments )
Link Flag
Perfect illustration
This is a perfect illustration of the problems of the current patent system.

It shows clearly the difference between having a good idea and implementing and commercializing a good idea, and why the latter should receive protection while the former should not.

Ideas are a dime a dozen. No successful company is particularly concerned with "ideas" - they already have far more good ideas than they know what to do with. Aspiring writers find this out all the time when they try to peddle the "idea" for a script to a studio; inventors discover this when they try to peddle the "idea" for a product to a major corporation. Half the time, someone has already thought of this idea (in a brainstorm session along with 100 other ideas, for instance), but it's been rejected or shelved as uninteresting or unattractive for some reason. Or it's already being worked on, or pending approval, or whatever.

Coming up with an idea is the easy part; anybody can do it, and most people already do from time to time. I've come up with dozens if not hundreds of (potentially) fantastic product or technology ideas over the years, but they are all worthless since I've never actually developed them into working products or started a company to commercialize them.

The saying "invention is 1% inspiration and 99% perspiration" is certainly true. And in many cases relating to the internet, even the "inspiration" part is overstated, as the "bright ideas" are themselves so blatantly obvious.

Figuring out a clever, original and non-obvious way to make a tough-to-implement idea work, I'd say, is what patents are all about. Some clever algorithms and the occasional non-intuitive solution or process could qualify for this, but most business-process and internet-related patents and many other software patents don't, in my opinion.

The problem with many of these internet-related patents is that they don't necessarily describe the solution to a difficult problem in enough detail to constitute a unique mechanism; in addition, they are generally obvious to any programmer (and many non-programmers) once the task of implementing such a system is assigned to them, though maybe not obvious to patent examiners, and the problem it is trying to solve is obvious to most business and marketing types who are given the internet as a possible means of reaching customers, selling products, and making money.

Such patents frequently say essentially "connect computer A (which already exists and was invented by someone else) to Internet B (which already exists and was invented by someone else, and which is already connected to computer A) and do process C (which may already exist in the real world, though not yet at the interface of a computer with the Internet)".

Generally speaking, if they've come up with an interesting way to implement a solution to a problem or task that's been known for a while, but difficult to implement ("it would be great if we could do this, but we don't know how to in an economical manner as it would take too much CPU/storage capacity to be useful"), or if the entire concept is so new and different that it is non-obvious itself, that would be a useful and deserved patent, and a company like Amazon would have to come up with a different solution to the same problem via their own programmers' creativity; if not, I'd argue the solution is likely "obvious", since it's possibly the ONLY design solution to that rather obvious problem, and not difficult for any programmer (or business analyst/systems designer) trying to accomplish such a task (such as selling books to customers, using the internet rather than telephone or mail forms or in person) to come up with.

Patents, like other intellectual property, are intended to expand human knowledge and capabilities; the Constitution explicitly grants protection to such ideas solely for the purpose of increasing their availability to and use by the public at large. As such, patents that are used by companies not commercializing such ideas to prevent others from doing so are contrary to the very justification for patents in the first place (just as virtually-perpetual copyrights held by by someone not actively publishing a work are contrary to the intent of copyright).

In addition, patents are intended to be clear plans for how to construct such a device; today, they are usually made to be unintelligible to even the original inventor, which also corrupts the intent of patents in that even when they have expired and freely available for use, they are generally not a useful aid for implementing anything in the real world.
Posted by fredmenace (159 comments )
Reply Link Flag
Perfect illustration
This is a perfect illustration of the problems of the current patent system.

It shows clearly the difference between having a good idea and implementing and commercializing a good idea, and why the latter should receive protection while the former should not.

Ideas are a dime a dozen. No successful company is particularly concerned with "ideas" - they already have far more good ideas than they know what to do with. Aspiring writers find this out all the time when they try to peddle the "idea" for a script to a studio; inventors discover this when they try to peddle the "idea" for a product to a major corporation. Half the time, someone has already thought of this idea (in a brainstorm session along with 100 other ideas, for instance), but it's been rejected or shelved as uninteresting or unattractive for some reason. Or it's already being worked on, or pending approval, or whatever.

Coming up with an idea is the easy part; anybody can do it, and most people already do from time to time. I've come up with dozens if not hundreds of (potentially) fantastic product or technology ideas over the years, but they are all worthless since I've never actually developed them into working products or started a company to commercialize them.

The saying "invention is 1% inspiration and 99% perspiration" is certainly true. And in many cases relating to the internet, even the "inspiration" part is overstated, as the "bright ideas" are themselves so blatantly obvious.

Figuring out a clever, original and non-obvious way to make a tough-to-implement idea work, I'd say, is what patents are all about. Some clever algorithms and the occasional non-intuitive solution or process could qualify for this, but most business-process and internet-related patents and many other software patents don't, in my opinion.

The problem with many of these internet-related patents is that they don't necessarily describe the solution to a difficult problem in enough detail to constitute a unique mechanism; in addition, they are generally obvious to any programmer (and many non-programmers) once the task of implementing such a system is assigned to them, though maybe not obvious to patent examiners, and the problem it is trying to solve is obvious to most business and marketing types who are given the internet as a possible means of reaching customers, selling products, and making money.

Such patents frequently say essentially "connect computer A (which already exists and was invented by someone else) to Internet B (which already exists and was invented by someone else, and which is already connected to computer A) and do process C (which may already exist in the real world, though not yet at the interface of a computer with the Internet)".

Generally speaking, if they've come up with an interesting way to implement a solution to a problem or task that's been known for a while, but difficult to implement ("it would be great if we could do this, but we don't know how to in an economical manner as it would take too much CPU/storage capacity to be useful"), or if the entire concept is so new and different that it is non-obvious itself, that would be a useful and deserved patent, and a company like Amazon would have to come up with a different solution to the same problem via their own programmers' creativity; if not, I'd argue the solution is likely "obvious", since it's possibly the ONLY design solution to that rather obvious problem, and not difficult for any programmer (or business analyst/systems designer) trying to accomplish such a task (such as selling books to customers, using the internet rather than telephone or mail forms or in person) to come up with.

Patents, like other intellectual property, are intended to expand human knowledge and capabilities; the Constitution explicitly grants protection to such ideas solely for the purpose of increasing their availability to and use by the public at large. As such, patents that are used by companies not commercializing such ideas to prevent others from doing so are contrary to the very justification for patents in the first place (just as virtually-perpetual copyrights held by by someone not actively publishing a work are contrary to the intent of copyright).

In addition, patents are intended to be clear plans for how to construct such a device; today, they are usually made to be unintelligible to even the original inventor, which also corrupts the intent of patents in that even when they have expired and freely available for use, they are generally not a useful aid for implementing anything in the real world.
Posted by fredmenace (159 comments )
Reply Link Flag
Patents should be based on algorithms not "features"
This is appalling. It used to be that software patents were based on unique algorithms rather than features. Under the logic in this case, Oracle could sue you if you came up with a better way dealing with data, or Microsoft could sue you if you built a new PC OS.
Posted by (274 comments )
Reply Link Flag
Patents should be based on algorithms not "features"
This is appalling. It used to be that software patents were based on unique algorithms rather than features. Under the logic in this case, Oracle could sue you if you came up with a better way dealing with data, or Microsoft could sue you if you built a new PC OS.
Posted by (274 comments )
Reply Link Flag
 

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