E-BUSINESS SPECIAL REPORT
The Case of Amazon's Newest Patent Battle

Where is BountyQuest when you need it? The company, founded in 2000 and backed by Amazon (Nasdaq: AMZN) CEO Jeff Bezos, offered cash rewards to individuals who could prove or disprove a company's claim to a patent. Amazon itself found its patent on one-click ordering called into question on the site. But BountyQuest is apparently no more, its Web site shut down, its phones disconnected.

Meanwhile, Amazon.com has filed for a patent involving online advertising, stoking the ire of many industry watchers. The company wants to stake its claim to a method of allocating online ad space via real-time auctions. But many are questioning whether this concept originated with Amazon, noting that the idea was discussed frequently during the dot-com boom.

Is there anything to Amazon's claim, or is this another instance of the company patenting the obvious, as it did with affiliate programs and one-click ordering?

Dissent Brewing

At issue in the latest uproar is patent application #20030055729, "Method and system for allocating display space." The patent application describes a way of choosing among several bids for Web page ad space submitted by advertisers, with those bids correlated to the time and context of the Web page request.

"[It] is not a serious patent application -- probably more of an ego booster for Bezos," patent activist Greg Aharonian told the E-Commerce Times. Aharonian is editor of the Internet Patent News service and has been cited often for activism against what he considers to be spurious claims to original art (i.e. true innovation) in software. He noted that Bezos should have checked patent #6,285,987, granted to Engage, Inc. in 2001, for "a system for providing advertisements from a central server to viewers who access web sites."

"It is sad when even financially well off patent applicants such as Mr. Bezos refuse to spend any money searching the prior art before they file such patent applications," Aharonian wrote in an e-mail.

Ghost of E-Commerce Past?

Controversy aside, however, the patent's value for Amazon seems somewhat questionable at first glance. "This would have been more useful in 1999," IDC e-commerce analyst Rob Rosenthal told the E-Commerce Times, noting the sharp decline in advertising sales since the dot-com implosion. In fact, he said, the patent seems to have its roots in a bygone era.

For this reason, among others, Rosenthal suggested that the patent is less sinister than Amazon's past efforts, including one-click patent #5,960,411 and its patent on affiliate sales, #6,029,141. And in this case, the company is patenting an algorithm or process, not a general idea.

Possible Plans

So, what use could Amazon possibly have for a patent on online ad placement? After all, the e-tailer generally keeps its site clean of banner ads. Amazon declined requests to speak about the filing, but Yankee Group Internet analyst Paul Ritter said he sees at least a couple of ways Amazon could utilize the technology.

For example, Ritter told the E-Commerce Times, the company could drive sales by placing information about related products into context in a Web page, based on customers' surfing behavior, similarly to the way it already refers book buyers to additional titles purchased by other shoppers.

Another possibility is that Amazon could charge a slotting fee for what Ritter refers to as multimedia merchandising or interactive experiences. "ABC News has had a lot of traction with this sort of thing online," Ritter said, noting the network's placement of products inside features on home repair, with content repurposed from television broadcasts and other properties.

More Court Battles Ahead?

But if either of those scenarios plays out -- assuming Bezos gets his patent -- Amazon could find itself back in court again to enforce its claim to powerful new ways of marketing and selling. Would it be worthwhile for the e-tail giant?

"It never hurts to surround yourself with secret weapons," IDC's Rosenthal said. In other words, when Amazon files a possibly questionable patent application, it is gambling that it might come up lucky and win rights to a vital technology of the future. Indeed, the latest brouhaha is simply a sign that the company is still taking risks -- and that is a good sign when it comes to predicting future success .