Staples, Office Depot, OfficeMax Are Sued For Their Web Sites—And Much Of The Rest of E-Tail Could Be Next

Staples, Office Depot and OfficeMax are standing in for the rest of the E-tail world in a lawsuit filed last Friday (Aug. 27). The office-supply giants are being accused of illegally using patented technology in their Web sites--though it's not clear what features of the sites are violating the law. The lawsuit, filed by a company Microsoft co-founder Paul Allen owns, also names E-Commerce companies eBay and Netflix, along with search engines Google and Yahoo, social networking sites Facebook and YouTube, and Apple and AOL.

Retailers aren't usually hit with patent lawsuits. Those are usually reserved for manufacturers, although the ways retailers handle debit cards, gift cards, micropayments and site accessibility have attracted litigation in the past. This time, though, it's their Web sites that have the office stores under legal attack. But there's nothing special about these Web sites that make them dramatically different from other large E-tailers. That means if these retailers lose in court--or settle the case--every other major retailer will soon be looking down the barrel of the same legal gun.

The lawsuit, filed in Seattle, is based on four patents collected by Interval Research, a Silicon Valley R&D group bankrolled by Allen in 1992 and shut down in 2000. The office-supply retailers are each accused of infringing two patents: U.S. Patent No. 6,263,507, "Browser for Use in Navigating a Body of Information, With Particular Application to Browsing Information Represented By Audiovisual Data" and U.S. Patent No. 6,757,682, "Alerting Users to Items of Current Interest." Google, Yahoo, AOL and Apple are accused of violating two additional patents.

But what, exactly, are these retailers supposed to have done wrong? Nobody--outside of Paul Allen's lawyers--seems to know.

The lawsuit doesn't explain how the retailers' Web sites are supposed to have infringed the Interval patents. The suit just lists the four patents involved, and which of the defendants are accused of infringing each of them.

It's not obvious what's being claimed in the patents. This case isn't another Amazon One-Click, where there's a specific feature that's clearly being claimed as protected technology. The four patents describe all sorts of potential user-interface features, including customer alerts and listing text and video content. For example, one patent describes a physical remote-control device that contains a video screen--not a common feature of retail Web sites.

Some of the features described in the patents may be protected and some of them obviously aren't. And Allen's spokesman isn't saying anything publicly that provides any guidance--just that Allen wants a return on the more than $100 million he invested in Interval.

As a result, in the time since the lawsuit became public, most of those commenting on the lawsuit have been reduced to railing against bad patents. Or pointing out that Microsoft and Amazon, two hometown companies for any Seattle jury, were not sued. Or speculating about the timing of the suit. (Are the patents about to be invalidated because of new patent standards? Is Paul Allen's health worse than anyone suspected?) Or calling Allen a patent troll.

But E-tailers have more immediate things to worry about. Usually, patent holders go after technology companies with infringement lawsuits. But more than half of the 11 defendants in this suit are online retailers, once you include eBay, Netflix and Apple.

And it's not obvious that there's anything in the office-supply retailers' E-Commerce efforts that is unusual among retail Web sites. They're included in the lawsuit almost certainly for a single reason: They are the top three online retailers in a particular category, and they represent a test case for every retailer doing business online.

In other words, if they're infringing these patents, then pretty much the whole E-tail world is infringing.

What's worse, there's very little that online retailers can do to defend themselves, at least for the moment. And short of shutting down all retail Web sites, there's not much for retail IT people to do at the moment except watch.

You can't remove the features that Interval claims are infringing its patents from your own Web site, because Interval's lawyers aren't saying what the allegedly infringing features are.

You can't change vendors to avoid the infringing features, because Interval isn't suing any technology vendors. There's no way to know which vendors to avoid.

You could ask for terms to license the patents, but there's plenty of time for that later. If you're a major online retailer, Interval's lawyers won't have trouble finding you.

There's no way to dodge the bullet, because you don't know what is actually covered by the patents. Or whether the patents are valid at all. Or whether E-tail Web sites infringe the patents. Or whether Interval waited too long to sue. Those are all things that a judge and jury will eventually have to decide--presuming the defendants don't settle the case in the years before it goes to trial.

For now, all the defendants are disputing the patent infringement charges. That means Staples, Office Depot and OfficeMax are on the firing line.

And everyone else has to wait their turn.