PanIP Sues Web-based Businesses For Patent Infringement

PanIP LLC has filed suit against 11 retailers, alleging that each is in violation of patents owned by Lawrence Lockwood that govern how commercial and financial transactions are conducted on the Web. The suits were filed on March 28, 2002, in the U.S. District Court, Southern District of California, in San Diego, and demand unspecified damages as well as reasonable attorney's fees.
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PanIP LLC has filed suit against 11 retailers, alleging that each is in violation of patents owned by Lawrence Lockwood that govern how commercial and financial transactions are conducted on the Web. The suits were filed on March 28, 2002, in the U.S. District Court, Southern District of California, in San Diego, and demand unspecified damages as well as reasonable attorney's fees.

Lockwood alleges that any business that sells products via a computerized system utilizing graphics and text that also processes business and financial transactions utilizes his patented inventions and is therefore violating his patents -- No. 5.576.951, granted Nov. 19, 1996; and No. 6.289.319, granted Sept. 11, 2001 -- unless he has a licensing agreement. Basically, every web site uses graphics and text, but "financial transactions" translates into accepting credit cards, as many e-tail sites do.

This is not the first time Lockwood has sued for patent infringement. In the '90s he battled American Airlines and the company's Sabre system for booking reservations. The case was ultimately lost by Lockwood, with the court invalidating Lockwood's claim of infringement.

PanIP LLC -- www.panip.com -- was formed on March 12, 2002, with Lockwood as the company's principle owner. All of Lockwood's patents have been exclusively licensed to PanIP, and it is PanIP that is bringing legal action against alleged patent infringements.

There is no common thread among the retailers selected for this group of lawsuits, other than the fact that each conducts all or a portion of their business on the Web, and shows revenues between $2 million and $20 million, according to Dun and Bradstreet reports that were pulled by the plaintiff (PanIP).

The eleven retailers being sued are: Backcountry Experience (www.backcountryexperience.com), Durango, Col.; Snow Country Ski Shop (www.scsports.com), Rochester, N.Y.; Dickson Supply Company (www.dicksonsupply.com), Brielle, New Jersey; Peekay Inc. (www.peekay.com), Auburn, Wash.; Video Age Inc. (www.videoage.com), Minneapolis, Minn.; All Wall Technologies (www.art.com), Raleigh, N.C.; Furniture and Things (www.furnitureandthings.com), Elk River, Minn.; Fabric Depot Inc. (www.fabricdepot.com), Portland, Ore.; Electronic Express (www.electronicexpress.com), Nashville, Tenn.; Abe's Electronic Center (www.abesofmaine.com), Brooklyn, N.Y.; and CP Industries Inc. (website unknown), Brooklyn, N.Y.

Kathleen Walker, attorney for PanIP, told SNEWS® that Lockwood is certainly willing to settle.

"Mr. Lockwood, the inventor, is a principle of PanIP and has another technology that is patent pending. We expect that patent to issue this summer. PanIP is offering to license the two patents currently issued, and the one when it does issue for a one-time fee of $30,000 covering the lifetime of the patents," Walker told us. "Basically, (the retailers getting sued) are getting a sweetheart deal because my client is not interested in setting up accounting or opting for royalties. Obviously, any case that does go to trial we would seek different damages."

A number of the defendants we spoke with believe they were targeted simply because they are too small to afford legal representation by a patent attorney, too far away to appear in court in California, and yet sufficiently large enough to pay the licensing fee to make the legal headache go away. Walker firmly denies those charges.

One retailer was reportedly close to settling, according to Walker, having agreed to terms in principle. Papers had not been signed as we went to press.

For the others being sued, settling appears to be the furthest from their minds.

One store, Dickson Supply Company, has even set up a website to house information about the case -- http://panipcase.homeip.net

Kirk Singer, owner of Backcountry Experience, told SNEWS® that there was no way he'd settle. "I'd close the place first," says Singer. "It's not worth it."

Backcountry Experience, Snow Country Ski Shop, Dickson Supply Company, Peekay, and Video Age have retained patent attorney Jonathan Hangartner of Liu & Liu, a law firm in San Diego, Calif.

Hangartner became involved by chance upon seeing the case in a legal brief and recognizing the name of one of the defendants -- Snow Country -- as the place where he used to buy skis when he was younger. He contacted the owner of the store who welcomed his representation.

"This suit bothers me on a fundamental level," Hangartner told SNEWS®. "I think it is a misuse of the patent litigation system. Our initial assessment is that I would call this a frivolous lawsuit, and we are currently evaluating our response to the complaint."

SNEWS® View: Irony abounds in this case. First, though not intended to have any meaning, it has been pointed out to SNEWS® that there is certainly irony in the date Patent No. 6,289,319 was awarded -- Sept. 11, 2001. Personally, we also find irony in the fact that many businesses now in possible violation of either patent had no idea what the Web was when Lockwood's first patent was issued in 1996. No retailers we spoke with had ever heard of Lockwood prior to being served. They know who he is now though. Perhaps the greatest irony of all is that the U.S. Patent and Trademark Office (www.uspto.gov) -- yes, the office that granted Lockwood's patents -- seems also now to be in violation -- click here to view a screen shot -- and will have to pay Lockwood if the patents are upheld in court. Most mind-boggling of all is that it now appears that if PanIP is successful, every Web site doing business in this country and Canada will be in violation of Lockwood's patents and will owe PanIP money. Multiply the number of businesses in the U.S. and Canada currently operating on the Web by a one-time $30,000 licensing fee. What do you come up? Visions of a very wealthy Mr. Lockwood and a very stunned population of web-based businesses. REI? L.L. Bean? Direct Focus? TreadmillByNet.com? Amazon.com? American Express? Visa? Hello? It is very likely Mr. Lockwood wishes to speak with you, too, soon.

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