On The Ariba / Emptoris Patent Spat

It’s a sad indictement of the state of vision and innovation in the industry when the two top players in the e-sourcing space start competing on the basis of who has the best lawyers rather than who has the best product offering.

Spendmatters covers the judgement in Ariba’s favour against Emptoris as the latest step in the Ariba/Emptoris pissing contest patent spat here , here , and here (and the commentary, as usual, is lively and entertaining).

I am not a lawyer but have had the good fortune to have to read through some patents in my time. So I figured I’d read the patents in question: 6,499,018 and 6,216,114. Just for fun. They are written in impenetrable patentese so here is what I can figure out.

The two patents claim protection for the following features. You’ll forgive me if I appear flippant, but it really is a surprise to me that you can patent such generic, obvious and trivial enhancements to the basic auction process:

  1. Dynamic Lot Closing Extension: Suppose you have  5 lots in your auction, each with their own closing time such that Lot 2 closes 10 minutes after Lot 1 (etc). If Lot 1 goes into overtime then Lot 2’s closing time is dynamically extended so that it always stays 10 minutes behind.
  2. Flexible Overtime: This means that you can extend an auction not just on “winning bid” or “any bid” but you can have a rule that says “Lot 1 extends by 3 minutes if a bid that is 1st – 4th place is received in the last 2 mintues, and Lot 2 extends by 5 minutes if a bid is received that is within 2% of the current leading bid.”
  3. Flexible  Bidder-Determined Line Item Decision Rules: As a bidder I can set line item rules so that for example I can decrease my total bid for Lot 1 by $50,000 and have that decrease apportioned, flexibly, across the line items that make up that lot based on the rules I have specified (e.g. Item #12345 must never go below $1.50 each).
  4. Pending Status: The idea here is that when an auction completes it goes into “pending” status during which the buyer and suppliers can discuss whether the auction really is over or not. If they decide that the auction needs to continue they can move the auction back to a live status.
  5. Auction Pause: Allowing the buyer to pause an auction (while the clock continues ticking) in a lot, several lots or the auction as a whole.
  6. Bidder Specific Bid Limitations: In a reverse auction the idea is that you can set different ceilings above which you won’t receive a valid bid from a supplier. Apparently this is different to simply starting an auction with any “pre-bids” offered by suppliers.

Freemarkets (who readers will know I hold in very high regard for starting off the whole reverse auction industry) applied for both patents on the same day in May 1999. Even writing back in 1999, though, the points the patents cover are pretty trivial to say the least.

According to Ariba’s press release the judgement centered around “the use of individual bid ceilings and certain auction overtime rules“. As Jason describes in his coverage of the Emptoris patch this covers:

  1. A feature that prevents a supplier submitting a bid higher than a pre-set amount
  2. A feature that keeps staggered lots open when a prior lot gets extended

Some thoughts on this:

  1. These two points are very trivial aspects of e-auctions. They are far from “key patents for electronic auctions” mentioned in Ariba’s press release on the subject.
  2. But at least the really obvious parts of the patents (e.g. pausing an auction) were either considered invalid or not infringed.
  3. This is another reason why such “software business process patents” are considered controversial by many in the industry.
  4. Interestingly this news from early November seems to cast some level of scepticism over whether process patents, like the ones at the centre of this case, are even allowed in the USA. It will be interesting to see how this develops.

Lest anyone misunderstand me:

  1. I’m not an Emptoris apologist. Their gorilla marketing when Ariba swallowed Procuri was no different to Ariba’s swipe this time round. And Emptoris have (at least attempted to) apply for equally embarrassing patents in the past, if memory serves.
  2. I am not anti-intellectual property. But I think that software in general is more suited to copyright than patents. Far from encouraging innovation, as I’ve written before, business process software patents are a tax on innovation and should be stopped.


7 responses to “On The Ariba / Emptoris Patent Spat”

  1. Should those who have Ariba solutions be concerned that the company’s stock is trading at a 52-week low — and that it burned through $15 to $20 million in cash for litigation expenses? Are these guys viable long term? Not crazy about the management here, they seem to be all over the map in terms of strategy. If I am with a $1 billion plus company, do they even care about my business anymore — or are they shifting whole hog to a mid-market, SaaS model?

    OK, financial analysts are downgrading their stock, but do I continue my investment if I am a software buyer?

  2. I have dealt with Ariba on a few events, and I’m not shocked that they would go to court over a trivial item such as this. Patent infringement claims over the usability of software does little good for the Procurement folks who are the end users.

  3. @Dirt Devil. Thanks for taking the time to comment – your questions seem rhetorical so I won’t chuck my thoughts in … yet

    @Norton. Agreed that multi-million dollars over some trivial usability features is of little benefit to the end users.

  4. Well, Ariba seemed to get their proper punishment. The company apparently spent over $18 million on litigation for these two puny patents, and only received a judgment of $6 million.

    Thats an Ariba loss of maybe $12 million in bringing this and other useless cases ..

  5. The Ariba v. Emptoris trial has concluded. The Federal District Court denied Ariba’s motion regarding the release of Emptoris’ new proprietary software patch which addresses the alleged infringement.

    The ruling effectively concludes the Ariba v. Emptoris trial (although Emptoris maintains the right to appeal the Court’s original ruling.)

    The overwhelming majority of Ariba’s patent claims were dropped, dismissed with prejudice, or ruled invalid as a matter of law by the Court.

    The court’s original judgment was related to code for individual bid ceilings and certain auction overtime rules, which Emptoris no longer utilizes.

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