Triumph Of The 1-Click

It's alive! Despite hopes that the U.S. Supreme Court would rescue retailers from patents like Amazon's 1-Click, on Monday (June 28) the court decided not to outlaw the often-vague patents for business methods that bedevil retailers, especially online.

Yes, it's business as usual in the wake of the decision: A patent for displaying products on grocery Web sites was announced the day after the ruling, and hundreds of patent lawsuits proceed apace. Still, the Supreme Court left the door open for the Patent Office, lower courts and Congress to tighten the rules for what can be patented?and how easily retailers can be sued.

Retailers are no strangers to patent threats, ranging from 1-Click to Card Activation Technologies' more recent claim that every brick-and-mortar retailer that sells gift cards owes it patent royalties.

In the case of advertising company Grocery Shopping Network, its new patent is for part of an advertising service it already offers to retailers, including the Jewel, Lucky, Giant and Albertson's grocery chains. When grocery stores display interactive flyers on their Web sites, customers can click on an item in the flyer (for example, Doritos on sale for $1.89) and see a list of all varieties available at a particular store (Cool Ranch, Fiery Habanero, Late Night Cheeseburger). Customers can then click on items to add them to a shopping list.

That's much more specific and practical than many of the "process patents" that give so much trouble to retailers, especially E-tailers. Roughly 15,000 of those patents have been issued since they first began to surface in the 1980s, and many are so broad that one Supreme Court justice, Anthony Kennedy, has made it a point to write about the "potential vagueness and suspect validity of some of these patents."

But it was Kennedy who turned out to be the swing vote this week as the court decided not to decide on process patents. In the court's decision on the case known as Bilski, Kennedy wrote that "the Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter." Four other justices said they wanted to ban process patents entirely. But for now, they're still legal.

For retailers, that means virtually nothing has changed on the patent front, and the patent misery continues. Process patents have made it ever-tougher for retailers to avoid stepping into someone else's intellectual property in the course of doing business. That means retailers will continue to live in fear?a very reasonable fear?that almost anything innovative they do will attract a patent infringement lawsuit.

For that matter, retailers face the possibility of getting sued for things as "innovative" as adding value to gift cards or having a Web site. And E-tailers routinely settle Web site-related patent suits instead of putting up a fight, not because they believe the patents are valid but simply because a lawsuit would cost them millions of dollars.

And for every genuinely innovative patent?say, Amazon's patent for taking videos of packages as they're being packed or Apple's patent application for selling concert tickets via iTunes?there are far too many vague, amorphous patents that have slipped through the system and continue to threaten retailers.

Where does that leave retailers? If the Supreme Court won't fix the process patent mess, who will?

Congress might. The Senate is currently considering the Patent Reform Act of 2009. Two problems there, though: First, it strongly resembles the Patent Reform Acts of 2007 and 2005. Those bills went nowhere; that's not a good sign for this time around. Second, the current version is largely aimed at limiting when and how patent lawsuits can be filed (good news in itself). But right now, it doesn't have anything to say about abolishing process patents.

The Patent Office could help by tightening the screws on would-be patents that are vague, abstract or obvious. But that's a tough proposition. Patent examiners face huge backlogs, in part because the number of patent applications has doubled since process patents were added to the mix. And even when a spurious patent application is rejected, appeals by a tenacious applicant can soak up examiners' time. (That's how the original Bilski patent application ended up before the Supreme Court: It was rejected all the way up the line. For the record, the Supreme Court rejected it too.)

Retailers' best hope may still be with the courts. This week's decision invited federal courts to look at narrower categories of process patents to see if, for example, everything in the category is an attempt to patent abstract ideas. That might thin down the number of patents plaguing retailers.

And with four justices ready to spike process patents altogether, one more vote swinging their way could eventually relieve retailers of their process patent pain.

But not this time around.

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