PATENT PROTECTION FOR E-COMMERCE

Although patent protection in the field of electronic commerce ("e-commerce") was first used decades ago it is now becoming increasingly important as the development, use and value of e-commerce technologies expand.

In particular, banks, financial institutions and developers of e-commerce technology are discovering that patents can be utilised by their businesses to protect the development of and/or investment in new technology.

What is patent protection?

Once granted, a valid patent is a valuable asset. It is a right to exclude others from "exploiting" the invention claimed in the patent. "Exploiting" includes making, using or selling. Generally speaking, to attract patent protection an invention must be novel, involve an inventive step and be useful. In Australia, patent protection can extend for up to 20 years from the date of the patent.

A patent granted in Australia only covers Australian territory. If protection is sought overseas it must be sought in the individual country concerned. This is particularly relevant to e-commerce and Internet related technologies, as by nature, they have no boundaries.

Who and what can be protected?

Many well known companies have utilised patent protection for their Internet related inventions, including IBM, AT&T, Microsoft, Citibank, Mastercard, Sony and Ericsson. On the opposite end of the scale individuals and companies in the start-up phase are also seeking patent protection for e-commerce technology.

Some examples of the types of inventions which have been patented include:

• A system and method for bill delivery and payment over a communications network
• A secure method for communicating credit card data when placing an order on a non-secure network
• A design grid for inputting insurance and investment product information in a computer system
• An interactive computer system to match buyers and sellers of real estate, businesses and other property using the Internet
• A digital signature verification technology for smart credit card and Internet applications

Points to consider

In developing or implementing e-commerce related technologies the following questions should be considered:

1. Can this technology be protected by patent?

   If the technology is novel, inventive and useful it may be able to attract patent protection. It is important to be aware that the use or disclosure of the technology by any person, including an intending applicant before a patent application is lodged may create a basis upon which any subsequent patent application is refused. To avoid problems, a patent application should be filed prior to disclosure in any form or nature, for example, testing the technology on a public Internet site or discussing the technology with a joint venture partner, technology provider or other outside party (unless adequate agreements are in place).

2. Should this technology be protected by patent?

   If the technology is valuable enough (or potentially valuable enough) an application for patent protection should be considered (if eligible). Failure to protect the technology by patent may allow competitors to freely use the same technology or provide the same product.

3. Who can apply for patent protection in respect of this technology?

   Subject to an agreement to the contrary, the right to obtain a patent is owned by the inventor or inventors of the technology. With this in mind, care should also be taken in engaging independent contractors to develop technology in relation to a business. Merely because the business pays for the development or use of the technology does not mean that it has the right to obtain a patent in the technology developed. If the company or business proprietors are to secure patent ownership rights in the technology, the independent contractor must have entered into a written agreement assigning its patent rights in the development.

4. Does this technology or an application to protect it infringe another's patent?

   Generally, infringement will occur where a product or process which is protected by patent has been used by someone other than the patent holder (or its permitted assign). The infringement of a patent has the potential to cause serious financial loss to the infringer.

What to look for:

As a rough rule of thumb anything involving computers or communications is potentially patentable. For example, if novel, inventive and useful the following can be protected by patent:

• All types of computer programs and algorithms (eg. for compression, encryption, searching, indexing or authentication) relating to e-commerce
• Internet applications
• E-commerce products
• Data processing systems
• Hardware devices such as ATMs and card readers
• Possibly, new financial products

New developments and technologies in the field of e-commerce are valuable. A valid patent provides the protection necessary to ensure that the value remains with those who created it. In this rapidly developing field it is vital that all those involved in developing and implementing new e-commerce related technologies (or engaging others to do this) ensure that their rights are legally protected.

For further information on this article, please contact (61 8) 8210 1200.

The contents of this newsletter are for information only and should not be taken as advice on the law. This newsletter may be reproduced in whole or in part with the prior permission of Norman Waterhouse and acknowledgment of its source and copyright.