Dell Sued Over Global E-Commerce Process

Can one small company own the rights to international E-commerce? That's the question posed by a patent lawsuit filed two weeks ago against Dell, one of the most successful online retailers in the world--a question that most likely will be played out in court.

DE Technologies Inc., a privately held company, sued Dell, claiming infringement of its patent on a method for conducting global E-commerce transactions. Dell had no comment on the pending litigation.

DE Technologies filed a detailed, 100-page-plus complaint in U.S. District Court in Western Virginia on Oct. 25 that laid out its case for owning the rights to a unique process for conducting global computer-based commerce. In the complaint, DE Technologies claims its system, known as "Universal Shopping Center for International Operation" (patent No. 6,460,020), facilitates "international computer-to-computer commercial transactions by integrating certain complex functions enabling for international purchases of goods over the Internet." Those complex functions include support for foreign languages, foreign currencies, duties, tariffs, taxes, and shipping and handling costs.

Dell "processes over 4,500 export transactions" daily, and Dell is "generating more than $50 million per day from their worldwide Web sites," DE Technologies claims. The company is asking for damages and an injunction against Dell. According to the lawsuit, Dell has 20 days to respond.

Why Dell? "We picked who we think is an infringer," says Ed Pool, co-founder of DE Technologies and developer of the system upon which the patent is based. That system, known as BOES (Borderless Order Entry System), was part of a contract DE Technologies was awarded by the Commerce Department in 1998 to develop an international E-commerce system for the U.S. Foreign Commercial Service. The contract was scrapped, but DE Technologies claims Dell accessed the company's Web sites, including its E-commerce site, between 1997 and 2000.

DE Technologies' business-method patent has generated considerable controversy. The company filed its first application with the U.S. Patent and Trademark Office in 1996 and received a "notice of approval" in the spring of 2000. The Wall Street Journal ran an article in August 2000 blasting the patent, and a Virginia politician carried that criticism to the House floor. The Patent Office withdrew its approval, and the patent application went through another two years of scrutiny. The patent finally was approved in October 2002. Since then, DE Technologies has been securing patent approval in other places, including Singapore and New Zealand, and looking for backers and licensors of the patent.

Bruce Lagerman, president of DE Technologies and a patent lawyer, won't comment on the company's financial situation. "Obviously, we have the resources to file the lawsuit," he says. DE Technologies took on a company as high-profile and deep-pocketed as Dell to prove that it wasn't trying to extort money for its patent from smaller players. It wanted "an adversary that was able to defend itself," Lagerman says. "This is going to be complex litigation that's going to take time."

That makes it similar to another case concerning Internet patent infringement, MercExchange LLC versus online-auction company eBay Inc. A jury last year ordered eBay to pay $29.5 million to MercExchange for violating two patents it owns related to online shopping. Both sides are awaiting the judgment of a Virginia court that recently heard eBay's appeal. Says Greg Stillman, an attorney for MercExchange: "This is as expensive a case as I've ever been involved in litigating."