Little-known lawsuit could rock international shipping
By James Aaron Cooke, Executive Editor -- Logistics Management, 1/1/2005
Last fall, DE Technologies of Blacksburg, Va., sued Dell Inc. in federal court for patent infringement. The patent in question: DE Technologies' claim that it invented the process by which international computer-to-computer commercial transactions are conducted.
How can one company claim to own the process for conducting electronic trade? DE Technologies owns what's known as a "business method" patent, which applies to a process rather than to a specific product, such as a chemical formula or a machine. Business-method patents have been controversial ever since a 1998 U.S. Appeals Court ruling paved the way for companies to claim ownership of processes.
On its website, DE Technologies claims that its co-founder and CEO, Edward Pool, "was the first to conceptualize that present computer technology combined with the global capabilities of the Internet could revolutionize the integrated import/export transaction." In 1996, Pool and Douglas Mauer developed Universal Shopping Service (www.ushop.com), a website that allowed American companies to sell goods online to customers overseas. The website was a success, and in 1998 DE Technologies was awarded a U.S. Department of Commerce contract to supply an international e-commerce pilot system to the United States Foreign Commercial Service.
DE Technologies' experience with ushop.com led to the creation of the Borderless Order Entry System, an online platform for international trade. According to the company's website, the Borderless Order Entry System is a standardized, interactive order-entry and payment system that allows merchants to conduct international transactions online. The system creates the necessary electronic documents, such as purchase orders, ocean and air bills of lading, and commercial invoices.
DE Technologies did not get its patent without some hullabaloo. The Wall Street Journal reported that when the U.S. Patent Office announced in 2000 its plans to issue a business-process patent to DE Technologies, there was an outcry in Congress that the patent-protection system had run amok. That reaction prompted the Patent Office to re-examine DE Technologies' request, before it finally issued a patent in 2002.
Now DE Technologies has begun to assert its patent rights and has picked Dell for its first legal tangle. In the lawsuit, DE Technologies makes two claims. First, it asserts that Dell's employees got some of their ideas for the computer giant's electronic commerce activities from visiting ushop.com between 1997 and 2000.
More disturbing is DE Technologies' assertion that it holds a patent for enabling international purchases of goods over the Internet. In particular, the software concern claims to have invented online processes for calculating international charges for transportation, creating complex import and export documents, exercising care in compliance with trade laws, and verification of payments.
Ultimately, this civil case could impact every international shipper, not just Dell. If the court upholds the patent-infringement charge against Dell for violating a process, then which global trader will be next? And what about all the vendors of international trade software and e-commerce applications? Many of them have invented methods of automating international trade processes, yet not one claims to have invented the concept of electronic trade.
Exporters and importers should keep an eye on this case (and may even want to contribute to Dell's legal defense). For if the court upholds DE Technologies' patent, U.S. companies may soon be paying tribute for each international sale they make online.
James Aaron Cooke, Executive Editor
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