If Mr. Pool's application holds up, companies using the Internet for computer-to-computer international trade will have to pay him a royalty fee.  Mr. Pool's Edison-like thought process began as follows. In the early 1990s, Mr. Pool, a small business owner, went to Russia in search for opportunities to import materials into the U.S.  Because of the fluctuations of the Rubble at the time, Mr. Pool commissioned a company to develop a computer system that could be regularly updated and spit out prices that could be locked in. He later applied for a patent based on the software, covering the computerization of the entire trade process, including the creation of customs declarations and shipping documents, along with services such as insurance and letters of credit.

In May, the patent office notified Mr. Pool that it would soon issue him a broad patent covering "a process for carrying out an international transaction ... using computer-to-computer communication."  When and if Mr. Pool's patent becomes final, lawyers hired by his company say anyone conducting computer-to-computer international trades over the Internet without the permission of his company will infringe on the company's intellectual property. Mr. Pool is letting you know now that if your company does computer-to-computer transactions such as currency conversions, file customs electronically, or calculate air, sea or truck freight, then you must SHOW HIM THE MONEY.

What's that going to add up to in Pool Dollars?  Mr. Pool's dream is to collect a fee equal to 0.3% of each computerized trade deal across borders. If you accept the projections of some research firms that by 2004 there will be about $6.8 trillion in e-commerce generated, and if only five percent of that e-commerce is cross-border, Pool's fee demands could amount to $1.02 billion in that year alone.

Mr. Pool's case is a dramatic example the controversy surrounding business methods patents. These patents, which cover a business process rather than a physical invention or a software program, leapt in popularity after a 1998 federal appeals court ruling upheld their validity. Critics say it is "ridiculous" that the patent office might give Mr. Pool a patent on his process because freight forwarders have used computers to calculate rates for years and several companies sell software to do the work.  Playing it safe, officials at the overburdened, understaffed, and under-funded patent office do not comment on specific patent applications, including Mr. Pool's.  But in true self-serving form, the patent office often states that business-method patents are examined with extra care. According to their own statistics, about 60% of such patents are granted, compared with 70% for other types of patents. Many see these statements by the U.S.P.T.O. as just trying deflect the fact that the government agency just doesn't have the resources to do an adequate job.  The result? Assuming Mr. Pool's patent is issued, his company, thanks to the PTO, will have a powerful legal weapon, because the patent office's examiners have done an "extra careful review."   How's that for getting your tax dollars worth?

 

If you have any questions about this E-Alert, please contact one of the following attorneys:
Doug Cawley:  cawleyd@hughesluce.com
Ted Stevenson:  stevent@hughesluce.com
David Guedry:  guedryd@hughesluce.com

 

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