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The Latest Threat To E-Commerce : The PanIP Patent Litigation
As if the recent attacks on the tax-exempt status of Internet transactions were not enough for e-commerce vendors to worry about, a new problem has come to light for companies that sell goods or services via an Internet Web site. PanIP, LLC (PanIP), a company based in San Diego, has initiated lawsuits in the U.S. District Court for the Southern District of California against over 50 companies transacting business over their Internet Web sites, alleging that such activity constitutes infringement of two patents owned by PanIP.1 The patents asserted by PanIP are generally directed to “data processing systems designed to facilitate commercial, financial and educational transactions between multimedia terminals”2 and to “a system for filing applications with an institution from a plurality of remote sites, and for automatically processing said applications in response to each applicant's credit rating obtained from a credit reporting service.”3
PanIP first asserted its patent infringement claims against eleven companies in a series of lawsuits brought in March, 2002.4 At the time of filing, PanIP offered the defendants in those suits a license under the patents at issue, initially demanding $30,000, which amount was later reduced to as little as $5,000.5 Most of the defendants in the first group of suits accepted PanIP's settlement offer.6 As a result, each of the original suits has been dismissed ' with the exception of one suit where PanIP has moved for a default judgement against a defendant that did not file an answer.7 Subsequently, starting in August, 2002, PanIP filed a series of four additional suits, each of which named exactly ten defendants8 ' for a total of 51 companies that have been sued overall.
The PanIP suits have received significant media exposure, due in large part to a Web site created by a number of defendants in the second group of lawsuits, www.youmaybenext.com, in order to publicize the lawsuits and to raise funds for a common defense initiative.9 The defendants allege on their Web site that PanIP, rather than file suit against major corporations that allegedly infringe the patents (via a technique previously made famous in complaints filed by inventor Jerome Lemelson), has instead chosen to target “small, hometown businesses with moderate gross earnings [and] limited financial resources and legal experience.”10 While these lawsuits have been reported on in various media outlets,11 the prior coverage has, for the most part, not addressed the issue of whether the asserted claims actually cover the allegedly infringing conduct. While the claims at issue have yet to be construed by the district court hearing the cases,12 a brief analysis of the claim language itself raises a number of questions as to whether the claims are capable of being construed so as to cover the e-commerce activities that PanIP alleges to constitute infringement.
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