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MS moves for dismissal of Priceline's shakey patent suit

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Expedia, the Microsoft travel subsidiary, has asked a federal judge to dismiss the patent suit brought by Priceline.com in October. Earlier this month, Expedia added a name-your-price feature for airline tickets similar to the disputed hotel room service that Priceline wants shut down. The basis for Microsoft's request is that it says the ownership of the patent is disputed, and that Priceline has "failed to include a necessary party [Marketel International] to the case". Bill Gates is personally involved, since he is claimed to have told Priceline CEO Jay Walker that "he would not allow patents to stand in the way of his business objectives" and that many companies were suing Microsoft for patent infringement, so "Priceline could get in line with the others". William Perell of Marketel challenged the August 1998 Priceline patent in January this year, before Priceline's action against Microsoft, and says that he came up with the idea and showed it under NDA to Walker in 1988. Marketel claims that Priceline misappropriated trade secrets, breached its contract, breached a confidential relationship, infringed copyright, committed fraud, engaged in unfair competition, and advertised falsely. But that's far from the whole story. There's also an additional challenge from Thomas Woolston, who claims that his patent for an electronic market for used and collectible goods was filed 17 months earlier. Priceline had to admit in its 10-Q filing to the SEC that if Woolston won on patent infringement, Priceline would have to obtain licences from Woolston, and that this could "significantly adversely affect Priceline.com's business", but if the win included interference, then Priceline might have to shut the service. Despite Priceline's huge market capitalisation, the viability of the business is in question in view of its accumulated deficit. The validity of the Priceline patent is still highly questionable. Priceline is vulnerable since its business model can be easily copied, so it has to try to enforce the patent, either through litigation or through a major licensing agreement. Amazon has successfully obtained a preliminary injunction to prevent Barnesandnoble.com from offering a service similar to its so-called one-click buying technology, but this could be reversed at trial. Interestingly, Priceline has not asked for a preliminary injunction, which tends to suggest less confidence in the worth of the patent. Priceline says this is because Priceline has additional patents pending, and has not yet been harmed competitively. Greg Aharonian, the scourge of the US Patent and Trademark Office, noted in Patnews that Microsoft's challenge would have to be based on prior art, in view of a Supreme Court decision not to overturn the US Court of Appeals in DC in October in the Signature Financial Group case, which upheld the belief, at least in the USA, that business methods are patentable. Aharonian expects the Priceline patent to be invalidated, "as should most of the software/Internet/business patents the PTO is issuing in its incompetence". He argues that the Priceline patent has three main aspects: reverse auctions, secure networking auctioning, and bidding contracts. The first two are not novel, and the third is a computerisation of well-known business practices, he says. The Priceline patent went through an expedited application procedure called a Petition To Make Special, but the required extra searching of databases demonstrated that the application excluded the main engineering, computing and economics databases, as well as terms like "auction". Ironically, although Microsoft is likely to do a thorough job in fighting the Priceline patent, its searches for its own patents are "pathetic", according to Aharonian. What is very surprising is that there appears to be no Internet patent re-examination request filed with the US PTO. Perhaps Aharonian is right in his assertion that the PTO caters to the interests of big business at the expense of the general public. If so, any re-examination request could expose the house of cards built on invalidly-awarded Internet and business process patents. But there is also a greater dimension: the US is using patents as part of a trade war, and international procedures are clumsy and have not been invoked to question the whole issue of patents on business practices. So absurd is the situation, it is possible to imagine patents being granted for business franchising, Dutch auctions, or even The Register's inimitable style. ® Related items Priceline-MS lawsuit: shark versus shark? Amazon sues Barnes & Noble over checkout system Reed sues MS and Expedia over travel database

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