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Business method patent prevails in US case

http://www.out-law.com/php/page.php3?page_id=businessmethodpate973599755


Business method patent prevails in US case

07/11/2000

A US federal appeals court has ruled in favour of a company that owns a business method patent that it claims covers the basic distribution of information over the internet. It is one of the first decisions by an appeals court on e-commerce business method patents.

In 1985, E-Data Corporation (also known as Interactive Gift Inc.) obtained a patent that lets companies sell directly to consumers at remote locations without having to stock warehouses full of products at those locations. E-Data claims that this patent also covers the basic process for selling software or documents on-line. On these grounds, it sued Comuserve, Broderbund Software, Waldenbooks and seven other companies for patent infringement and recovery of royalties. If ultimately successful, E-Data is expected to claim royalty payments from thousands of e-commerce web sites.

E-Data lost the first round of its case. A New York district court judge, Judge Barbara Jones, ruled that the company’s patent could not be extended to internet-based technologies. E-Data has now won its appeal before the federal court which said last week that Judge Jones interpreted the patent too narrowly. The appeals court ordered that she review the case again.

E-Data President, Scott Hillstrom said, “this case represents a strong victory for E-Data. While we didn't win every point, and some questions remain to be decided, E-Data's position in the digital product distribution marketplace is strengthened substantially.”

An E-Data statement added:

“The ruling construed the patent's claims in such a way that its application to virtually all US kiosk businesses selling digitally downloadable products (e.g. music, video games, books, etc.) is clear. The ruling also clarifies the issues that may now be addressed in further litigation relating to the sale of software, video games, music and other products downloaded by businesses and consumers to offices and homes.”

The appeals court limited the patent's effect by upholding Judge Jones' view that the patent does not cover downloads to PC hard drives. Further, Judge Jones has still to determine whether the patent was actually infringed. Even if she does find infringement, the defending companies could still argue that the patent is invalid on the grounds that the processes it covers were in use prior to the grant of the patent.


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