Practical Ecommerce

Legal: Ecommerce Owners Liable to Patent Trolls?

There has recently been an increase in the number of patent claims against website developers and operators. The claims are based on “business method” and software patents for various functions of a website, such as drop-down menus, site search, and other common functions. Many of these functions are in common use by many developers, who do not know that the software or method they are using is covered by a patent. Many of these patents are old, and developers have furthered website development using their functions to create new technologies, which are still covered by the patent. In addition, searching patent registrations to determine if your website is infringing on an issued patent is difficult, time consuming, and expensive. “Patent trolls” are patent owners that take advantage of the difficulties of finding a patent, and lie in wait for someone to use their technology without realizing it is covered by the patent owners rights under their patent.

For example, Kelora Systems, LLC has lately been one of the most aggressive patent owners to try to enforce patent rights against ecommerce companies based on a searching function that many websites are using. Kelora has picked some formidable opponents, such as Target, eBay, Office Max, Amazon, Dell, Office Depot, Costco and many other large organizations. These organizations are seeking to invalidate Kelora’s patent related to the search function. The lawsuits are still pending, and Kelora continues to aggressively pursue its patent rights against both large and small ecommerce companies.

How Do a Website Owners Protect Themselves?

Website developers used to routinely indemnify their clients against infringement claims based on items that they have developed for the client. Many developers are now moving away from such assurances because of the rash of patent claims, and their use of third-party software in the development of a website or a portion of a website. Therefore, your first avenue of protection is to make sure your website developer is covering you for third-party claims based on what the developer has used in creating the website. A website owner should push to have as much covered as possible.

The developer is typically in the best position to know what functions the website will use, and where that software came from. The development agreement should be read carefully to determine what — if anything — is excluded from a developer’s indemnification. If the developer does not cover certain aspects of the website, you should make sure that you understand why, and look for indemnification from a third-party vendor if the technology being used is some type of off-the-shelf software used under a license.

If you are developing your own website, you should make a list of any software that you use for all functions and the website itself. Unless you are customizing your own code, the software programs from each company you are using should have a license agreement that discusses what they will indemnify in the event you are sued. You should also do some research into the technology that is being used to develop the website. There may be certain functions that have already been the subject of patent claims, and until those claims are settled, you should avoid potentially stepping into a lawsuit. Currently, there are several large companies fighting over software patents, taking the lead to try to invalidate these patents. However, it is usually less costly for you to avoid the technologies that are in questions, than to end up fighting a patent lawsuit or taking the risk that the patent will not be over turned.

Avoiding Open Source

In addition, whenever possible you should avoid open source versions of software in your development. These versions of software are typically not covered by indemnification provisions, and therefore leave the website owner open to the risk that the developers have used some type of technology or method that is covered by patents. Developers like to use opens source because the cost in much less, but the lack of indemnification leaves the website owner open to the risk of the cost of a possible patent claim. If you use opens source, you should look at the function of that software and decide whether it is worth the risk to keep using it.

Summary

If you take these steps to transfer the possibility of patent infringement liability to your developer, it can help lessen the risk that you would have to bear the cost of fighting an infringement lawsuit. In addition, making the developer liable will cause the developer to be more careful about what software is used and where the software comes from. If you have concerns about your developer agreements or license agreements, you should consult a lawyer to review the agreements to determine what protections are afforded.

Jeff Jacobson, Jd, Llm

Jeff Jacobson, Jd, Llm

Bio   •   RSS Feed


email-news-env

Sign up for our email newsletter

  1. Andrew Youderian May 24, 2012 Reply

    There was a major ruling in the Kelora case this week, which ruled their patent invalid – great news for eCommerce merchants! We wrote a detailed story on the ruling which including the reaction from Kelora’s attorney:

    http://www.ecommercefuel.com/ecommerce-patent-dispute/