Retailers join forces to beat licence fee

By PETER GRIFFIN IT writer

Internet retailers nationwide are banding together to fight a Canadian company's demands for them to pay up or be shut down, a fight that the Government is distancing itself from.

Montreal-based DE Technologies (DET) has written to several e-commerce operators demanding licensing fees for use of international e-commerce processes that it has patented in New Zealand, the US and Singapore.

DET's claim is that it has been granted a patent for computerised processes automating the paperwork involved in e-commerce across national borders and it lists areas where it believes that each e-tailer is infringing the patent.

It is seeking licence fees of US$10,000 ($16,900) from e-tailers and 1.5 per cent of sales. Internet providers hosting the e-tailers face a one off fee of US$25,000, licensing it for 25 operators, and a 1.15 per cent royalty on sales.

It is understood up to 40 such letters may have been distributed by James & Wells, the law firm acting for DET.

A group of concerned e-commerce operators and web hosting companies are joining forces to fend off DET's claims, which might mean applying to have the company's patent ruled invalid. The group is organising its resistance through a website, which went live yesterday.

Chris Auld, a software architect and intellectual property lawyer at listed e-commerce software vendor E-media, said several of his customers had received letters, but some of them had been filling international orders and accepting payment online since the mid 1990s, before DE Technologies' patent application was lodged here.

"We've a reasonable amount of money in the bank and we're not likely to roll over any time soon, so we'll be defending any claims and instructing our clients to ignore the letters," said Auld.

Ewen Jones of e-tailer www.nzshopping.com, an E-media customer, said he had been successfully selling to an international customer base since 1996. He intended to ignore the letter.

Industry observers are dismayed that the Intellectual Property Office of New Zealand granted the patent and note that its existence threatens the Government's efforts to expand the IT industry and the knowledge economy.

But in a statement to the Herald, the Ministry of Economic Development said the only action that could be taken was by those questioning the patent's validity.

"This is a commercial matter. If people wish to dispute the validity of the patent there are mechanisms in the Patents Act (1953) for them to seek to have the patent revoked."

The most common grounds for a patent being revoked are where it can be shown that the invention is not new or that "the invention claimed is an obvious progression of what has gone before".

Also singled out by DET are the etailers www.americascupstore.com and www.rugbyworldcupstore.com, which operates from Sydney.

Both online stores use supply chain management software from Estaronline.

The chief executive of Estaronline, Stuart Clark, said it would seek to fight any action DET levelled at the company.

He had been advised that attempting to have a patent declared invalid could cost up to $150,000, but this was less than the revenues DET would derive if its patent stood up to legal scrutiny.

"In theory a company like Fonterra or our largest meat exporters may have to pay 1 per cent of their turnover if they're using the internet or an intranet and trading [online] in foreign currency," Clark said.

DET's founder, ED Pool, was unavailable for comment.

Patent problem


DE Technologies has patented an international e-commerce transaction system. It is attempting to license use of its intellectual property to New Zealand internet retailers.

The patents cover e-commerce processes related to purchasing, shipping and accounting for goods and services bought online.

The patents were granted in the US (October 2002), New Zealand (June 2002) and Singapore (April 2002).

Patents can be disputed if they are not new or the 'innovation' is an obvious development of existing processes.

Fight the patent

DE Technologies

NZshopping.com

Intellectual Property Office of NZ

Americascupstore.com

Rugbyworldcupstore.com