Saturday, Sep 6, 2008
Amazon.com's patent on its affiliate program has roiled the Web, but such protections may actually promote innovation.
Mar 3, 2000 | When Amazon.com last week won a patent for its "customer referral system," the Web community mobilized with characteristic speed, splashing the Net with caustic comments, letters of protest and calls for a boycott of the bookseller turned superstore.
By Wednesday, some 1,300 people had united at NoWebPatents.org, agreeing to boycott Amazon unless it gives up its strategy of patenting "obvious" and widely used technologies. On the site of computer book publisher O'Reilly & Associates, visitors posted about 3,500 responses to CEO Tim O'Reilly's critical open letter to Jeff Bezos. Even Amazon's discussion boards were brimming with anti-patent messages.
The uproar is understandable. About 3,000 sites including familiar names like CDNow, BarnesandNoble.com and Art.com have long established affiliate programs; they encourage content sites, for instance, to send visitors via hyperlink to an e-commerce site like CDNow where any purchases they make earns the referring site a small commission. Affiliate programs account for as much as 25 percent of e-commerce sales, says Evan Schwartz, author of Digital Darwinism. Amazon, critics say, has won a patent on the age-old practice of rewarding business associates who refer customers to you.
Amazon argues that it filed for the patent back in 1997, before many sites were using affiliate programs. But that is no excuse for going ahead with the patent, say its detractors.
O'Reilly, in his letter to Amazon, points out that both the "1-click" technology it won a patent on last year, which could prevent other Net companies from using Amazon's simplified ordering system, and Amazon's customer referral system, are based on cookies. And cookies, the code that Web sites use to track visitors, were "introduced in 1994 ... well in advance of your 1997 patent application." He then asks the Seattle, Wash., company to "avoid any attempts to limit the further development of Internet commerce on the basis of patents."
If O'Reilly's letter lacks vitriol, the reader responses to it do not. "A buzzword does not an innovation make," reads one. "Grow up and compete," reads another. "Play fair" says a third. In Amazon's discussion area, one poster calls Bezos a "corporate moron." And a response to the O'Reilly letter lays it out clearly: "What comes around goes around MR. BOZOS ... particularly to companies that thrive on greed. I'll take my book buying elsewhere."
Amazon did use the 1-click patent to fire off a lawsuit against rival (and Salon.com bookselling partner) BarnesandNoble.com -- forbidding it from using the easy ordering method. While that suit is pending, the affiliate patent looms large; it covers the process used to "electronically apply" to be an affiliate; the assigning, recording and extracting of an affiliate "identifier"; the process of providing instructions for creating links and of transacting the sale; and finally, the patent covers the process of "determining and recording within a computer memory compensation for the associate [Amazon's word for affiliate] for the sale."
In fact, several intellectual property attorneys say patent number 6,029,141 could have the ability -- barring a successful legal challenge -- to shut down the estimated 3,000-plus sites that give merchants space on their Web sites in exchange for a commission on sales.
But other patent attorneys and experts say that is unlikely and that the Web tirade is premature, even misdirected. Patents are unloaded guns, and Amazon still hasn't said if it plans to shoot, they say. Holding a patent gives the company the right to sue a competitor that uses the same technology -- but the existence of the patent itself doesn't outlaw the technology.
Many sites that run affiliate programs don't expect lawsuits or even exorbitant licensing fees to be handed down from Amazon. "Amazon could issue a cease-and-desist order but that would seem to go against the spirit of the Net," says Michael Kahn, Art.com's vice president of marketing. "Or they could come to us and ask for a part of our profits. But I doubt they will." Aggressive patent policing would be expensive and a public relations nightmare. "Corporate moron" or not, Bezos is probably not eager to shoot himself in the foot.
"A lot of people on the Web really have it wrong," says David Kline, coauthor with Kevin Rivette of "Rembrandts in the Attic: Unlocking the Hidden Value of Patents." "As a general rule, the American patenting system promotes innovation. There's nothing like it in the world, and it's probably the most effective system for promoting innovation ever devised."
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