Online Retailers Sued for Infringement of Spyware Patents

British Technology Group (BTG), through it’s Pennsylvania based subsidiary, has filed a lawsuit in the Federal District Court of Delaware against Amazon.com, Netflix.com, BarnesandNoble.com, and Overstock.com, alleging infringement of U.S. patents No. 5,717,860 and No. 5,712,979. Originally granted to Infonautics.inc in 1998 and aquired by BTG in 2002, the patents cover a technology used by Internet retailers to track the movements of customers on the web prior to and after purchase. The resulting information is used to direct advertising towards the most likely “referral sites.” Spyware has attracted a lot of negative attention from consumers, the press and the government. There are numerous bills pending in the House and the Senate that attempt to regulate the nonconsensual installation of Spyware.

BTG is an IP solutions firm engaging in a number of activities ranging from the acquisition of technologies, technology licensing, and venture funding for technology startups. The Group was founded in 1981 through the merger of the British National Research and Development Corporation and National Enterprise Board. The British Government created NRDC in 1948 to commercialize British publicly funded research. NEB was established in 1975 to assist existing British enterprises and to invest public funds into profitable areas of the manufacturing industry. In 1985, BTG lost it’s right of first refusal on inventions resulting from British publicly funded research and the company was privatized in 1992. Currently, the company has subsidiaries in the U.K., the U.S. and Japan, and holds a portfolio of 3,500 patents.

BTG had been in licensing negotiations with all of the named defendants for several months prior to filing the suit. BTGs Director of Investor Relations says, “Our preference is to license technologies, [but] litigation is part and parcel of the intellectual property space.” BTG does not shy away from litigation. Earlier this summer, the company filed claims against both Microsoft and Apple Computer for infringement of a patented technology that allows users to receive software updates over the Internet.

Spyware, of the kind at issue in this suit, is also a hot topic in the House, the Senate, and the Federal Trade Commission. Most Spyware is surreptitiously slipped onto a users computer during a visit to a website with no prompt explaining the software that is being installed on the users computer, and no solicitation of consent. The software, once installed, is extremely difficult to remove. The proposed SPYBLOCK ACT of 2004, introduced in the Senate, would require companies installing Spyware to solicit users consent to the installation and provide instructions for easy removal. The Internet Spyware Prevention Act of 2004 would make the unauthorized installation of Spyware a federal crime punishable by fines, imprisonment of up to 5 years, or both. Republican Senator Conrad Burns, one of the three backers of the SPYBLOCK ACT, says, "Computer users should have the same amount of privacy online as they do when they close the blinds in the windows of their house, but computers across the country are being hijacked every day as users unknowingly download unwanted and deceitful programs that spy into their online world."

However, none of the proposed legislation will make the installation of Spyware per se illegal. Internet users frequently consent to the installation of Spyware by clicking on user license agreements, "Clickwrap Agreements," that have consent clauses burried within. Whomever ends up with the rights to practice the patents is unlikely to lose the freedom to operate anytime in the near future.