This could potentially be a huge problem for ecommerce

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This article dated 9 July 2003 is from http://www.stuff.co.nz/stuff/0,2106,2564510a13,00.html

[b]Canadian-based company poses patent threat to NZ e-tailers [/b]
09 July 2003  

A tiny Montreal-based company with patents covering international e-commerce transactions is demanding New Zealand internet retailers pay licensing fees to avoid being shut down. 


DE Technologies (DET) has been granted patents in New Zealand, the US and Singapore covering cross-border e-commerce processes, which range from currency conversion and electronic invoicing to creating databases of purchase histories. 

Now DET is looking to enforce its patents and generate revenue from them, the New Zealand Herald reported today. 

Thousands of Internet retailers in the three countries could potentially be targeted with licensing demands in a move that appears to be initially aimed at small operators. 

Among the first to be threatened with legal action was two-man operation www.productsfromnz.com, which advertises and accepts payment for New Zealand-made products over the Internet. 

The firm received a letter from James & Wells, a law firm acting for DET, which demanded a "signing fee" of $US10,000 ($16,762) and a "royalty rate" of 1.5 per cent of website transaction value. 

DET also wanted US11 cents for documents generated – from commercial invoices to packaging lists and import declarations. 

Website founder Simon Cope said the letter threatened his business with an injunction unless it paid up for a three-year licence agreement. 

"We're in our first year, we haven't even made a profit yet," Mr Cope said. 

He would seek legal advice before deciding whether to remove elements of the site covered by DET's patent, or simply ignore the action. 

Either way, a protracted legal fight was out of the question, Mr Cope said. 

He thought his company was targeted because of its high rankings on Internet search engines. 

"We've no ability really to (fight it). This is beyond me from a funding point of view." 

James & Wells' lawyer, Ian Finch, would not reveal which other Internet retailers had been sent letters similar to Mr Cope's. 

But DET also has Internet providers in its sights, the Herald reported. 

The letter to Mr Cope outlines a licensing model that would apply to ISPs which host infringing e-commerce operators and would involve paying an upfront fee of $US25,000 covering 25 merchants and a further $US1000 for each additional e-tailer it hosts. 

This licence type would attract a royalty rate of 1.15 per cent of total transaction value and US5.5 cents per document produced. 

That threatens Internet provider WebFarm, which hosts Mr Cope's website. 

Other web-hosting ISPs such as Xtra or Clearnet, which host hundreds more e-commerce websites, were potentially in the same boat. 

WebFarm chief executive Richard Shearer said DET's patent would apply to any website calculating delivery payments or offering currency selections, bringing thousands of operators within its scope. 

"They're basically trying to lay claim to the idea of providing a service to a customer," Mr Shearer said. 

He feared thousands of small e-commerce operators would be unable to afford to mount a challenge against DET's claims. 

The Internet Society was looking at DET's patents, and executive director Peter Macauley doubted the licence demands would stand up to legal scrutiny. 

"In my experience events like these are usually someone out to make a quick buck," Mr Macauley said. 

Intellectual property lawyer Matt Adams said DET's patents may be successfully challenged and made invalid. 

He said patents were often granted because examiners were unable to find research material that would invalidate them. 

"If anyone can find any documents which describe the system or evidence of its commercial use in New Zealand prior to December 1997, that's good grounds for invalidating the patent," he said. 

The men behind DET's far-reaching patents, Ed Pool and Douglas Mauer, claim to be the first inventors to "computerise the ability to do international business transactions". 

The patent application originally drew Congressional objections in the US, but was granted last year. 

Then, the Wall Street Journal reported that DET had been granted a controversial patent by the US Patent Office that "purports to cover any computerised process for automating international-commerce paperwork". 

DET Montreal-based president Bruce Lagerman said the firm was just going after licensing revenue it was entitled to. It also had a "licensing programme" in place in the US. 

"We're not going after the little guy, we're not interested in enforcement proceedings unless we have to," Mr Lagerman said. 

In 2001, DET unsuccessfully sought help from Investment New Zealand to set up its business here.