Patently False Time for Bezos to get serious
Patently False Time for Bezos to get serious
Hal Plotkin, Special to SF Gate
Friday, March 17, 2000
Amazon.com founder Jeff Bezos has been getting a lot of praise lately for his deft handling of the growing controversy over whether his firm’s patents might enable him to impose what amounts to a tax on many other online businesses.
Drawing upon his formidable public relations skills, Bezos has gone on the offensive, engaging in an attention-grabbing online discussion on the subject, issuing a call for patent law reform, and throwing his support behind a web-based effort that is trying to clean up the patent system.
Confusingly, he’s also suggested he probably won’t fully enforce his patents, although in some cases, he says, he almost certainly will.
He hasn’t, however, done the one thing he could do to end the controversy that’s giving his company a public shiner. It’s in his power to settle the whole thing right now.
All he has to do is offer non-competing Internet entrepreneurs irrevocable perpetual licenses to use Amazon.com’s disputed patents for a token $1 a year annual fee.
Doing so would thwart a growing boycott of his company while leaving him with the ammunition he says he needs to fend off larger copycat competitors. At the same time, entrepreneurs and innovators would get the legal clearance they need to build secure and sustainable online businesses.
In his most recent public comments, however, Bezos has likened such suggestions to unilateral disarmament, saying Amazon needs to take a tough stance to avoid becoming “another Netscape.”
Using the charm it took to turn his firm’s staggering losses into a measure of its success, the congenial Bezos says he has no plans to make smaller, non-competing firms pay to use the technologies he’s patented.
Instead, he indicates, at least for the moment, that he’ll only seek patent royalty payments from big players who could put him out of business, such as Wal-Mart and Barnes & Noble, the latter of which he’s already suing.
Amazon’s patents cover so-called one-click ordering and, more alarmingly, affiliate marketing arrangements, deals that enable web sites to send business to one another in exchange for a commission. The patents, if widely enforced, threaten to damage the Internet as an open and free marketplace by undermining the viability of a wide range of online businesses.
The dispute has already touched off an international boycott against Amazon.com.
All of which leaves the company at a crossroads. If Amazon takes the wrong path it would lead the innovative company, and much of the emerging online industry, into a time-consuming and costly legal quagmire.
The good news for Bezos is that the group leading the boycott of his firm is small and not very well known. Unfortunately for him, though, the boycotters include many of those who built the Internet into an open public resource in the first place.
Bezos’s public comments to date indicate he realizes what a worrisome development it is to now find himself on the wrong side of those who have already demonstrated their ability to start and sustain a global technical firestorm.
Bezos’s response thus far, though, has been little more than another demonstration of the considerable public relations prowess that helped land the money-losing tycoon on the cover of Time magazine as last year’s Man of the Year.
The danger, of course, is the calamity awaiting less sophisticated investors when Wall Street rediscovers that to make money, you have to make money.
Ironically, though, it’s Bezos stance on the patent issue that might finally draw more of the hard-nosed scrutiny he has so nimbly avoided to date. If it becomes clear he has failed to adequately address the hot-button patent issue, the validity of his answers on other topics are likely to draw an ever-increasing measure of skepticism.
The key point Bezos has not yet dealt with is the fact that his firm’s patents are already doing damage to the Internet economy even in the absence of their actual enforcement.
Amazon.com’s patent on affiliate marketing arrangements, for example, throws a cloud over the business plans of any entrepreneur hoping to use the powerful and age-old commission model to drive success in their own business. It makes it harder for the founders of such firms to raise money. It also forces them to spend more on lawyers, develop costly yet worthless technical work-arounds, and focus less on real innovation.
I don’t know about you, but what I really want is more software and better Internet-based products and services. Not more lawyers making sure web sites don’t work as well as they could.
And telling smaller entrepreneurs they probably don’t have to worry about running afoul of Amazon’s already granted patents offers little in the way of real relief.
It’s sort of like borrowing a tuxedo from a company that has the right to recall it at any time but promises it probably won’t. The entrepreneurs who rely on such a promise could easily be caught standing naked in the marketplace at the precise moment they’ve captured the public’s attention.
The controversy over Amazon.com’s patents began in earnest several months ago when open source guru Richard Stallman first called for a boycott of the company.
Stallman is the founder of an open-source organization called the Free Software Foundation that predates the Linux operating system. A few weeks later, legendary open source book publisher Tim O’Reilly, who had declined Stallman’s call to join the boycott, wrote an open letter to Bezos likening his firm’s patent moves to “pissing in the well.”
O’Reilly pointed out, for example, that virtually all of the software that made the Internet, and by extension Amazon.com, possible, was created by individuals who wanted to solve, not create, problems.
In a public relations masterstroke, Bezos, who had ignored Stallman, quickly phoned up O’Reilly, who then posted details of their amiable conversations online. O’Reilly reports asking Bezos to consider formalizing his pledge not to seek patent royalty payments from anyone other than his largest, most direct competitors.
Bezos reportedly responded by promising to bring the matter up with his lawyers. He also intimated that it might be impossible for him to legally make an agreement that pertained to some companies but not others.
But businesses routinely grant other businesses favorable terms and conditions in exchange for something tangible in return. Utilities, for example, often give lower prices to their largest customers in exchange for a promise of repeat business.
In this case, Bezos would be granting at least one class of Internet entrepreneurs the right to use his patents in perpetuity for a low fee in exchange for something equally tangible and necessary: the preservation of the goodwill his company needs to survive.
He would be under no obligation to extend that courtesy to larger and more direct competitors that can easily make do without such assistance. They would be free to fight it out with Bezos in court where, if justice is served, they will most likely triumph in the end.
The problem is that smaller entrepreneurs often don’t have the one million dollars or more it takes to get an improperly granted patent tossed out in court. Giving those entrepreneurs the ability to get on with innovating, serving customers, and creating new markets is not only the right thing to do for them, it’s also the right thing for Amazon.com.
Bezos’s call for patent reform is welcome, as is his promise of some pocket change to support a web site that allows Internet entrepreneurs to post information that can help demonstrate whenever pending patent applications are bogus.
But words and kind gestures are no substitute for the more meaningful action now required. For the sake of Bezos’s shareholders, let’s hope he takes the real steps needed to resolve the patent dispute before it casts even more attention on the substantial gap between Amazon.com’s promise and its performance.