In 1985, E-Data Corporation (also known as Interactive Gift
Inc.) obtained a patent that lets companies sell directly to
consumers at remote locations without having to stock warehouses
full of products at those locations. E-Data claims that this patent
also covers the basic process for selling software or documents
on-line. On these grounds, it sued Comuserve, Broderbund Software,
Waldenbooks and seven other companies for patent infringement and
recovery of royalties. If ultimately successful, E-Data is expected
to claim royalty payments from thousands of e-commerce web
sites.
E-Data lost the first round of its case. A New York district
court judge, Judge Barbara Jones, ruled that the company’s patent
could not be extended to internet-based technologies. E-Data has
now won its appeal before the federal court which said last week
that Judge Jones interpreted the patent too narrowly. The appeals
court ordered that she review the case again.
E-Data President, Scott Hillstrom said, “this case represents a
strong victory for E-Data. While we didn't win every point, and
some questions remain to be decided, E-Data's position in the
digital product distribution marketplace is strengthened
substantially.”
An E-Data statement added:
“The ruling construed the patent's claims in
such a way that its application to virtually all US kiosk
businesses selling digitally downloadable products (e.g. music,
video games, books, etc.) is clear. The ruling also clarifies the
issues that may now be addressed in further litigation relating to
the sale of software, video games, music and other products
downloaded by businesses and consumers to offices and homes.”
The appeals court limited the patent's effect by upholding Judge
Jones' view that the patent does not cover downloads to PC hard
drives. Further, Judge Jones has still to determine whether the
patent was actually infringed. Even if she does find infringement,
the defending companies could still argue that the patent is
invalid on the grounds that the processes it covers were in use
prior to the grant of the patent.
