Online businesses beware

So you came up with a grandiose online business model - one that ensures a large customer base - it is convenient, cheap, cuts out middlemen, and ensures a quick turn around time. You implement it, create delivery channels, and develop interactive websites. Everything seems to be going right. Some competitors emerge, but then don't they always. Three years later, a competitor files a lawsuit against you for infringement on a business method patent.

That is exactly what is happening to Blockbuster DVD rentals. Netflix (a competing movie rental service) has filed an infringement suit against them for infringing on U.S. patent No. 7,024,381 (read more in this news item). The patent describes a method for processing rental orders for movies. A customer can create a list (in a particular order) of movies which he/she wishes to rent. A set of movies (say not more than three) are delivered to the customer. When the customer returns one or more movies, the corresponding number of movies from the list are dispatched to the customer. Quite intuitive and slick, I must say.

My guess is that Blockbuster will first try to attack the patent based on its obviousness - "what's so inventive about automatically dispatching movies from a list when rented titles are returned?". In parallel, Blockbuster will also try to search for 'prior art' for this patent, i.e., an existing implementation of such a business model.

Moral of the story: If you have something new, it's a wise investment to file a patent application for it. The cost will be quite negligible as compared to setting up the process. If you don't think this worthwhile, do not be surprised when someone slaps you with an infringement suit for something that you thought was not worth patenting.

I wonder why Priceline.com did not patent their business model of online airline ticket booking with itineraries that span multiple airlines such that the overall trip cost is minimum. They could have put many players, including Indiatimes air-ticket auctions and Makemytrip.com, out of market (of course, they would have had to file a patent application in India too).

Disclaimer: All views expressed in this article are entirely of the author's and are not provided in any professional authority. The views should not be construed to be a legal opinion.