Selling of products through a reverse auction process. Priceline.com claims that it holds a patent related to its service where a buyer can submit a price bid for particular service. Expedia was forced to pay royalties to Priceline.com after being sued for patent infringement by Priceline.com. Many firms that hold these types of patents have used them to assault competitors and subsequently provide a steady stream of income from royalties or licensing fees.
Given the increase in the assaults and because of the growth of digital technologies such as the Internet, computer software, and telecommunications, concerns have evolved regarding these business method patents. Examples of the focus of these concerns are tax strategies, the determination of insurance rates, or how commodities are purchased through a third party. These business practice patents are now being threatened by a recent Supreme Court ruling that denied a patent for a process of hedging risks against weather-driven changes in energy prices. The Federal Circuit Court had denied the patent because it did not meet the machine or transformation test. This simply means that any business method or practice must be tied to a machine such as a computer. Thus, a mental process of calculations for hedging risks in energy prices did not include a machine or computer and therefore was not granted a patent. However, the Supreme Court’s decision did not provide any new specific means to determine if a business method was patentable, leaving the future uncertain for these types of patents.
START-UP WITHOUT A PATENT
Not all start-ups will have a product or concept that is patentable, In this case the entrepreneur should understand the competitive environment (see Chapters 7 and 8) to ascertain any advantages that may exist or to identify a unique positioning strategy (see Chapter8). With a unique marketing plan, the entrepreneur may find that striking early in the market provides a significant advantage over any competitors. Maintaining this differential advantage will be a challenge but represents an important means of achieving long-term success.