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The Latest Threat To E-Commerce : The PanIP Patent Litigation

By Jeffrey P. Dunning
April 01, 2003

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.

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