Partners' Patent has World of Potential - From Franklin County comes an invention that could have a major impact on global e-commerce.

UNION HALL - Ed Pool's office is small; his aspirations are not. From a strip mall in Franklin County, Pool and his partner in DE Technologies have developed an Internet system that they say will revolutionize international e-commerce. 

Their invention - they call it the Borderless Order Entry System, or BOES - is designed to help small and mid-sized U.S. businesses import and export products via the Internet. The system handles all aspects of international e-commerce, Pool says. It translates prices into multiple currencies and product descriptions into any number of languages. It figures shipping and taxes and duties. It creates all the necessary electronic documents. Pool believes his automated system represents the only way small players can compete on the worldwide market. "There's resources they need that they can't afford to buy in the paper world," he said. 

DE Technologies isn't the only company trying to smooth the way for international business via the Internet. A number of larger players already offer some international e-commerce services. But the Franklin County company holds a unique - and valuable - asset: a patent. The U.S. Patent and Trademark Office agrees with Pool and his partner, Doug Mauer, that their system is worth protecting, which means that the many other companies engaging in international e-commerce could be infringing on their technology. Pool and Mauer don't know how much money - if any - they'll make on their invention. And even with the patent, the partners face substantial hurdles. They haven't secured any venture capital; Virginia investors haven't been terribly interested in the technology; and DE Technologies' rural address leaves it at a disadvantage when dealing with Silicon Valley or New York venture capitalists. Then there's always the chance that someone will challenge the patent, which could lead to an expensive court battle. 
But Pool remains convinced his years of work on BOES will pay off - that they already have paid off, with the issuance of the patent. "You're at the big-stakes poker game now," he said. "You haven't won anything, but at least you're at the table." 

The idea behind the Borderless Order Entry System might not seem particularly novel today, when hundreds of companies are active in Internet sales. But Pool and Mauer started working on the system long before e-commerce - let alone international e-commerce - was widespread. "This may not be rocket science in the year 2000, but try eight years ago," Pool said. 

Pool, who used to sell construction equipment on the international market, teamed with Mauer, co-founder of BizNet Technologies in Blacksburg, about five years ago. Their first joint project was Universal Shopping Service, a Web site launched in 1996 that allowed American companies to sell their goods to international consumers. The site - www.ushop.com - permitted customers to shop in a variety of languages and calculated costs in a number of international currencies. U-Shop didn't draw much business, but it did attract attention and served as a valuable test bed for the BOES technology. 

They won a $120,000 contract to create an e-commerce backbone system. They had hoped to bid on the implementation portion of the contract, which Pool said could have been worth millions of dollars, but the government canceled the procurement. Instead, they've spent much of the last 3 1/2 years dealing with the U.S. Patent and Trademark Office. Pool even shut down his excavating company so he could devote more energy to DE Technologies. He figures they've already spent $600,000 in time and energy to get the company off the ground. They've been operating on little money. Pool sold U-Shop to raise quick cash, and they raised $60,000 in outside investments, which gave them enough money to file for patent protection in about 30 foreign countries. 

They've been trying to scare up $30 million to $50 million in venture funding but have come up short. "We have to have it," Pool said. "I'm not having much success, though, with the Virginia folks. It's a state of mind. ... They don't understand patents. I've had guys tell me, 'Well, a patent doesn't mean anything.'" In fact, the rewards for winning a patent can be enormous. A patent is often the only asset a small company can leverage to win funding: Most venture capitalists won't sink money into a concept that could be easily duplicated by a competitor. 

DE Technologies' patent hasn't officially been published yet, but Pool received a Notice of Allowance, which means the patent office has finished its investigation of the claims and will print the final documents within a month or so. With their Borderless Order Entry System patent, which protects both software and a method of conducting business, Pool and Mauer have stepped squarely into the midst of an international controversy. 

The question: Should the U.S. Patent and Trademark Office issue patents for so-called "computer-implemented business methods"? 

These patents protect not just technical aspects - nuts and bolts - but entire business models. Priceline.com patented its name-your-own-price auction system. A Massachusetts company called Open Market Inc. patented key aspects of e-commerce, including online shopping carts and real-time credit card transactions. In recent years, the number of these patents issued by the U.S. Patent and Trademark Office has grown significantly, from 143 in 1996 to 583 last year. 

Detractors say such patents are often too broad and their continued issuance will stifle innovation and lead to monopolization of critical Internet sectors. One of the best-known - and most debated - of these patents is the one that online bookseller Amazon.com received for its "one-click" ordering system, which permits customers to order merchandise without having to re-enter shipping and billing information each time. Within days of receiving the patent, Amazon sued rival Barnesandnoble.com for using a similar one-click system. During the key Christmas shopping season, Barnesandnoble.com was forced to retool its Web shop and revert to a two-click check-out. The patent, and Amazon's strict enforcement of it, have drawn the ire of some in the Internet community, who have accused the bookseller of monopolistic practices . At least one Web site -www.nowebpatents.org - is devoted to promoting a boycott of Amazon. 

Gary Hecker, an intellectual property attorney in Los Angeles who has represented Sun Microsystems and Apple, believes this debate is just another verse of an old song. "Whenever there are new technologies ... that become a hotbed for patenting, there is a lot of concern that it may be an impediment to technological development," he said. In the 1980s, when the patent office first started issuing patents on computer software, detractors warned that such patents would threaten the growth of the software industry. Instead, he said, software designers simply figured out ways to work around patents. 

Pressure is building on the patent office to re-examine the way it handles Internet patents. Hecker and others say the office lacks the resources and expertise to figure out whether Internet business methods truly represent new innovations, and the Internet is changing too quickly for the patent office to keep pace. The patent office also has been hampered by lack of a comprehensive database of existing software technologies, which until recently couldn't be patented. Almost 90 percent of intellectual property attorneys surveyed by PricewaterhouseCoopers said they don't believe the patent office adequately addresses the issue of existing inventions when it reviews e-commerce business method patents. 

Patent office spokeswoman Brigid Quinn dismisses the idea that patent examiners are overwhelmed by applications for Internet business method patents. The number of these patents has been growing, she said, but they still represent only a small fraction of total patents: just 2,600 of 289,000 patent applications received last year. The patent office has developed a plan to better deal with Internet patents, however. It includes a pledge to work more closely with the software industry, to better train examiners, to revise examination guidelines and to expand its searches. 

Software industry members have formed the Software Patent Institute, which built a searchable database of software technologies designed to help the patent office determine whether patent claims truly represent new innovations. "There are a lot of really innovative business methodologies being implemented on the Internet," Hecker said. "The idea that business methods are protectable as a concept is a good one. What needs improvement is the scrutiny by the patent system of those inventions. The standard doesn't need to be raised. Implementation of existing standards needs to be improved." 

Pool and Mauer insist they want to work with, not shut down, competitors who might be infringing on DE Technologies' patent - a group the partners say includes just about anyone currently conducting international commerce over the Internet. They've started talking to companies that Pool calls "the big boys" - IBM, UPS and others. "They've got something we want, and that's distribution," he said. "We've got something they want, and that's a patent." 

Pool said they don't want to create a "holy war." They'd rather license the Borderless Order Entry System to other companies - which could create a handsome income for DE Technologies - and form partnerships to develop an international standard for electronic commerce. That will be the only way to ensure the future growth of e-commerce, Mauer said. "If you have 150 different systems ... they're all going to have their own proprietary way of dealing with things," he said. 

Because the patent hasn't been published yet, it's too early to say how IBM and others will respond to their overtures, Mauer said. But he believes they really will have no choice but to cooperate once the patent is enforceable. And he thinks that at least some companies will be eager to collaborate. "The environment is riper now for people who are competing to recognize that they need standards," he said. 

Working toward an international e-commerce standard is an admirable goal, said Janine Hiller, professor of business law at Virginia Tech and head of the school's Center for Global Electronic Commerce. International trade is fraught with pitfalls, especially for small businesses, and anything that smooths the way could be a terrific invention, she said. "If you could do this on the Internet, you could do this off the Internet," she said. "It's huge." But it won't be easy to get the international community to play along, warned Hiller, who serves on a United Nations subgroup that has been studying standardization for electronic commerce. "It would have to have extremely wide acceptance in the commercial community that would make it impossible for international groups not to use it," she said. "They have quite a road in front of them," Hiller said. "Getting the patent sometimes is not the most difficult part. The most difficult part is enforcing it." 

Mauer feels confident that their patent will stand up to scrutiny. The patent office "put us through all the hoops," he said. And the patent isn't just for a business method, either; it also covers software. "I wouldn't say that we're on a power trip, that we need to dictate any of this," Mauer said. They'd even consider selling the patent, if the price was right, he said. 

Any competitors who want to talk to them about licensing their technology are welcome to come to Virginia, Pool said. He knocked on doors for years and got no response, he said, and now it's someone else's turn to travel. 
"I no longer go no place," he said. "I spent six years begging, on my knees, crawling." 

By Megan Schnabel
From The Roanoke Times, July 9, 2000
http://www.theroanoketimes.com

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